Playing the Cards We’re Dealt.

November 2, 2012 at 7:39 am Leave a comment

I’m not the world’s most religious man but yesterday I attended the first day of an economic forum hosted by the Association and Alloya Corporate and it got me thinking of the serenity prayer: Lord help me change those things I can and accept those things I can’t and give me the power to know the difference.  As credit unions try to manage their ride on the most unstable economy since the Great Depression with no end in sight, this is a good mantra for all of us to keep in mind.

First let’s accept the fact that much of what ails the industry is outside its control.  Take, for instance, today’s jobs report.  Later today, the government will release the latest numbers on the unemployment rate.  This number will get much attention from the campaigns looking for one more jolt of enthusiasm prior to Tuesday’s election.  But the reality is that we need job growth of more than 200,000 people a month if we are going to turn this economy around and we are nowhere near that number.  That means that for the foreseeable future credit unions will continue to have members with underwater mortgages or who are simply struggling to keep up with the car payments.

What about housing?  I usually get suspect when I hear industries say that government policies are impacting their short-term decisions.  But this is one case where I think the federal government has effectively put mortgage lending at a standstill.  For instance, the most recent survey of senior underwriters conducted by the Federal Reserve indicated virtually no change in tougher underwriting standards.  The reality is that any credit union or bank that loosens underwriting standards prior to the finalization of a host of mortgage rules by the CFPB would be crazy.  For better or worse, and I think for worse, by nationalizing underwriting standards, Dodd-Frank has effectively made the federal government the underwriter in chief.  So if a member complains about not being able to get a mortgage, you may want to tell him to contact his local Congressman.

So what can we change?  For me the most interesting question from yesterday’s forum was from a participant who asked why PIMCO gets such a high return on its investments in the same economy than credit unions can get on theirs.  Is this something we have under our control?  The short answer is no given the statutory and regulatory restrictions currently placed on credit union investment authority.  The more intriguing question to ponder is should we as an industry, recognizing the likelihood that the ground hog’s day economy we are in isn’t going to change any time soon, start advocating for broader investment authority.  If the answer is yes, then what restrictions should we place on credit unions to ensure they have the baseline competency to manage the increased risk?  I don’t have the answers, but I think these are questions worth trying to answer.

Have a nice weekend.

Entry filed under: Advocacy, Economy, General. Tags: , , , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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