I have been following, with no small amount of trepidation, the bad news in the financial markets of late (bondad: The Worst Economy of Our Lifetime pt I, pt II, pt III, and What the Hell Happened in the Markets?; and Jerome a Paris: Credit Crunch Act II, Financial Meltdown - More to Come, and The Level 3 Bomb). All that talk of so many very large banks ending up holding that much worthless paper, and thus going bankrupt, left me concerned that my own meager savings was at risk. After all, the scale of this has been speculated to potentially overwhelm federal agencies that insure bank accounts like the FDIC or NCUA.
Follow me over the fold for more discussion.
As Jerome's diaries make clear, the banks are doing their best to hide how much risk they're shouldering from the world, including the people who have accounts with them. They have every right to do this, of course, because the board and corporate officers are responsible to the share holders, not the account holders. Thus, if you're an account holder and tried to find out how much risk your money is in, I doubt you would get a straight answer.
The structure of a credit union is pretty much the opposite - everyone who has an account is a member of the credit union and thus has a say in how it is run. So, when I contacted my credit union to inquire about how much of their asset pool is potentially worthless, I got a reply within 48 hrs (I have excised the name of the credit union under the assumption that they didn't know that I would quote them on a blog - even though I'm sure they'd love the free advertising):
Thank you for your email. The first mortgage loans that [your credit union] originates and retains in portfolio do not fall under the "sub-prime" category of mortgages. Additionally, [your credit union] does not invest in structured investment vehicles. I would be happy to discuss these issues with you if you so desire. Thank you and have a great day!
This was accompanied with a name, email address, and phone number for further correspondence.
It's like a breath of fresh air - I ask, they answer, no bullshit.
So, please, tell me whether I'm being naive because I overlooked something. I feel kind of like I'm making a credit union commercial here - I just figured that there is a way to get some good financial news and I wanted to share it. So, I would encourage everyone to poke their local credit union for information about their exposure to the housing bubble credit crisis.