The Michigan Department of Insurance and Financial Services issued an order authorizing all Michigan-state chartered credit unions to invest, without limitation, in the obligations of government sponsored enterprises (GSEs) as long as it is in a safe and sound manner.
GSEs include Federal National Mortgage Association (Fannie Mae), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal Home Loan Banks (FHLBs), and entities in the federally-chartered Farm Credit System (FCS).
Dow Chemical Employees Credit Union requested a decision from the Director.
The Director found that state law limited a Michigan chartered credit union's investment in the debt obligations of Fannie Mae, Freddie Mac, FHLBs, and FCS up to 25 percent of a credit union's net worth, because these obligations are not insured or guaranteed by the United States government or an agency of the United States, or a state or local government.
However, the Director found that Michigan chartered credit unions compete with federally-chartered credit unions and Michigan chartered non-credit union depositories, which have the authority to invest in these obligations without limitation. This places Michigan chartered credit unions at a competitive disadvantage.
The Director concluded that by permitting Michigan chartered credit unions to exercise these expanded powers that are available to other competitors will allow state chartered credit unions to compete more effectively and will ensure parity among all credit unions operating in Michigan.
Read the order.
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