Crisis in the Markets: Why ‘Safe & Sound’ Is No Longer Good Enough

Back in July, the League, many credit unions and credit union organizations put the word out to the media and members that member accounts were safe and sound under the NCUSIF umbrella. At the time, the markets had tumbled and folks were nervous.

Looking back, it seems like those were the good old days.

The credit markets are seizing, and there’s pure panic on Wall Street this week. And people on Main Street are really, really worried.

So the League is speaking up again, but this time “safe and sound” is an afterthought in our message approach.

Why pull that punch with people so nervous? It’s simple really – nobody believes it anymore.

Here’s a few notable “reassuring” messages as of late:

  • “The strategic initiatives we have announced today reflect our determination to fundamentally reposition Lehman Brothers by dramatically reducing balance sheet risk, reinforcing our focus on our client-facing businesses and returning the Firm to profitability.” — Richard Fuld, CEO of Lehman Brothers, five days before the firm went bankrupt.
  • Bruce W. Harting, an analyst at Lehman Brothers, said that Fannie’s “capital appears much stronger than widely perceived“ and that neither Fannie nor Freddie “has an immediate need for capital.“ — As reported by Andrew Ross Sorkin in the New York Times, three days before the US Government you and I took control of Fannie and Freddie.
  • In an effort to squelch investor anxiety, WaMu insisted Thursday that it has sufficient capital to fund its operations … — As reported by Sarah Repro in the Seattle Times two days ago. As I write this, WaMu is up for auction in order to stave off bankruptcy.

Messages like that have been foisted on the public for weeks now, but like a weatherman forecasting snow in Miami every day, it doesn’t take long for them to be disbelieved (or worse yet, actually raise fear about the folks who are saying them). It’s also worth mentioning that a few of the above statements were factual!

So how do we cut through the perception problem and connect with people about the reality that credit unions are in much, much better shape? My take is you avoid talking about stuff people don’t understand and may not believe, and start talking about things people can hear that tell them you’re doing fine. And be sure to let your members know you’re there for them and you want to help.

A press release follows below that we’ll be sending out Thursday. And if you click here, you’ll see some of the wonderful messages some of our credit unions in NC are developing and sharing in an effort to reassure their members. These will be shared with the media, and as you’ll see if you click the link, those messages from our credit unions about the specific things they are doing to help people are the real difference-makers in this message outreach.)

NC Credit Unions Shine As Credit Crisis Roils Banks, Wall Street

As other financial institutions curtail lending in order to deal with the unfolding credit crisis, NC credit unions continue to help their members weather the economic storm, the NC Credit Union League (NCCUL) said today. The announcement came as many consumers worried about the state of the economy and the banking system.

“It’s natural for people to see the headlines and wonder if their money is safe,” said NCCUL President/CEO John Radebaugh. “Not only are credit unions safe, they’re a safe haven in this economic storm.”

Radebaugh noted that credit unions are fundamentally strong and a number of credit unions are reporting strong loan growth in 2008. “Credit unions made prudent lending decisions when other lenders didn’t, and so there’s no need for them to cut back on lending now.” He added that as cooperatives, credit unions do not rely on the stock market for funding.

As credit unions continue to stand out, NC consumers are taking note. The League offers a credit union locator service, called Find a Credit Union, on its web site. This site allows NC consumers to search for credit unions in their community that they may be eligible to join. “Over the past few months, we’re seeing a lot more searches on the site,” Radebaugh said. In fact, Find a Credit Union searches surged 62% in April – June over the first three months of the year. (To search for a credit union, you may go to http://www.findacreditunion.com/.)

Radebaugh also noted that deposits at all NC credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF). NCUSIF, which is funded by credit unions and not taxpayers, provides up to $100,000 for individual accounts, and $250,000 for retirement accounts.

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