As financial markets became frozen in 2008, two doomed corporate credit unions -- U.S. Central and Western Corporate -- increased their use of the Federal Reserve's discount window to meet their liquidity needs, according to recently released data.
U.S. Central borrowed in aggregate almost $172 billion from the Federal Reserve and Western Corporate borrowed in aggregate approximately $51.6 billion.
In addition, Eastern Financial Florida CU, which was seized by the NCUA in April of 2009, borrowed almost $555 million between October 24 and December 11.
Other credit unions that made regular use of the discount window include Alaska USA FCU ($17.3 billion in borrowings between February 13 and end of 2008), America First FCU ($990 million in total borrowings between October 17 and December 24), and Scott CU ($591 million in borrowings between February 22 and the end of 2008).
To see what credit unions borrowed from the Federal Reserve during 2008, click on this link.
There are two tabs on the excel spreadsheet. The first tab provides you with the date and amount borrowed by a credit union during 2008. The second tab on the excel spreadsheet gives the aggregate amount of borrowings by credit unions during 2008.
The next project will be to look at credit union borrowings from the Federal Reserve in 2009 and 2010, as problems in the corporate credit union system intensified.
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I am not sure why the good professor considers this information useful. The discount window has been increasingly important as a source of liquidity for financial institutions of all types. As the credit union world reshapes itself and more of us become account holders at the Fed, you should be prepared to see a more credit unions use the discount window as they occassionally experience missmatches in their investments/liquidity portfolios. All borrowing at the discount window is well securitized and no taxpayer money is at risk.
ReplyDeleteWell said. I hope he doesn't bring the "tax exempt" issue into this discussion. Then I would hope he would explain how CUs that are members of the FHLBs are helping to pay back the money used in the 1990s-era bailout of the for-profit banking system even though credit union did not receive ANY federal assistance for deposit insurance.
ReplyDelete$172 billion sure sounds a lot more dramatic than overnight borrowings of $1 to $6 billion over a period of around 3 months. I have a jar of change on my desk with about 30 bucks in it. Using Dr. Leggett's math, I had over $10k on my desk last year!
ReplyDeleteCUs that are members of the FHLB system are members of their own free will - they don't have to become members in order to become a credit union. Therefore, they should know and understand the cost of membership, and make an informed decision about the costs and benefits of said membership. If the access to the system (and resulting liquidity and/or mortgage purchasers) is worth the cost, then CUs become members.
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