| Photo by Stephen Dawson on Unsplash
Part XXI of the “Back-to-Basics Governance” Series
Last Wednesday morning, this columnist posted this note in several CNN Facebook Groups: “@Poppy Harlow Here is a suggested option for the failed banks, which you may mention tonight at the CNN Prime Time’s “Bank Bust” Townhall meeting: Turn the banks into credit unions. Thank you. Pls read my column today about the topic: https://www.philippinedailymirror.com/president-biden-can-change-crony-capitalism-by-converting-failed-banks-into-credit-unions/”
This journalist also sent the above message to Ms. Harlow in her Facebook Messenger. Perhaps the CNN Townhall was probably pre-taped before the broadcast aired in the Western United States. But there was no mention of this column’s suggestion in the program. Perhaps if and when CNN may follow up its coverage on the “Bank Bust” topic, the suggestion of turning failed banks into credit unions may be highlighted.
It does not mean that credit unions do not experience failure. But the National Credit Union Administration (NCUA) reports that credit unions had only two conservatorships/liquidations in 2020. This is fewer than the number of Federal Deposit Insurance Corp. (FDIC) bank failures that merited deposit-insurance bailouts. Both types of financial institutions have seen fewer failures than in past years.
A credit union that resolves its operational problems can return to its status as member ownership, according to the NCUA. Conservatorships can merge with another NCUA credit union, or the NCUA can liquidate them.
As Googled, Washington Mutual was a conservative savings-and-loan bank. In 2008, it became the largest failed bank in U.S. history. By the end of 2007, WaMu had more than 43,000 employees, 2,200 branch offices in 15 states, and $ 188.3 billion in deposits. Its biggest customers were individuals and small businesses.
According to an analysis made in the book, An Examination of the Banking Crises of the 1980s and Early 1990s, Vol. 1, it said: “During the 1980–1994 period, 1,617 FDIC-insured commercial and savings banks were closed or received FDIC financial assistance (see table 1.1).” How much money did depositors lose when banks failed? All in all, 9,000 banks failed–taking with them $7 billion in depositors’ assets.
In contrast, the NCUA reported on June 28, 2021, that it would distribute $865.5 million to the 1,800 credit union members of three corporate credit unions that failed during the Great Recession.
Here are the facts of the Great Recession insofar as credit unions and commercial/savings banks were concerned. The 1,800 failed or restructured credit unions cost the NCUA $866 million (as rounded off). While the 1,617 FDIC-insured commercial and savings banks that closed or received FDIC financial assistance amount to more than $7 billion.
Yes, “it is elementary, Mr. Watson,” to use an oft-quoted adage that credit unions are better financial institutions in safeguarding their members’ deposits than banks. And credit unions the best examples of “Cooperative Economics”? Because most bank executives are often the alleged poster boys of “Crony Capitalism”?
Perhaps Ms. Poppy Harlow, her other CNN co-anchors and broadcasters, and their guests better take note of the above information, as Googled. After all, CNN has access to well-known financial gurus and banking-industry experts that it often touts on its broadcasts. At the same time, The Straphanger relies mainly on Google and other social-media research platforms.