Mortgage-Market Trouble Reaches Big Credit Unions

Wall Street Journal (08/11/08) P. A1; Maremont, Mark
Five of the country's biggest credit unions--Constitution Corporate Federal Credit Union, Members United Corporate Federal Credit Union, Southwest Corporate Federal Credit Union, U.S. Central Federal Credit Union and Western Corporate Federal Credit Union--together posted nearly $5.7 billion in "unrealized" losses on mortgage-related securities as of the end of May, a key indicator that trouble in the housing market is infecting even the most risk-averse financial sectors. Such losses occur when the market value of a security falls, even if it has not changed hands. The losses are likely to be reversed when mortgage markets stabilize, although some outside observers remain worried that the credit unions are underestimating how deep their mortgage-market problems run. In particular, George Mason University finance professor Gerald Hanweck is concerned that perceptions of added risk could result in a run on one or more of them.