Mendo Island Journal — Timely. Useful. Sometimes Cranky.

Posts Tagged ‘Money’

Banking on Credit Unions

In Around the web on February 21, 2009 at 1:28 pm

By Ralph Nader

While the reckless giant banks are shattering like an over-heated glacier day by day, the nation’s credit unions are a relative island of calm largely apart from the vortex of casino capitalism.

Eighty five million Americans belong to credit unions which are not-for-profit cooperatives owned by their members who are depositors and borrowers. Your neighborhood or workplace credit union did not invest in these notorious speculative derivatives nor did they offer people “teaser rates” to sign on for a home mortgage they could not afford.

Ninety one percent of the 8,000 credit unions are reporting greater overall growth in mortgage lending than any other kinds of consumer loans they are extending. They are federally insured by the National Credit Union Administration (NCUA) for up to $250,000 per account, such as the FDIC does for depositors in commercial banks.

They are well-capitalized because of regulation and because they do not have an incentive to go for high-risk, highly leveraged speculation to increase stock values and the value of the bosses’ stock options as do the commercial banks.

Credit Unions have no shareholders nor stock nor stock options; they are responsible to their owner-members who are their customers.

There are even some special low-income credit unions-thought not nearly enough-to stimulate economic activities in these communities and to provide “banking” services in areas where poor people can’t afford or are not provided services by commercial banks.

According to Mike Schenk, an economist with the Credit Union National Association, there is another reason why credit unions avoided the mortgage debacle that is consuming the big banks.

Credit Unions, he says, are “portfolio lenders. That means they hold in their portfolios most of the loans they originate instead of selling them to investors….so they care about the financial performance of those loans.”

Keep reading Banking on Credit Unions at Common Dreams
Hat tip to Janie Sheppard and Dan Hamburg

See also Mendo-Lake Credit Union
~~

Next week could be really big – 2/21/09

In Around the web on February 21, 2009 at 8:43 am

From Don Sanderson

2/21/09 Ukiah, Northern California Next week, some economically/financially important events are unfolding that well may portend a rapid economic dive off the cliff for the United States, much more quickly than anyone is predicting that I’ve seen reported in the usual media. But, the tracks are there. It concerns the U.S. Treasury bond market where Obama must go to get his stimulus funds and, increasingly, much of the rest of the money he needs to operate the government and fight his wars. Some background:

A good way to track the economy, given the amounts of money the U.S. government is spreading around, is to follow the yields of U.S. Treasury bonds. Whenever the U.S. spends money it hasn’t collected from taxes and fees, it must first get from the sales of bonds.

Some background: When one invests a certain amount of money in a bond, say $1,000, at an annual return of 15 percent, it is said that the bond has yielded 15 percent or $150. If the bond is then sold for, say, $800, the buyer still gets an annual return of $150, but that is a rate of return of 18.75 percent, the bond now yields 18.75 percent. So, if you read that U.S. Treasury bond yield has increased, this should tell you that the market for bonds has fallen, much as the stock market falls. Bond yields have been steadily growing.

The U.S. Treasury sells both short term, say 5 year, and long term, say 20 year, bonds. Those who invest in short term bonds may be uncertain with the future and don’t want to bet long term. So, the relative yields of the two types of bonds should give one an idea of how much faith investors have in America’s financial future. In fact, short term bond yields are low in historical terms relative to long term ones, indicating bond holders feel insecure. Keep reading→

What about a new bank?

In Around the web on February 9, 2009 at 11:34 pm

From Janie Sheppard
Mendocino County

The Obama administration is about to disgorge the second half of TARP (Troubled Assets Relief Program) money ($350 Billion Dollars) to bail out the banks. The first $350 Billion didn’t do the trick, the second won’t either. But wait, before once again dumping that much money into unsound banks, here’s another idea. This idea isn’t mine, and if it gets some attention, I’ll again ask permission to disclose its origins. For now, we’ll just focus on what I understand to be the substance.

Forget existing banks. Why not leave them to sink or swim? The Federal Deposit Insurance Corporation (FDIC) was created to clean up banking messes, and it has a good record. Let it do its job.

Instead, ask Congress to appropriate money for a NEW BANK. In its charter would be a mandate to extend credit, something no amount of TARP money alone will do, as we have seen.

The NEW BANK would not be burdened with toxic assets like mortgage-backed securities that turned out to have no value and were a bad idea in the first place.

The NEW BANK would not have greedy shareholders demanding dividends from government bailout money. The shareholders would be us, the taxpayers. Instead of dividends going only to rich shareholders, taxpayers would see the benefits in the form of readily available credit. What would this mean? Ordinary people could finance cars, houses, businesses, and get lines of credit. With the increase of economic activity created by the loosened credit, employment would increase. Instead of losing hundreds of thousands of jobs each month, there would be a gradual turnaround.

What else would this mean? No more huge bonuses for executives more concerned about their pay and perks than the welfare of the country. No more incentive to produce short-term stockholder dividends. The NEW BANK’s profits would come from the interest on loans, not from fraudulent financial instruments that through the deceptive magic of “bundling” hid huge losses. This game of “hot potato” went on while the bundlers sold the instruments to our pension funds and, amazingly, to each other.

Congress would set the salaries for NEW BANK employees and managers. Bonuses would be tied to the health of the economy, not bolstered by phony recommendations of executive pay consultants. This could be in the legislation, if we demanded.

There are plenty of people in the federal government who could run the NEW BANK. Recall that the Resolution Trust Corporation and the FDIC employ plenty of smart people. Bankers who made the mess would be prohibited from employment, if we demanded.

To get the NEW BANK going requires a popular revolt. Unless we tell the Congress, loud and clear and with street demonstrations, if necessary, that we’re fed up and not going to take it anymore, the TARP money will be spent, banks will continue to go bankrupt, and the likes of you and I will not see any benefits while the unemployment numbers keep going up.

If you’re fed up, let President Obama know, let Mike Thompson know, let Barbara Boxer and Dianne Feinstein know, and share this idea with your friends. Don’t take it anymore!

See also Good Bank/New Bank vs. Bad Bank: a rare example of a no-brainer - Financial Times

and I am as mad as hell and I’m not going to take it anymore – YouTube


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