Posts filed under ‘Economy’
Don’t be surprised if someone asks you that question in the coming days. The Washington Post reports that the Berkeley Labor Center will release a study today critical of the wages paid to bank tellers. According to the report, nearly a third of the country’s half million bank tellers rely on some kind of financial assistance to get by to the tune of nearly $900 million a year in public benefits including food stamps, the earned income tax credit and Medicaid/Child Health Insurance Program. The report is going to have particular prominence here in New York where it will be used by labor groups pushing for higher wages.
The minimum wage is getting a lot of attention lately. For instance, our good friends on the opposite coast in Seattle are actually arguing for a $15 minimum wage. Economists have spent years debating what effect, if any, increases in the minimum wage have on the economy and the debate won’t end any time soon. But the simplest solutions are rarely the best ones. No matter what the economists argue, it is foolishly simplistic to think that the key to helping people make a living is to have government determine a living wage. There are just too many moving pieces when it comes to figuring out how much people need to make ends meet.
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Did I ever mention that Jocoby Ellsbury was my favorite Red Sox player?
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Here’s one for your hard-core compliance people: Yesterday, FinCEN released regulations finalizing the definitions of transmittal of funds and fund transfers in the Bank Secrecy Act. The regulations were required by amendments to the Electronic Funds Transfer Act related to protections for consumers who send remittance transfers. The final regulations clarify that the new remittance transfer requirements do not require expanded record keeping requirements under the BSA.
Like a kid who slides a bad test score in front of her father on a busy Monday morning hoping he won’t notice the mark, the Obama Administration announced more bad news on the rollout of Obamacare the day before Thanksgiving. No one releases good news the day before Thanksgiving. By the time America’s tryptophan induced slumber has worn off, we are off to battle the Black Friday crowds at the mall.
So, it’s worth reminding you on Monday morning that the government announced that it would be delaying for a year the inauguration of its website for the Small Business Health Options Program, which in the words of the Department of Health and Human Services “will help curb premium growth and spur competition based on price and quality” for small businesses.
What has always intrigued me most about the impact that Obamacare could have on credit unions is how much it would entice credit unions to nudge employees into government based exchanges. Credit unions are a unique industry in that the vast majority of employers are small businesses that offer health care to their employees. This also means that they are acutely aware of how expensive health care has become.
Small employers — defined as employers with either 50 or 100 or fewer employees depending on the state in which you live — who offer qualified health plans will be eligible for various tax credits to help cover the cost of health insurance premiums. Although these tax credits are still taking effect, an Internet-based SHOP exchange was supposed to allow individual businesses to shop and compare health care plans the same way as individuals are supposed to be able to.
On Wednesday, the Administration, which of course is still struggling to get its health care site for individuals up and running, announced that it was delaying its small business website for a year. If you want, you can still shop for small business health plans and take advantage of tax credits with a broker, for instance, but really it’s the Internet that is needed to create a true marketplace where small businesses have leverage.
I have never seen any administration at any level of government self-inflict so much political damage on itself as the Obama Administration has with its health care legislation. Let’s not forget that beyond the political incompetence, there are real practical consequences for a health care system that cannot be sustained in the long run. . .
A few quick notes: The initial take on Black Friday is that consumer spending was a bit more sluggish than retailers had hoped. This is, of course, yet another piece of evidence that for the consumer, the economy remains stuck in neutral. . .
Finally, although this has absolutely nothing to do with credit unions, Amazon.com is planning to use unmanned drones to drop packages at your doorstep within a few years. Can you imagine being the first person in your neighborhood to get that delivery?
The minutes from the most recent FED Open Market Committee meeting are getting a lot of attention (http://www.zerohedge.com/news/2013-11-24/banks-warn-fed-they-may-have-start-charging-depositors), not because of the increasingly redundant debate about if and when the FED will “taper” its bond buying program, but because of the FED’s discussion of what it will do to keep downward pressure on interest rates even after its bond buying binge ends. Specifically, this passage is getting some major banks riled up:
Participants also discussed a range of possible actions that could be considered if the Committee wished to signal its intention to keep short-term rates low or reinforce the forward guidance on the federal funds rate. For example, most participants thought that a reduction by the Board of Governors in the interest rate paid on excess reserves could be worth considering at some stage, although the benefits of such a step were generally seen as likely to be small except possibly as a signal of policy intentions. By contrast, participants expressed a range of concerns about using open market operations aimed at affecting the expected path of short-term interest rates, such as a standing purchase facility for shorter-term Treasury securities. . . (http://www.federalreserve.gov/monetarypolicy/files/fomcminutes20131030.pdf)
By way of background, the interest on excess reserves is the interest that FED banks pay to financial institutions for holding their excess reserves. Keep in mind that the FED has always sought to underscore its intention to keep interest rates low long after the bond buying ends. This may seem like an obvious point, but when conventional wisdom was that tapering was imminent over the summer, there was also speculation that the FED would soon raise interest rates. As a result, the FED’s comments are best understood as part of a wider discussion about how to make sure its interest rate intentions are abundantly clear.
Still, the suggestion that the FED might cut back on the interest it pays for these funds has gotten “leading banks” to publicly state that they would start charging depositors for the right to deposit their money if the FED cuts its own interest payments.
