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Tighter Times for Christian Financial World

Interbank lending crisis is hitting where subprime mortgages missed.

Although Christian financial institutions appear to be in better shape than their Wall Street counterparts, a noted Christian investment adviser said everyone has been affected as the economic crisis has shifted from mortgages to interbank lending.

"It's gone to another level," said Rusty Leonard, CEO of Stewardship Investment Counsel of Matthews, North Carolina. "Does that mean they're all going to go bankrupt? No. Most probably have little exposure to the subprime mortgage market. This has been a problem of the hedge fund community and high echelon levels of the investment banking community."

The Evangelical Christian Credit Union (ECCU) relies on other financial institutions to provide funds for a portion of its loans, said president and CEO Mark Holbrook. With many financial partners holding on to their cash, the credit union has had to curtail some of its lending.

"This reflects what's going on throughout our economy," Holbrook said. "Fewer dollars are available between institutions, reducing capital available for businesses and ministries alike."

As the economy has deteriorated, the ECCU has tightened its credit standards. In addition to requiring higher down payments on property purchases, it is examining applicants' year-to-year income trends.

Despite these moves, the Brea, California, organization has had a healthy 2008—on an annualized basis, its deposits are up nearly 20 percent.

The Christian Community Credit Union (CCCU) in neighboring San Dimas has also tightened its lending standards, with maximum loans of 80 percent of value for autos and real estate.

Still, president and CEO John Walling said an influx of new and current members are continuing to deposit funds because they value the CCCU's safety and soundness.

"The problem with the interbank lending does not affect credit unions because we have our own corporate deposit and lending network," Walling said.

Nor investors base decisions on the vacillations on Wall Street, which saw a pair of near-900-point upswings in October sandwiched around huge losses, Leonard said.

Echoing the advice of sage investor Warren Buffet in a mid-October New York Times column, Leonard is advising his clients to stay fully invested in the stock market.

He insists things will improve despite the likelihood of terrible unemployment statistics and other economic indicators the last two months of 2008.

"We're looking for brighter times ahead," Leonard said. "A lot of this has to do with confidence. It's a crisis of confidence as much as it is a crisis of actual facts. As a long-term investor you don't enjoying going through the downturns, but they do provide some stunning opportunities."

Related Elsewhere:

See Walker's earlier article, "Christian Financial World Sees Silver Lining in Banking Mess" (September 29, 2008).

More news and opinion on the economic crisis is available in our full coverage area.

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