Will Economy Give Us A Trick Or A Treat?

October 30, 2015 at 9:03 am 2 comments

According to the NCUA Examiners Guide (Chapter 11) a good ALLL policy includes “Descriptions of qualitative factors (e.g., industry, geographical, economic and political factors) that may affect loss rates or other loss measurements.”

Good luck complying with that one. We face more economic uncertainty today than at any point in the last decade.  Plausible arguments can be made that in the next two years we could be in an economic downturn, a robust expansion, or continuing in this current slog. No one knows.

Take the Fed. Will they or won’t they raise rates?  I blogged about a  speech by Chairman Yellen a little more than a month ago in which she laid out a convincing case for raising rates now to guard against future inflation but that speech was quickly swamped by lackluster economic indicators. The Fed is as confused as anyone.  The statement it released earlier this week would seem  to indicate that a rate increase is coming just in time for Christmas but with so many unknowns, ranging from China’s economy to  home sales, all this could change. The world is so interconnected and so unstable that “geographic factors” half a world away are impacting your credit union.  And remember the  question is not just when the Fed will raise rates but by how much and over how long a period?

Then there are the political factors. Here the news is a little better.  By getting a budget deal done and raising the debt ceiling raised before riding off into the sunset John Boehner did the country a huge favor.  By not being able to put the country in default or shut down the Government the matches have been put out of the reach of the Congressional children. Besides  Paul Ryan is a great pick.  I’ve given up on thinking that Washington will do anything to help the economy but I’m pretty sure it can’t hurt it.

Where does all this leave us? To me the more flexibility you have the better. We just don’t know how sensitive all those new members you have will be to even slight interest rate increases and the search for yield today could leave you squeezed for profits tomorrow. Hope for the best and prepare for the worst.

Here are some links to some of the material to which I am referring so you can decide for yourself.




Entry filed under: Economy, General. Tags: .

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2 Comments Add your own

  • 1. Rob Nemeroff  |  October 30, 2015 at 9:32 am

    Your first sentence doesn’t make sense? What god?

  • 2. Richard Wagner  |  November 2, 2015 at 1:20 pm

    The word , I think, is good. That’s what I have on my iPad. Richard Wagner


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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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