Why do Manitoba credit unions give rates that good? | Page 3 | General comparisons | Discussion forum

I think all this has been covered here before, if anyone wants to search.

DGCM is not part of the Manitoba gov't, CDIC is a federal crown corp thus is part of the federal gov't. Neither the federal gov't nor the Manitoba gov't has any connection to guaranteeing Manitoba provincial credit unions, as far as I know.

Can anyone clean up the title of this thread? Makes it look like we're not very bright.

Perhaps my hubris get the better side of me, and if apology is need, i am willing to give.

However, implicit guarantee is a thing, that's the reason why Fannie Mae and Freddie Mac turns into gigantic monster before it collapse as investor believe their security are guarantee by Washington, which allow them to enjoy lower cost of borrowing compare with their Wall street rivals.

From what Top It Up and hotmoney described, that is sadly, the case here for Manitoba CU, where the implicit "unlimited amount" guarantee of the government of Manitoba allow those CU to absorb massive amount of deposit by giving them competitive advantage. When this privilege is abuse, which is likely as individual members have little knowledge and interest to monitor CU (Compare with banks in which large institutional shareholders keeping a close eye on everything). Depositors and tax payers of Manitoba will have to pick up the pieces. The later claim means the government will have to step in to ensure there will not be a total destruction of the industry and cost many more people to loss their saving and create a massive political and economical firestorm.

P.S: fix spelling mistake and grammatical error, as I was previously typing on my phone.

FWIW, I don't think Jon was being insulting, just straightforward.

"There are four provinces in Canada in which credit union membership borders on half of the population: Manitoba, Québec, Saskatchewan, and British Columbia" -
http://anserj.ca/index.php/cjn.....le/236/142
This interesting article does not tell us what percentage of MB mortgages are held at CUs as opposed to banks, but if about half the population belongs to a CU, if CUs are the only FIs available in many smaller communities and rural areas, and if people shop around for the best deal and find it at CUs, then I wouldn't consider CUs an 'alternative lender' in the MB context unless they have a higher-than-average default rate. I would consider that they are better judges of risk than the banks because of their local knowledge.
Unfortunately, I have not been able to find the definitive answers to all these questions.

From the CDIC website:
"We are the federal Crown corporation – a part of the Government of Canada - that protects eligible deposits........."

From the DGCM website in response to the question "Is the DGCM part of the Manitoba government?":
"No. The Deposit Guarantee Corporation of Manitoba is established under The Manitoba Credit Unions and Caisses Populaires Act. A Board of Directors, appointed by the Lieutenant Governor in Council of Manitoba, oversees the Deposit Guarantee Corporation of Manitoba."

The DGCM site goes on to make clear that "There is no legislated requirement for the Manitoba government to provide financial support to the Deposit Guarantee Corporation of Manitoba."

What a government of the day would do in response to an inability by either CDIC or DGCM to meet its commitments is speculation.

Top It Up said
There is some credit union / bank "comparing" information in this CCUA publication -

https://www.ccua.com/~/media/CCUA/member_corner/publications/pdfs/2017%20Community%20and%20Economic%20Impact%20Report.pdf?la=en  

Thanks.
Page 20 shows loan losses as a percentage of amounts loaned by credit unions to be less than half the losses of banks over a 20 year period. Further, the loss rate of CUs is far less volatile.
There are various reasons for this and banks are a somewhat different kettle of fish, but this does point to sound risk-taking on the part of CUs. They may be called "alternative lenders" with a somewhat disparaging tone because they sometimes take clients who are rejected by the banks but I don't think this negativity is warranted.

Bill, Hotmony and NorthernRaven, what I am trying to say is even when there are no explicit guarantee by the government. If people treated FIs as if it is guarantee by the government, this will cause investors to neglect their risk assessment process and create competitive advetange for FIs covered under this scheme. This imply those FIs can become very large AND investor of those FIs will be more incline to allow those FIs to make risky decision as they believe they no longer bear the risk.This is a recipes for disaster and government will need to step in because those FIs are more likely to fail AND they are now too big to fail, which cause such assurances by the government become self fulfilling prophecy.

This is the type of mentality NorthenRaven demonstrate when he/she say:

If one wishes to believe the Manitoba government (or the federal financial system, for that matter) would be as unconcerned as to let things get that far without providing some stability, feel free.

It is perfectly possible to debate the utility and fallacy of policies in an abstract and conceptual manner.

I do agree with the implicit message of Snoopy and Hotmony to educate people that such guarantee does not exist, but I doubt how useful this will be until people learn it the hard way, in which the government are disincline to do so. The road to hell is paved with good intentions, after all.