See the news late Friday that your U.S. government seized three credit unions? You could be forgiven if you missed it; most people did, as it came late Friday, after the market closed, when all anybody was talking about was the stock rally.
But it happened. The government came in late Friday, seized three “wholesale” credit unions, and came up with a $30-$35 billion plan to keep them afloat. If they were household names, if people’d heard of them, it may have been splashed all over the news. But they aren’t household names. The news caused barely a ripple. But it should.
Why in God’s name, two years after the collapse of Lehman Brothers, is the government still bailing out private institutions? Not just private institutions, but credit unions; these aren’t outfits generally given to excessive risk-taking. These aren’t investment banks. They’re credit unions. From the Journal’s write-up:
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.