An under the radar bailout

By Rick Moran

Congratulations America! You are now the proud owners of several failed "wholesale" credit unions. And what a bargain! Only $50 billion or so in bad assets will be absorbed by us, the taxpaying public, in a deal that will transform (there's that word again) the credit union industry.

The Wall Street Journal:

Regulators announced Friday a rescue and revamping of the nation's wholesale credit union system, underpinned by a federal guarantee valued at $30 billion or more. Wholesale credit unions don't deal with the general public but provide essential back-office services to thousands of other credit unions across the U.S. The majority of retail credit unions are sound, but they will have to shoulder the losses through special assessments over the next decade.

Friday's moves include the seizure of three wholesale credit unions, plus an unusual plan by government officials to manage $50 billion of troubled assets inherited from failed institutions. To help fund the rescue, the National Credit Union Administration plans to issue $30 billion to $35 billion in government-guaranteed bonds, backed by the shaky mortgage-related assets.

Officials said the plan won't cost taxpayers any money. Still, it marks the latest intervention by the U.S. government into a financial system weakened by the real-estate bust. Bad bets on mortgage-backed securities have now killed five of the nation's 27 wholesale credit unions since March 2009. The federal government, which now controls about 70% of the total assets at such credit unions, said the surviving institutions will be reined in so that they take fewer risks with their investments.

Do you believe them when they say it won't cost the taxpayers any money? That means they are not contemplating using taxpayer monies to bail out these wholesalers, but as we've seen with every other bailout plan, the best laid plans of mice and men...

Aren't you excited to have these failing companies added to our portfolio?

The government "seized" 3 wholesale credit unions. And no taxpayer money will be used to prop them up? I guess that means that the government printing presses will be working a little harder in the next few months.

But don't worry. It's not real money anyway. Nothing we have to worry about at all. Now, our grandchildren might be telling a different story...