oneleaf wrote:I was tempted to join a credit union in CA awhile back, due to fantastic service, rates, and benefits, but decided against it when I found out it was privately insured by American Share Insurance, and not the NCUA.
Occasionally, I would reconsider opening a small account there, especially since as far as I can tell, ASI is a fine organization, and the member credit unions I have looked into seem to be very well-managed.
Before this financial crisis, I could imagine going with them, but now, do you think there is still a place in this country for non-federally insured credit unions? I'm still trying to understand the strong advocacy I see in favor of credit unions being allowed to choose private insurance.
Can anyone provide some insight into the advantages of private insurance, and whether it is still sensible to do business with a credit union that isn't federally insured?
After there were losses and delays in withdrawing funds from privately (not federal) insured or not insured credit unions in the 1980s, many (I think most) states required all state chartered credit unions in those states to have federal insurance (NCUA). Federally chartered credit unions have been required to be federally insured. A few states continued to allow state chartered credit unions to have the choice of federal insurance or private insurance. I believe ASI is the only private credit union insurer.
I believe the federal government could have required all credit unions to be federally insured, but chose not to do so. ASI and state chartered credit unions and the trade associations for state charters have all heavily lobbied for both state charters and for the option of private insurance. There is even some (small right now) push for the option of private insurance in states that do not allow it today.
I think the time is past for mandating all credit unions to have federal insurance. The risks are too high, in my opinion. When runs on privately insured credit unions cause problems to the system, or when failures of ASI insured credit unions put ASI at risk, then all credit unions suffer.
From what I know:
1. ASI is a fine, well run organization
2. ASI insured credit unions are just as well run, safe and sound as federally insured credit unions
3. The percentage of insured savings held in reserves by ASI is higher than the federal percentage.
Relating to #3, I still recall that in the 1970's, State chartered savings ald loans in some states had private (non federal) insurance. These institutions could pay a higher rate on savings in some states. Maryland was one such state. "Don't worry", the Maryland S&Ls said, "We as safer than FSLIC because we have a higher reserve ratio." I did not have any funds in a Maryland S&L when things hiot the fan. Some folks waited years to get their money. In some states, some folks had actual losses from private savings insurance for S&Ls and credit unions.
Some of the advocacy for private insurance is a sometimes justified distrust of the competence of federal government agencies.
Another factor motivating the ASI insured credit unions is the belief/hope/experience that the costs of insurance is lower and/or will be lower in the future.
I reluctantly have concluded that I would not place any significant amount of funds in a non-federally insured credit union.
Interestingly, in speaking with several folks who know this issue very well, there has been close to zero fuss raised over this, and members of privately insured credit unions have not complained in any significant way. The trade press has had ZERO articles on the issue.