Trey asks the right kinds of question here, and while I commented, thought I would throw up here too, for the record. While this particular housing situation is unique compared to others, its not the first crisis ever, and won’t be the last. My thought, is that this kind of situation is what should drive serious introspection in all Banks/ CU’s to consider not how they will react, but how they will act over the next few months and years, as the situation plays out.
While Trey asked the question about CU’s my answer equally applies to Banks, although it is harder for Banks, and will require even greater introspection in many cases to achieve the right level of customer focus.
Open Source CU: Credit Union Blog
If the bubble bursts (just talking worst-case scenario here), what actions should a credit union take? Is there a responsibility on the part of credit unions to warn/educate members if the economic indicators signal the worst-case scenario is inevitable?
And my comment:
Some insightful comments here, and I liked Tony M’s in particular. Some of the comments have an undertone of panic.
I think there is lots of room for sanity in this situation. Look on the bright side, that its not like the 80’s interest driven crisis, when interest rates peaked in the teens.
Talk of bubbles bursting tends to overlook the fact that every house has some value even in a crash. The crash only relates to values dropping, not value being eliminated.
The other point is that by and large, as someone pointed out above, the neighbour on one side is a policeman, on the other someone in pharmaceuticals, etc … in other words, peoples lives generally goes on. There will always be pockets where that is not the case, say in the event factories close down, but much of that occurred already in the 80’s and 90’s.
To my mind CU’s are in a perfect position to recognise the overall situation of each customer. To continue to provide education, guidance, and importantly, support, to their customers, to allay fears, and to continue to recognise the overall customers circumstance, and not get fixated on home values. Home values will experience some shock for some time, as the financial industry sorts itself out. Customers will remember who worked with them forever.
Bankwatch 
Thanks Collin. Great post…in both places! I hope we will keep this going, folks. I would have thought that all of the recent articles in reference to CU’s being a great resource “in times like these”, would have stirred a lot more blog chatter than it has. I’ve been checking the CU blogs and it hasn’t yet (until Trey turned it over yesterday). Check out this AM’s CUNA NEWS NOW about the three articles quoted there. I just love that many of the articles say things like…”credit unions don’t advertise much, but…” Many of the articles imply that CU’s are a “best kept secret”. That should just not be! It’s time for CU’s to get out of the “best kept secret” mode and “come out swinging” with advocacy type marketing efforts.
Colin,
Timely post; thanks. After 35 years of being a banker, advising bankers, and most recently, poking fun at them, this is too good to ignore.
While it’s true that the current real estate fissle isn’t exactly like that of the 1980’s, the underlying culprit is the same – the yield curve – except today bankers face a flat or slightly inverted form when 25 years ago it was spiked. Faced with the inability to push high loan volume through their own retail delivery systems, our banker friends opted to prop up the substrata of subprime lenders on a wholesale basis. And, although the damage to CUs so far has been limited, the industry isn’t immune. To quote Walt Kelly, “We have met the enemy and he is us.” Bankers facing the challenge of burgeoning liquidity always will find ways to deploy it and it seems like every seven years the industry (all segments) stumbles into the real estate patch, pumps it up, and then watches the air escape.
The U.S. economy has absorbed far worse explosions than what we’re seeing today and, bankers being bankers, there’s sure to be another one sooner or later. For instance, the Private Equity folks might say they’re holding a string of fire crackers right now.
John MacAllister