Editor/Publisher's Column: Adjusting to the Realities of a New Year
Forget that jobless claims were revised upward, even higher than initial projections. The New Year is a time for optimism. As California CU League Economist Dwight Johnston wrote in his commentary in the Trust for Credit Unions e-newsletter, “This was the fifth year in a row of triple-digit gains on the first trading day of the year.”
While the stock market rallies, the economy does not necessarily follow. In addition to the unemployment numbers, the consumer confidence index is depressed and home-refinance applications, accounting for 82% of total mortgage activity, have declined for three consecutive weeks, according to the Mortgage Bankers Association.
One bright spot appears to be the automobile market, which TransUnion announced just before the holidays, is forecast for record-low delinquencies and increased borrowing. According to the credit bureau, auto loan debt per borrower is expected to increase from an estimated $13,689 at fourth-quarter 2012 to $14,133 at year-end 2013. Loan delinquencies in the category essentially are expected to hold steady from 0.36% at yearend 2012 to 0.37% at year-end 2013.
In part there is great uncertainty as to whether and when Congress will pass and the president will sign a long-term solution to the fiscal cliff crisis. Every lender in credit unions knows you don’t lend beyond a borrower’s ability to repay or the credit union will likely lose the money. Why anyone would lend more to the U.S. is beyond me, but perhaps the greater mystery is why the government continues to want to dig deeper into debt. Just one more reason we need more credit union people in government in addition to supporting credit union issues.
In line with congressional expectations and credit unions’ desires, CUNA seems to have backed off business lending for now. The trade group’s priorities list has been reprioritized, placing defending the tax exemption at the top.
Tax reform in general is a given and repealing the tax exemption has already been introduced–albeit “accidentally”–in legislation, so this is a wise choice. Additionally, some large, high-profile credit unions made a lot of noise about expending too much political capital on MBLs. Their dues dollars walked right out the door, just before the hopes of passing legislation to expand business lending.
Meantime, problems were hitting the business lending market, taking down credit unions like Texans and Telesis. The bankers were able to make hay out of it. Miffed by the bankers’ opposition to expanded business lending, CUNA was able to help stop the community bankers from getting the Transaction Account Guarantee extension in an effort to demonstrate its reciprocal might.
In an email addressed to the league presidents and other interested parties, President/CEO Bill Cheney stated that CUNA will pursue the introduction of a bill to expand business lending. However, he acknowledged, “Going forward, we have to take some lessons from the failure to raise the MBL cap, understand the realities of the credit union vs. small bank influence in Congress, address those realities and build a system that will allow the passage of important pro-credit union legislation in the future.”
We saw NAFCU turn the corner toward the tax exemption last fall with the study it commissioned and released during its Congressional Caucus that found that eliminating the credit union tax exemption would cost the federal government $15 billion in lost tax revenue, $148 billion in GDP and 1.5 million lost jobs over the next decade. A more unified front would have helped the chances for business lending, but it still appeared a long shot due to the bankers’ opposition and lack of consensus among credit unions.
Still CUNA saw what it thought was a solid opportunity and took it. The group can’t be faulted for that. What is at issue is whether it, or NAFCU for that matter, was following a false mandate in pursuing business lending. Member business lending elicits a mixed bag of emotions and responses from credit union professionals and volunteers, but it is still on the list of advocacy priorities, though at the bottom.
Reducing regulatory burden should shoot to the top, but it’s not very sexy and will be an uphill battle with the Democrat-controlled Senate and White House, both of which favor the Consumer Financial Protection Bureau, a leading cause of credit union hand-wringing over what’s to come. Housing finance reform is another worthy priority as well as supplemental capital, which seemed to take a significant back seat to business lending in 2012. The Coalition for Credit Union Access, launched specifically to supplement the supplemental capital effort, grew because the trades were preoccupied with MBLs.
The New Year is a time of goal setting. Everywhere people are promising to quit smoking or lose weight or take up a new hobby. All of these resolutions are aligned with most humans’ innate will to live–depending upon the hobby.
What is necessary in 2013 to feed your credit union’s stamina? I suggest political activity, no matter which side of the issues you're on. Just make sure the stances align with your credit union’s future positioning so it is something you’re truly willing to get behind.