*This article appeared in the 2008 Joke Issue.
Even before the aftermath of the collapse of Bear Stearns has subsided, the credit crisis has found a fresh victim on Penn’s campus: the Student Federal Credit Union.
SFCU – an entirely student-run bank – is facing imminent bankruptcy due to heavy losses. The credit union’s meltdown stemmed predominantly from the defaulting of mortgage loans by alumni as well as from some riskier investments made by the bank last year.
The announcement of the dire financial situation by SFCU, which has served students and alumni for almost two decades, is sending shock waves through the Penn community.
Prior to this, the bank had never been short of capital.
Students in SFCU’s investment division were seen yesterday fleeing a crowd of students whose savings may have been lost.
Wharton sophomore Ashwin Shandilya, who worked in the investment division, said the bank’s biggest losses were due to ownership of a number of shares of Bear Stearns.
“I didn’t know Bear Stearns was going to fail, but if I had, I wouldn’t have bought so many shares,” Shandilya said.
But students worried about the future of their savings may be able to breathe a sigh of relief as help is on the way: rival campus bank PNC has made a bid to buy out SFCU.
1972 College of Women graduate Claudia Cohen, a former Daily Pennsylvanian managing editor and currently deceased, is providing the funds to PNC for the buyout.
Cohen, who banked with PNC for over 20 years, bequeathed $10 million in her will to the bank to show her gratitude for its quality customer service. Still, PNC chief executive James Rohr says he has yet to see the money.
“We are not trying to take advantage of the situation like JPMorgan,” Rohr said. “Instead we like to see ourselves as the angel from above helping out a peer institution.”
PNC has offered to buy SFCU for $2 a share to match the level initially offered by JPMorgan Chase to buy Bear Stearns.
Wharton professors say that SFCU will most likely be forced to accept the deal because the only other option available is to file for bankruptcy.
Although student deposits may be secure, the plight of the bank’s 100 student employees is less certain.
“If I can’t work at SFCU anymore how am I going to fill my resume and get a job at Goldman Sachs?” Wharton sophomore David Lei said. “My only other source of income is some crappy newspaper job but that just won’t pay the bills or pad the resume.”
PNC Bank executives said that they will try to retain as many employees as possible but they stressed that job cuts are an inevitable component of a merger.
“I can totally sympathize with SFCU. It still haunts me in my dreams,” Bear Stearns chief executive officer Alan Schwartz said. “My heart goes out to all those affected by this traumatic experience.”
