Credit union trades are optimistic that cooperative institutions will win the right to issue secondary capital to investors. However, one vendor that specializes in capital markets called credit union debt "riskier than banks."
"When you invest in Pentagon FCU or Navy FCU, you're also investing in the Eastern Financials, too," said Lou Paar, partner at the New York-based Sandler O'Neill and Associates. "I don't know how you could possibly craft this deal so you could offer a reasonable rate to the member while accounting for the risk of interconnectivity, the fact that credit unions are essentially all subject to a capital call by the NCUSIF."
Unspecified corporate stabilization costs are another issue, Paar said. Capital markets demand a high degree of disclosure, and the redacted PIMCO and Clayton reports available to credit unions won't cut it on Wall Street.
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