Bailout Turns to Shore Up Credit Unions

$41B will focus on largest; most haven't seen a dime yet
By Clay Dillow,  Newser Staff
Posted Dec 9, 2008 10:39 AM CST
Treasury Secretary Henry Paulson's bailout initiatives have focused on taking equity stakes in banks, leaving credit unions largely to fend for themselves.   (AP Photo/Gerald Herbert)
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(Newser) – Largely overlooked by federal regulators managing the bailout, credit unions will receive  $41 billion in lending to brace a handful of the largest institutions in a plan expected to be announced this week, the Wall Street Journal reports. The plan is intended to bring relief to as many as 10,000 homeowners by cutting mortgage rates, as well as to stabilize lending between retail credit unions and so-called corporates.

Corporates, which don’t deal with the public, take deposits from retail credit unions and invest them in long-term assets, but some suffered big paper losses on mortgage-backed securities. The plan will offer low-cost loans to retail institutions to deposit with corporates, recapitalizing the system. It also offers credit lines of up to $2 billion that retail institutions could tap at favorable rates to subsidize struggling homeowners.