SAN DIMAS, Calif. — During his Columbus Day Webcast, Western Corporate FCU's Dwight Johnston correctly predicted that the first of the $700 billion bailout package will be applied toward reinforcing capital positions of healthy banks. The very next day, Treasury Secretary Paulson proved Johnston right.
Johnston also predicted the government is dividing banks into two categories: healthy enough to save and far enough gone to let fail. In fact, WesCorp's top economist predicted several big regional banks will fail in the coming months.
The names will be shockers, he said, but shouldn't create mass panic because the government will successfully guarantee deposits. California, Ohio and the Southeast will see some dramatic bank failures, he said, and Citibank's days might be numbered.
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Credit unions will probably eventually see at least a little bit of the bailout booty, Johnston said, but it won't be via quick stock purchases. For one thing, credit unions aren't in dire straits. Another hurdle is the fact that the cooperatives don't have stock to sell.
What does it all mean for credit unions? Johnston said the industry should be able to profit from the banking mess, but the success of individual credit unions will depend upon the stability of members' employment status. Credit unions that work closely with members to minimize losses will fare the best, he added.
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