NCUA's latest corporate seizure requires the industry to remain "calm and avoid knee jerk reaction" as it considers alternative moves to handle wholesale services, the chairman of the Illinois Credit Union League said today.
Still, small and medium size Illinois CUs will be facing difficult financial dilemmas as they grapple with NCUA's takeover of at least one of the corporates, the $7.4 billion Members United Corporate FCU of Warrenville, Ill, said Dennis Hall, who also is president/CEO of the $830 million I. H. Mississippi Valley CU of Moline.
Hall said his own CU is of sufficient size to seek out alternative vendors for its item processing, check clearing or funding sources but observed that smaller CUs are in a tougher bind.
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Nonetheless, Hall said his Quad Cities CU "decided months ago, long before Friday's events" to set up a working account at the Federal Reserve Bank of Chicago because of better pricing. It also had maintained liquidity backup at the Federal Home Loan Bank of Chicago. Hall noted that I.H. Mississippi retains its wholesale clearing business with Members United but said "we just want to be ready so we could move in an instant."
"This should be a period of wait and see for Illinois credit unions until the dust settles," Hall advised. He added that the CU's capital investment in Members United had long been written off.
He said one option for small CUs may be to seek out banks, but that route may be impractical and too costly. "Let's just sit tight," he said. He added that Friday's seizure "caught us and others completely off guard–a big surprise with a lot of negative press." So far, however, the public reaction he's observed has been nil. "Not one phone call or email from a member," he said.
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