News & Events

Financial Crisis Leaves Credit Unions Unscathed

Oct 04, 2008

Repurposed from The Journal News, Westchester County
By David Schepp
(Original Publication: October 4, 2008)

The turmoil that has ripped through the U.S. financial system has seemingly touched every sector, from investment banks to savings and loans to mortgage companies.

Credit unions, however, have remained unscathed, even as concern about the fallout has pushed the National Credit Union Administration, which administers the National Credit Union Share Insurance Fund, to assure credit union customers that their money is safe.

Last week the NCUA, which is to credit unions what the Federal Deposit Insurance Corp. is to banks, opened a call center to respond to an increase in calls by credit union members about the safety of their funds.

“We experienced a high influx of calls related to share insurance, more than what could be handled by the normal call center,” said spokeswoman Katie McDonald. “Obviously, there’s a need for answers.”

Part of NCUA’s mission is to get out the message that institutions and funds insured by NCUA are just as secure as those backed by the FDIC. Just like FDIC insurance, NCUSIF insures depositors’ accounts for up to $100,000. Also like FDIC-insured deposits, that amount was raised to $250,000, with yesterday’s passage of the Bush administration’s $700 billion bailout legislation.

As of March, nearly 89 million Americans are members of the nation’s 8,215 credit unions, according to statistics from Combined, credit unions hold assets of $805.2 billion.

Though the number of credit unions has shrunk in recent years, due mainly to consolidation, the number of branches has grown by nearly a third to 21,122.

Locally, there are 33 credit unions based in Putnam, Rockland and Westchester, according to the Credit Union Association of New York. Collectively, they have 184,463 members and more than $2.1 billion in assets.

William J. Mellin, the association’s president and chief executive, said he wasn’t aware of any credit union in the state that had soundness issues.

Still, he said, that doesn’t mean the credit unions haven’t been affected by the financial crisis.

“Credit unions have made investments in different types of Wall Street securities, and the securities are not valued as they once might have been,” he said.

Credit unions wanted to be included in any federal bailout, “but only because it makes sense to do that,” Mellin said. “We don’t know what the future holds.”

Like many credit unions, Quorum Federal Credit Union in Purchase has avoided the crisis by not pursuing subprime lending as a business unto itself, said President and CEO Bruno Sementilli.

“It’s really as simple as we didn’t involve ourselves in the same types of lending practices,” he said.

That doesn’t mean Quorum has no home loans to members with less-than-stellar credit, he said. “We try to help people that also have struggled with their credit.”

Additionally, without shareholders to report to on a quarterly basis, Sementilli said, credit unions can take a longer view in managing the business. “We’re not looking for expediency,” he said. “It’s more about delivering for members in the long run.”

Credit unions, which, like banks, can have either state or federal charters, got their beginnings by providing banking services to employees at specific companies. Quorum, for example, started life in 1936 as the credit union for General Foods employees.

It has since morphed into a 40,000-member institution with branches in eight states that offers many of the same services as banks and savings and loans.

Unlike many credit unions that have grown by broadening membership eligibility to the communities where they are based, however, Quorum has expanded by attracting employees of other businesses. Its roster of nearly 60 companies includes Kraft Foods in Tarrytown, Good Samaritan Hospital in Suffern, Pernod Ricard USA in Purchase and Prestige Brands in Irvington.

Palisades Federal Credit Union in Pearl River has expanded its customer base by allowing those who live, work, attend school, worship or even have a relative in Rockland County to join.

The credit union has more than 9,000 members. It was founded in 1941 for the benefit of employees of Lederle Laboratories, now Wyeth.

Palisades recently updated its Web site to assure members of its financial stability. “Our call center this past week has been getting increased calls,”said spokeswoman Connie Craven.