US avoided massive Credit Union failure

In case you missed it, last week’s Wall Street Journal reported that this autumn, we avoided a huge failure among US credit unions related to the ongoing mortgage crisis:

U.S. government rescues prevented the failure of about 1,000 consumer credit unions, which could have been pulled under due to the failure of larger institutions that hold their investments, a regulator said Thursday.

In late September, the federal government moved to stabilize a crucial part of the credit-union sector, which was battered by losses on mortgage investments. The government is issuing up to $35 billion in government-guaranteed bonds to help fund the rescue.

“Inaction would have resulted in massive disruption to consumer services,” Deborah Matz, chairman of the National Credit Union Administration said in written testimony submitted to a Senate Banking Committee hearing. “Total costs to any remaining insured credit unions would have been far greater than the resolution strategy” used by the government, she said.

Yet another indication of how tentative the so-called economic recovery has been.  Yikes!