To be sure, accounts cost money. But I just can’t wait to see the backlash as bankers try to explain to the public why it simply isn’t worth it to take their money. Instead of the FED coming up with new and creative ways to unofficially cap interest rates even after the tapering has ended, why doesn’t it just continue the tapering program? It might seem like an awfully simplistic way of looking at things, but it’s not too difficult to figure out that we have a sluggish economy and a continuing need to encourage lending and investment.
On that note, have a happy Monday and remember the holiday season is just three days away.
You know the economy is in a rut when even the good news is bad. Statistically speaking, the unemployment rate declined, albeit at an anemic pace, in September as the economy added 148,000 new jobs. This relatively sluggish growth is nowhere near where the economy needs to be headed if it is going to break free from the gravitational pull of the Great Recession.
This is why I included this chart in today’s blog post. Policy makers are increasingly looking to the workforce participation rate, which measures the percentage of working age Americans who are employed or fall under the official definition of unemployed, rather than the unemployment rate, which measures those without jobs who are seeking jobs divided by the total workforce, as the true measure of the country’s employment strength. As you can see, today we have the fewest number of working age Americans in the workforce as a percentage of our total population at any time since the late 1970s.
Statistical cynics, like my wife, point out that this trend, in part, reflects aging baby boomers checking out of the workforce. Fair enough, but demographics can’t explain most of the dramatic decline. If we were having a true recovery employers would be hiring to keep up with increased demand. Instead the number of long-term unemployed is remaining at stubbornly high levels.
Another school of thought is that technology makes the country that much more productive. We simply don’t need as many workers as we used to. The argument goes that, the Chinese model not withstanding, today’s manufacturing plant is run by software designers and robots. Another interesting point, but the economy has always gone through periods of innovation and the person who used to make horse-drawn buggies usually ended up making Model T Fords. Plus, if these statistics indicated nothing more than demographic and systemic shifts then why would they be so pronounced over the past five years.
One other depressing statistic to take a look at is the total unemployed plus the underemployed as a percentage of the total workforce. That number currently stands at 13.6%, down from 14.2% in September 2012.
At some point maybe our politicians will realize that the one piece missing in the economic puzzle is consistent, thoughtful leadership.
Joint Regulations Proposed on Assessing Diversity
Yesterday, federal regulators including the NCUA issued a proposed regulation mandated by Dodd-Frank establishing a framework for assessing the success financial institutions have in attracting a diverse workforce. I haven’t had a chance to read the full regulation yet, but the Association will be coming out with a survey to see what comments, if any, we should make on this proposal.
Yesterday, a vote by the Senate to temporarily fund the government beyond October 1 was delayed by Republican Senator Mike Lee (Utah), a leading opponent of the health care law. This maneuver followed closely on the heels of a 21 hour filibuster by Senator Ted Cruz (Texas), again motivated by a last ditch effort to defund Obamacare.
But if you really want to know just how dysfunctional Washington has become, all you need to know is that Republican Senator Bob Corker (Tennessee) responded to Lee’s objections by saying “the reason that we’re putting this off is because they would like for people around the country that they have notified to be able to watch.” In other words, a Republican Senator is accusing another Republican of putting his interest in grandstanding to potential national supporters above the interest of his constituents, the Senate and the country.
I personally think the Senator from Tennessee has a point and I would love to see more Republicans stand up to these so-called Conservatives before they can do even more damage to the country’s economy, but increasingly that doesn’t appear to be the case, which means that the Sunday talk shows are required watching for anyone responsible for plotting your credit union’s path given the potential trajectory of the economy over the next six months to a year.
First, it appears unlikely that the House Republicans and President Obama will be able to avoid a government shut down. When this happened in the late 1990s, the economy had already picked up steam. But take a look at NCUA’s most recent video recap of current economic conditions and how they are impacting credit unions and you will realize that this is no time to be playing games. Employment rates continue to be sluggish and credit unions are already being impacted by uncertainty over interest rates. Plus, for those of you with large numbers of federal government employees in your SEG groups, make sure you’re ready to provide whatever short-term help you can to these individuals who will find themselves with no paychecks in the coming days.
This scenario is bad enough, but right around the corner, probably some time in late October, but no one knows for sure, the Government will run out of its spending authority to satisfy creditors financing the national debt. A fringe group of so-called Conservatives has somehow deluded itself into thinking that the fiscally responsible thing is to threaten to let this country default on its payment obligations if the President does not agree to a host of their most cherished reforms.
Whether you agree or disagree that government spending is out of control, ask yourself how you would respond to a member who informs you that he is no longer going to pay off his credit card bills or mortgage in the name of fiscal responsibility. That is exactly what some members of Congress are threatening to do. If the worse case scenario plays out, our members will pay the price for this stupidity.
I would like to say that the issues having the most direct impact on credit unions today has nothing to do with D.C. politics, but I’d be wrong.
New York Posts Proposed Force Placed Mortgage Insurance
As I mentioned in a blog earlier this week, New York State is proposing new force placed insurance regulations intended to clamp down on affiliate relationships between servicers and insurance providers. The regulations were officially posted September 26, which means you now have 45 days to respond to this proposal. My guess is that it will only impact a very narrow group of credit unions, but I think it’s worth taking a look, just to be sure.
On that note, have a great weekend and let’s hope that you and your friends and family get along better than the U.S. Congress.