U.S. Backs $30 Billion in Bonds to Stabilize Credit Unions
September 26th, 2010Thirty to $35 billion worth of government-guaranteed bonds are going to be issued on what amounts to, “Shaky mortgage-related assets.”
Does anyone understand how this, “Won’t cost taxpayers any money”?
Via: Wall Street Journal:
Two years after the peak of the financial crisis, the federal government swooped in to stabilize a crucial part of the credit-union sector battered by losses on subprime mortgages.
Regulators announced Friday a rescue and revamping of the nation’s wholesale credit union system, underpinned by a federal guarantee valued at $30 billion or more. Wholesale credit unions don’t deal with the general public but provide essential back-office services to thousands of other credit unions across the U.S. The majority of retail credit unions are sound, but they will have to shoulder the losses through special assessments over the next decade.
Friday’s moves include the seizure of three wholesale credit unions, plus an unusual plan by government officials to manage $50 billion of troubled assets inherited from failed institutions. To help fund the rescue, the National Credit Union Administration plans to issue $30 billion to $35 billion in government-guaranteed bonds, backed by the shaky mortgage-related assets.
Officials said the plan won’t cost taxpayers any money. Still, it marks the latest intervention by the U.S. government into a financial system weakened by the real-estate bust. Bad bets on mortgage-backed securities have now killed five of the nation’s 27 wholesale credit unions since March 2009. The federal government, which now controls about 70% of the total assets at such credit unions, said the surviving institutions will be reined in so that they take fewer risks with their investments.
Research Credit: jk
I don’t understand this either. I belong to two different federal credit unions. They only make home equity or improvement loans: not mortgage loans. I am suprised whenever I see the list of banks failing that credit unions are on the list of them. More BS. I guess you have to know your banker as well as your farmer! And how this won’t cost taxpayers anything? Please bring me the forceps so I can pry the head, of whoever said this out of their hind quarters.