Do Credit Unions "Rat" on the Industry's Bad Actors?

It is often argued that the financing structure of the National Credit Union Share Insurance Fund incents credit unions to monitor each other.

In 1997, the Treasury Department wrote:

"Because their 1 percent deposit is at risk when other credit unions fail, and because the Share Insurance Fund may have to levy additional assessments on surviving credit unions, credit union managers have an incentive to alert federal regulators to unsound or illegal practices at other credit unions. Although credit unions cannot directly prevent excessive risk-taking by other credit unions, they can report undesirable practices by other credit unions to regulators, who can take remedial actions."

However, with the exception of a few credit unions objecting to an expansion in the business lending authority for credit unions, there appears to be a dearth of evidence regarding credit unions raising the alarm about unsound or illegal practices of bad credit union actors.

For example, did any credit unions raise alarms prior to the financial crisis regarding corporate credit unions doubling down on their bets on risky mortgage-backed securities?

Did any credit unions point out to their regulators the risk associated with Norlarco CU (CO) or Huron River Area CU (MI) making speculative residential loans outside of their market areas in Cape Coral (FL)?

I suspect not.

While credit unions probably know who are the bad actors in their industry, the concept of credit unions squealing on bad actors is probably a modern myth.