NEW YORK-It was a headline that many credit union executives everywhere cringe: "Credit Unions Bailed Out."
But it doesn't appear to have had much effect on members, at least not yet.
That banner headline ran over the lead story in the nation's most widely circulated newspaper, The Wall Street Journal, the morning after NCUA announced its new corporate proposals (see related stories here, here and here). It was quickly called a "glaring mischaracterization" by one trade group. But the story, and others, were immediately picked up by wire services, other newspapers and Internet news sites and blogs, most of which used the term "Bail Out" in some form.
For an industry that has prided itself on mutual self-help and not having accepted any taxpayer money even as banks received billions of dollars, the term was painful, especially since as the Wall Street Journal correctly reported in its story, no taxpayer funds are going to credit unions. Instead, under the so-called legacy assets plan, NCUA will take the cash flows on these troubled bonds and aggregate them into new bonds, which are collateralized debt obligations that NCUA is referring to as "NCUA Guaranteed Notes."
NCUA has borrowed several-billion dollars from Treasury to stabilize corporates, a loan whose repayment term was recently extended until June 30, 2021.
The CU trade associations, numerous state leagues and even some credit unions were quick to issue statements seeking to clarify the reference to "bailout," sending letters to the editors of various publications, and to get in contact with congressional offices. NAFCU said it sought to make several points in a letter to the Wall Street Journal:
- The headline was a glaring mischaracterization and showed a basic lack of understanding of the CUs.
- Actions undertaken by NCUA, "while regrettable, did not involve federal taxpayer funds."
- CUs have been self-funded since inception and "have never cost the American taxpayer one dime."
By the Monday following the Wall Street Journal's Saturday story, CUNA was distributing a number of materials in response, but also noted that while headlines referred to a "bailout" most of the reporting did not. CUNA distributed a Q&A to state leagues, with answers to "What has happened?," "What actions were taken?," "Why was this action taken?", and "Is this a bailout?"
Meanwhile, in the week after the story it appeared to not have grabbed the attention of many members, according to CEOs who talked with Credit Union Journal. Greg Smith, CEO of the $3.7-billion Pennsylvania State Employees CU in Harrisburg, had his finger on the pulse of his membership Monday-the CEO has an e-mail he shares with his members. The inbox had three inquiries. "That is out of 400,000 members," Smith said.
Smith noted the messages were from members who were not misinformed about NCUA's actions. "The members simply asked what I could tell them about the corporate story," Smith said.
The CEO expected member inquiries and communicated with staff via e-mail some key points about the credit union, such as PSECU does not have any money within the corporate system and was not involved in the subprime mess. "And I said if any member wants any information independent of PSECU, they can go to Bankrate.com, where we carry four stars as a sound institution."
At BECU in Tukwila, Wash., PR Manager Todd Pietzsch said the credit union "received a small number of calls on Friday. We put a message up on our website to answer any questions members may have. Our contact center did not get any inquiries on Saturday. It is safe to say that so far we really have not had much of a reaction from our members."
Wayne Vann, CEO of Army Navy FCU in Corpus Christi, Texas; Laida Garcia, CEO Florida Central CU in Tampa, Fla., and Jeff Disterhoft, CEO University of Iowa Community CU in Iowa City, Iowa, also shared that none of their members have expressed concern. At the Pennsylvania CU League, SVP Mike Wishnow reported that one credit union called asking if the league was proactively addressing the Wall Street Journal article. "I mentioned that CUNA had already addressed the matter and that the article, outside the headline, was pretty well balanced."
That fact, and the resulting low number of members reaching out to PSECU, convinced CEO Smith that it is not wise to send an e-mail to members about the WSJ story. "In this case, it's best to let the story go and not give the thing more legs that it might already have."