6. The protection of savings was a strategic issue and applied to ALL including the Banks. That is entirely a different matter as well you know.
It's not entirely a separate issue. You seem to only look at DGS from the perspective of the deposits placed with credit unions. Brendan is talking about the benefits the CUs received from the banks being guaranteed.
The credit unions had credit risk exposure to 2 main fronts:
1. The lending to their borrowers, and
2. The credit risk of the banks they placed funds with.
If the DGS hadn't existed, and banks had been allowed to fail, credit unions would have been decimated overnight.
There was approx 17m of Credit Union funds still invested in an IBRC product at the date of liquidation, which at the time looked unlikely they would ever get anything back. This was a drop in the ocean compared to the deposits they had, which were covered by DFS / ELG when the guarantee came in.
So, in my opinion
2. Did credit losses sink the credit unions?
They would have, without the guarantee.
7. Reduced Credit Union lending because of 3 resulted in temporary surplus of funds.
Ah now, you know the CU sector better than anyone here. Several credit unions had massive surplus funds long before the financial crisis. There's nothing temporary about it.
I don't agree with Brendan's overall analysis, but it's difficult to have a worthwhile debate about the CU sector if you fail to acknowledge that there are any issues.