SAN ANTONIO (10/4/10)--Four areas of risk will affect the economic recovery, and credit unions and regulators should expect continued difficult economic times that may not return to the "normal" as they know it, attendees of the National Association of State Credit Union Supervisors (NASCUS) Annual Summit were told Thursday.
CUNA Mutual Group President/CEO Jeff Post, speaking at the summit, said he believes the slight improvement in 2010's economic conditions may only be a break, rather than a real economic recovery. “We’re clearly not in a recovery and we face the potential risk of the economy declining before it fully stabilizes,” Post said. “I believe we’re entering a new economy--one that will not have the type of growth or accumulation of wealth we’ve seen in previous decades. I also believe it’s very important to have our eyes wide open for the future. In times of great challenge, there are also opportunities to improve, differentiate and gain market share.” Post focused his concern on four areas of risk that will affect an economic recovery: housing, employment, credit losses and debt.
* Housing: “Total delinquencies were at 13.97% at the end of second quarter. With foreclosures continuing and inventories still high, there’s a real concern that values will continue to decline. Credit union members are affected in another way--many were counting on their home equity to contribute to their retirement. In the future, that may not be an option.” * Employment: “Only when there’s a consistent increase in employment will we see improved home sales and starts. Until companies have more confidence in the future, employment will continue to be a challenge.” * Credit losses: “Remember, the economic crisis started as a credit crisis, and we continue to see credit losses continuing today. An astonishing $1.3 trillion of consumer debt is delinquent ... Adding to the weight of this debt is the fact that consumers’ income statements aren’t flush now due to high unemployment and rock-bottom interest rates.” * Debt: “I worry about the next decade and beyond because of the growing U.S. debt and debt around the world.”
Despite the gloomy economic picture, Post said he feels better about the economy today compared to 2008 and early 2009. “However, I’m clearly not bullish,” he added. He reminded attendees that challenging times also present opportunities and suggested credit unions employ some of the same strategies CUNA Mutual has in the down economy. “This is a great opportunity to clarify your strategy and what sets you apart," Post said. "Now is the time to improve by leveraging your strengths and reducing costs in areas where you don’t differentiate, and it’s also an opportunity to return to your roots, or your original purpose. These actions can help improve your operations and the balance sheet, and give you the flexibility to adjust based on the things you don’t control,” he added.