CUNA economists often report on the wide-ranging financial and social benefits of credit unions’ not-for-profit, cooperative structure for both members and nonmembers, including financial education and better interest rates.

However, there’s another important benefit of the unique credit union structure: economic and financial stability.

During the 2007-2009 financial crisis, credit unions significantly outperformed banks by almost every possible measure. In fact, evidence suggests that if credit unions ruled the market, it’s quite likely we never would have had a financial crisis.

What’s the evidence to support such a claim?

First, numerous complex and interrelated factors caused the financial crisis, and blame has been assigned to various actors, including regulators,
credit agencies, government housing policies, consumers, and financial institutions.

But almost everyone agrees the main proximate causes of the crisis were the rise in subprime mortgage lending and the increase in housing speculation, which led to a housing bubble that eventually burst.

As home values plummeted and the stock market crashed, the U.S. entered a deep recession, with nearly nine million jobs lost during 2008 and 2009.

Who engaged in this subprime lending that fueled the crisis?

While “subprime” isn’t easily defined, it’s generally understood as characterizing particularly risky loans with interest rates that are well above market rates. These might include loans to borrowers who have a previous record of delinquency, low credit scores, and/or a particularly high debt-to-income ratio.

To be clear: Not all subprime lending is bad. Many credit unions take pride in offering subprime loans to disadvantaged communities.

However, the particularly large rise in subprime lending that led to the financial crisis was certainly not this type of mission-driven subprime lending.

NEXT: Run-up to the crisis