5 Trends You Should Pay Attention To On A Thursday Morning
There are days when finding material to blog about makes me empathize with a weapons inspector in Iraq and then there are others when it’s about as easy to find issues to tell you about as it is to spot a picture of a Kardashian sister in the supermarket checkout line. This is one of those latter days.
This morning’s news highlights 5 trends that will help shape the direction of the credit union industry for months, if not years, to come.
- In case you missed it, the Federal Reserve Board bucked conventional wisdom when it announced that it would not cut back on its $85 billion monthly purchase of treasuries and mortgage-backed securities intended to spur economic growth. Chairman Bernanke touched off a sharp rise in mortgage rates (coinciding almost to the day that your blogger decided it was a good time to look for a new house) when he held a press conference after the last meeting of the Fed’s Open Market Committee where he seemed to suggest that the Fed would shortly be cutting back on bond purchases in response to the growing strength of the economy. Yesterday, the Fed Chairman emphasized that the Fed has consistently overestimated the economy’s capacity to grow and that a tapering of the bond buying program was only “possible” some time this year. The bottom line for credit unions: brace yourselves for a continuing scramble for investment yields for several months to come. Furthermore, don’t make the Fed’s mistake and assume that your members are going to be saving and borrowing in a robust economy any time soon.
- Washington’s silly season gets serious. One of the reasons pointed to by Mr. Bernanke for the decision to continue the bond buying program was the looming possibility that in the not too distant future, Congress has several opportunities to do damage to the nation’s economy in the name of fiscal austerity and ideological purity. Like this article in Politico this morning, the Chairman suggested that while a government shut-down in early October if Congress and the President can’t agree on a spending plan by the start of the federal fiscal year on October 1 would be bad, the real damage would come if politicians decide to play a game of Russian Roulette by forcing the President to negotiate over raising the debt ceiling. At his press conference, the Chairman went out of his way to point out that there would be little the Fed could do to soften the economic impact of a debt crisis. Unfortunately, with House Republicans set to pass legislation “defunding” Obamacare and demanding changes to the Food Stamp program, I’m not quite sure that the Chairman’s message is getting through to many of our elected officials. Listen, I would love my CEO, Bill Mellin, to get me a chauffeured Mercedes Benz to take me to work every morning, but refusing to show up until he does so simply isn’t a good negotiating tactic.
- HAMDA, HAMDA everywhere. Yesterday saw an explosion of Government agencies competing to bring you the latest analysis of the 2012 HAMDA data. Of course, the coolest kid on the block was the CFPB, which released a new easy-to-use tool for people to slice and dice this data from the local all the way up to the national level. The CFPB released an iPad cool search engine that is bound to result in well-meaning reports both using and misusing mortgage data to suggest nefarious reasons for why some Americans pay higher mortgage rates than others. The most interesting factoid of the day was released in a report by the Fed that stated that in 2012 the number of mortgage originations increased by 38% over 2011, led by a 54% increase in the number of refinanced loans. In contrast, home purchase lending increased at a more moderate pace of 13%. Translation: the Fed’s bond buying program helped people who already had houses get better financing, but has so far done little to help that first-time home buyer.
- NCUA to announce stress testing for the big guys. In a blatant example of me-tooism, NCUA announced yesterday that it would be coming forward with a rule mandating that credit unions with $10 billion or more in assets undergo stress tests to see how they would react to severe economic downturns. I can’t quite figure out how I feel about this one yet. On the one hand, stress tests are hard to argue against from a safety and soundness standpoint; on the other hand, this is another example of credit unions paying the price for the mismanagement of banks. Then again, who said life was fair.
- Finally, OCC Comptroller of the Currency Thomas Curry, who is quietly doing a great job as the primary bank regulator, delivered a thoughtful speech signaling the dangers that cyber security attacks pose to the financial industry as a whole, including smaller community banks. My favorite warning in the speech, which should send a chill down your spine if you put cybersecurity on the back burner, is this: “as our largest institutions improve their defenses, it is very likely that hackers will turn their attention to community banks. These smaller institutions can provide a point of access into the system and they have less sophisticated defenses than large banks.” Even though many of these institutions rely on third-party vendors for their IT security, “they still have to be able to assure themselves that these service providers have adequate controls and solid processes in place to protect them and their customers.” Amen, brother. I see a new point of examiner emphasis coming to your credit union soon. Now get to work on implementing those CFPB regulations. . .