by Jay Kruse, Chief Advocacy Officer
March Madness is upon us! Did you fill out your bracket? I’m guessing many of you will be spending the day in front of one or more TVs, hopefully at a sportsbook, watching as much basketball as you can handle. There is still time to complete you bracket, but let this serve as your final warning, games kick-off this morning at 11:15 a.m. CT. I’m wishing you all the best of luck in your office pools and parlays!
But now, let’s talk about some real Madness – Banking Madness.
The country has experienced the failure of three banks in the last two weeks, including Silicon Valley Bank and Signature Bank. The collapse of Silicon Valley Bank (SVB) on March 10th is the second largest failure of a financial institution in U.S. history, and then on March 12th, regulators also shut down Signature Bank. SVB's leadership team made some major mistakes. Using short term deposits, which were mostly uninsured, to purchase long-term low-rate bonds in a rapidly increasing interest rate environment was not only risky but extremely negligent. The fact that those short-term deposits were mostly uninsured compounded the issue, causing a major run on the bank with depositors racing to the bank with the hope of being the first to withdraw their funds.
It’s quite a simple concept really. If depositors can demand free access to their money at any time, then using those same funds to buy long-term bonds is risky. According to reports, SVB was forced to fire sale $21 billion worth of bonds, resulting in a $1.8 billion loss.
The credit union difference is clear for consumers.
Credit union members have never lost a penny of insured savings at an insured credit union.
Recent bank failures have no connection to credit unions. Members can rest assured that credit union deposits are insured, safe and secure. As not-for-profit financial cooperatives, credit unions’ first priority is the people we serve, not bank shareholders or Wall Street investors. Credit unions are not-for-profit and that is what makes us unique and different.
Remember, credit union deposits are insured up to $250,000 per individual depositor – the same level as any other federally insured financial institution.
Encourage your members and potential members to learn more about the credit union difference at www.YourMoneyFurther.com.
Visit www.MyCreditUnion.gov for more information about the National Credit Union Share Insurance Fund coverage for consumers.
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