Federal regulators took over three key lenders to U.S. credit unions, after losses on mortgage investments threatened to topple them. The move was a reminder that parts of the financial system are still burdened by the toxic assets two years after the financial crisis peaked.
Taking over busted credit unions won't be enough to stop the bleeding. That's why Uncle Sam has offered an $80B backstop to the remainder of the nation's credit union network. I had thought credit unions were a safe alternative to banks up until now, thanks to their avoidance of leverage. Most of them still are. These actions are designed to ensure that back-office functions supporting the entire industry will still function if a major credit union fails.
There's still plenty of systemic risk left. Let's see a show of hands of anyone who wants to go long ANY financial institution right now. My hands are down at my sides (after I'm done typing).
