I read Jim Blaine's November article on "copping a plea on the corporates" with interest and amusement. While I often agree with Jim and would never criticize his credit union-loving heart, in this case I don't agree with his conclusion that he "couldn't read the writing on the wall" with respect to the corporate system debacle.
I say this because I believe if Jim had had the same information that the corporate investment folks had about the underlying collateral on all those now toxic bonds, he most certainly would NOT have invested in them. Why? Because from what I've been told, at U.S. Central approximately one-third of the mortgages were sub-prime and another one-third were Alt-A (low and no Doc loans otherwise known in the trade as "liar's loans"). Now, I have no doubt that Jim and his credit union have made many loans to poor members and folks with less than stellar credit but I don't believe for a minute that he would ever get involved in sub-prime or Alt-A type lending. Nor would any other credit union that I am aware of. So, if we wouldn't make those kind of loans, I think it is fair to say we would not have invested in bonds secured by those type of loans. Oh, and when told that they were rated AAA and "we had the highest tranche", meaning we would get paid back first, I believe even a North Carolina donkey (substitute the other name yourself) knows that even when you're on top of the heap it isn't necessarily great because you just might be standing on a big pile of dung (substitute other word here if you want).
All this being said, I do agree with Jim that we need to move forward together and not waste too much time pointing fingers and complaining. However, in my opinion, anyone who had direct responsibility for the investment strategy decision to buy sub-prime and Alt-A mortgage backed securities should be looking for work on Wall Street, not within a restructured corporate credit union system.
Marshall Boutwell, President/CEO
Gwinnett FCU, Lawrenceville, Ga.
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