In France the government even went as far as to recommend having some money at home - now that is scary - I'm surprised it didn't cause a run on the banks.
It’s interesting to see that the trend of consumers cashing out their bank accounts and moving their money to credit unions isn’t as pronounced here in Hawaii as it is on the mainland. That’s probably the Wall Street banks that provoke so much consumer ire – the Citibank’s and Bank of America’s – have such a small role in our local banking sector. Local banks – even wholly-owned subsidiaries of international behemoths, like First Hawaiian, or regional giants, like Bank of Hawaii – simply don’t seem to arouse the same kind of antipathy. But that doesn’t mean Hawaii’s credit unions and banks are unaffected by the mainland turmoil.
One problem that has mostly escaped local scrutiny has to do with the failure of several wholesale credit unions due to losses in the residential mortgage-backed securities market. The failure of a few credit unions on the mainland may seem remote, but they have an effect on all credit unions, including those in Hawaii. That’s because someone still has to pay for the losses. This is done through something called the Temporary Corporate Credit Union Stabilization Fund, which, in turn, is funded by assessments on all federally insured credit unions. Ultimately, of course, those costs are passed along to credit union members.
This isn’t small change. To fulfill its statutory requirements, the National Credit Union Association has had to re-securitize over $28 billion in assets. According to NCUA Board Chairman Debbie Matz, to cover the losses associated with this, the NCUA has already assessed the nation’s credit unions $3.3 billion, and those assessments may ultimately reach $6 billion. Hawaii’s credit unions have had to pay their fair share. This is just one more cost associated with the collapse in the mortgage-backed security market in 2008 and 2009.
But there’s good news. On Monday, the NCUA announced a settlement with Deutsche Bank Securities, which “agreed to pay NCUA $145 million to reduce the losses associated with the five credit union failures.” This settlement will help mitigate the assessments to the nation’s credit unions. Of course, $145 million is just a drop in the bucket, but this is just the first legal salvo. The NCUA still has three outstanding lawsuits against other securities firms “alleging violations of federal and state securities laws and misrepresentations in the sale of hundreds of securities.” So it’s still possible more money will be recovered for the nation’s credit unions, including those in Hawaii.
Maybe even more important, this settlement represents one just a handful of incidents where the financial institutions responsible for the mortgage-backed security fiasco have been held accountable (although Deutsche Bank Securities didn’t admit any culpability with this settlement). This may not dramatically reduce the assessments to Hawaii’s credit unions, but it sure seems like it improves the ledger of the public at large.