RALEIGH, N.C. — U.S. credit unions flush with deposits and eyeing favorable investment returns might want to follow the model of the $15 billion State Employees Credit Union which is providing $1.1 billion in financial backing for a beleaguered student loan agency, the CU management suggested Friday.
"This is certainly one way that credit unions which right now may have large amounts of money to lend out can use it for a very worthy cause and get a rather nice return," declared Leigh Brady, senior vice president.
The Raleigh CU has been getting favorable press coverage for its billion-dollar investment in North Carolina State Education Assistance Authority to provide critical funding for student loans six weeks before the start of college classes.
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State Employees' is getting a 4% return on its investment in the agency deal "whereas if we stick with just U.S. Treasury securities it would be 3.25%," said Brady. The SECU transaction replaces funds that had been generated through the so-called auction-rate securities market which failed in February during the credit crisis drying up student loans across the U.S.
"We will use this investment from the credit union to refinance some of our taxable auction-rate bonds," Steven Brooks, director of the state authority, told the Raleigh Observer, noting also "the rate we got from the credit union was at least as good and probably better than we could have done anywhere else."
Brooks also said the CU "actually came to me when they read about the problems in the credit markets and how it was affecting us."
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