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Old 09-11-2010, 09:45 AM   #41
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My question is how they can make money at those rates. I once was involved in an NCUA insurance case (long ago) and I was not impressed with the level of financial regulation. Exactly how are they making money paying 5% ?
Loan Growth Falls To Historic Lows

Credit Union Journal Daily Briefing | Wednesday, September 8, 2010

WASHINGTON – Credit union lending has all but dried up, even with interest rates plunging to new lows, leaving new challenges for credit unions to attract borrowers.
Monthly data complied by CUNA from almost 500 credit unions showed total credit union loans declined by 0.1% during July, and have declined by almost 1% for the first seven months of the year.
That’s the first time in almost 30 years credit unions have had negative loan growth through the first seven months of a year, according to Bill Hampel, chief economist for CUNA, who predicted the weakest year for loan growth since World War Two. “That’s why this recovery is so weak,” said Hampel.
The CUNA economist attributed the continued lack of loan demand to the efforts by consumers to pay down debt. “For the past 15 years the household sector has increased its debt faster than it has increased its income,” he said. “What we’re seeing now is a de-leveraging of the household sector.”
Tun Wai, chief economist for NAFCU, said the enduring recession has had pushed down demand, even for borrowers who have not lost their jobs. “If you are employed and you are really concerned about the future you don’t spend and you’re really trying to pay down your debt,” he said.
“I think there is going to be rather slow loan growth for quite some time,” Wai told Credit Union Journal yesterday.
NCUA figures for the first six months of the year, which were released last week, show loan growth for the first half at a meager 0.1%, with the fastest-growing types of loans being those with members seeking lower payments and less collateral.
New auto loans, for example, fell by 4.2% in the first quarter and by another 5.7% in the second quarter – almost 10% for the first half of the year. Credit card loans were down almost 0.6% for the first half, while first mortgages – fueled by decades-low rates – were up only 1.2% for the first half of the year.
The slack loan demand creates a major dilemma for credit unions who now have cash to lend but few takers, according to NAFCU’s Wai. “The question is, what are you going to do with it? Some credit unions are probably holding on to it as cash,” he said.
Both CUNA and NCUA figures also show a big drop in share growth. NCUA said share growth slowed from 11% annualized for the first quarter to just 0.6% in the second quarter. CUNA’s figures show shares grew by just 4.17% for the first seven months, half of the 8.73% growth rate for the same period last year.

I am afraind that someone is stoking a balace sheet with taxpayer taking the risk

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Old 09-11-2010, 10:09 AM   #42
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Originally Posted by Emeritus View Post
My question is how they can make money at those rates. Exactly how are they making money paying 5% ?
I wondered this 7-8 years ago when I bought my first CD's at PenFed.(At 5.25%)

My guess was and still is that they make enough loans at 8.99% to make money on the 5% CD's.
They make boat, cycle, personal, and consolidation loans at around that 9% mark, along with credit cards at higher rates.They have a lot of service person clients, who need these kind of loans. I have watched the rating on PenFed, along with reading financial reports, which I don't profess to be an expert at, and feel safe with my money. I do keep my $ amounts below the insurance level, for the most part.(A tiny part of SO's IRA will be over in a year for a year or so)

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Old 09-11-2010, 01:32 PM   #43
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But why pay 5% for money with 100% treasury guarantees? If you have a genuine retail franchise you go to some major player and borrow milllions at 3-3.5 %
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Old 09-11-2010, 01:40 PM   #44
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Don't they require you ( A bank or CU)to have so much core deposits?
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Old 09-11-2010, 01:53 PM   #45
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This question (how can PenFed offer these rates) was discussed a few days ago on this thread: Purchasing SPIA through Fidelity

Brewer's post (#25) offers a reasonable explanation...

Numbers is hard

Although rare, it is possible to read something on this forum you don't agree with and simply move on with your life

Retired in 2005 at age 58, no pension
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