Credit Union Shenanigans

Note: I published this last night and WordPress ate part of the post (user error is not an acceptable explanation) so I have recreated it as best I could.

Are you for some more acronyms? Brought to you by those friendly folks at your neighborhood credit union I want to introduce you to The NCUA, the CU HARP and the CU SIP. The latter two are cousins of TARP.

The one that you need spelled out is NCUA. That stands for the National Credit Union Administration. Believe it or not that is a federal agency that charters and supervises credit unions. Who ever said that we had a disjointed system for controlling our financial system deserves the award of the century for understatement. Anyway this agency, which I confess I have never heard of, has $2.5 billion of relief money that has been authorized by Congress to flow into retail credit unions to refinance troubled borrowers. That’s the CU HARP program.

Of course that’s chump change today a plan was advanced to up the ante with another facility that could go up to $41.5 billion. That’s CU SIP. This plan is to help retail credit unions help corporate credit unions. Let me try and explain that one.

A retail credit union is what you or I might go to for a checking account, auto loan etc. Corporate credit unions are sort of like banks for the retail credit unions. Their job is to aggregate funds from the retail credit unions and then invest those funds. The concept is to give the retail credit unions more investment clout by pooling their money. The corporate credit unions also facilitate short term lending to the retail credit unions.

Like anyone else who had lots of money to invest the corporate credit unions stubbed their toe. The lure of mortgage backed securities was too much to resist and, consequently, they are hurting. So the Feds to the rescue, sort of. You see, the NCUA is prohibited by law from helping the corporate credit unions so they came up with a pretty nifty money laundering scheme to get around that detail,

Here is how Housing Wire described it:

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