Credit unions during the crisis: did they provide liquidity?

ABSTRACT

We use the consumer finance monthly national survey to demonstrate that credit unions (CUs) in the United States did little to help consumers obtain a home equity line of credit (HELOC) during the recent financial crisis. Our results hold after including a two-stage regression structure using the availability of CUs as the identifying instrument, as well as employing a Heckman correction procedure to adjust for sample selection bias. We find that during the financial crisis, CUs were no more likely than other depositary institutions to extend HELOCs either in areas experiencing housing price declines or to lower income households. Our results provide an empirical counterpoint to those who have lauded CUs for providing liquidity during times of crisis or for serving consumers who would otherwise be challenged to obtain funds.

KEYWORDS:

• Credit union
• home equity line of credit
• liquidity
• financial distress

JEL CLASSIFICATION:

• G20
• G21

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Our HELOC data were capped at $100,000. The 130 affected observations were recorded as $100,009. Whether we treated these observations as $100,009 or else excluded them from the analysis did little to change the nature of our results.

² For additional information, see https://www.congress.gov/bill/114th-congress/senate-bill/2028.