What's Different after September 11?

Following the attacks of September 11th, credit unions are faced with difficult economic challenges such as 0% financing for autos, very low investment yields and heavy cash inflows? What should they do?

 
 

“Do things you’re supposed to do.”

A credit union leader as well as a veteran of three US wars called to provide me his thoughts. He said credit unions are faced with some exceptional challenges: 0% car financing, very low investment yields, heavy cash inflows. What should they do?
While he said he had no crystal ball, his message was that people are depending on us to do our job-let’s do it. It is all right to cry and to pray and to be fearful. But if this leads to closing up shop or people loosing jobs, then the terrorists are winning. We have to go about our business. Now.

The Economic Impact

There are two clear tendencies. Short term, events are going to be more difficult. Longer term, wars have contributed to pulling the US economy out of depression, recession or just plain slowdowns.

Last week I was with a credit union team from Las Vegas. The board’s primary concern was about the Vegas economy. It is built on airline flights and discretionary spending where people want to be free of ordinary constraints. Layoffs at hotels had already occurred.
But at the same time, the consensus of the board was that the worst thing the credit union could do was to “do nothing”, that is to wait and see what events bring and then react. Their impression was that there would be unusual opportunities and to “go for it.”

Some Initial Steps Forward

The flags are flying everywhere-in branches, on websites and in literature. There is a changed mood, call it patriotic, or a sense of community. People are united and in many ways lifted out of their individual priorities. There is a willingness to lead or to participate.
Communicating in all possible ways is more important than ever. Members want assurance and the certainty that all is safe with their credit union and their funds.
Some members are looking for counsel, whether this is for their investments or because of changing job prospects.

Credit unions, according to the corporate numbers, are still seeing cash inflows. This means the plain old checking and savings account services do matter.

Loans have always been the backbone of credit union results. Some areas may slow, but other areas, such as real estate refinancing are picking up once again. 0% financing is here, which means the auto manufacturers are getting their profit out of the car price. We need to explain that fact to members as well as offer competitive rates. Many credit unions have 5.9% auto loans and that rate could go down to 4.9% before yearend.

Investments-the temptation will be to search out above average yield. But if it is there, there will be some commensurate risk.
The net result for the rest of the year will probably be a decline in earnings from the .96 basis points at midyear. That’s all right. A period of adjustment in ALM is normal.
A New Sense of Community

People and a nation were changed by September 11th. Credit unions will change too. One experience that continues to resonate in all the facts from the tragedy is a new sense of community. We care about New York. We worry about our military. Everyone is asking what they can do to help.

In the past, the credit union approach flourished in times of uncertainty. The Federal Credit Union Act was passed in 1934, building on experiences from over 20 states, to help members find collective strength to meet individual need during the depression.
I can think of no better time or place to be in the fall of 2001 then working in the credit union community.

 

 

 

Oct. 29, 2001


Comments

 
 
 
  • Thought there would be more info on how to handle the competition from auto dealers.
    Anonymous
     
     
     
  • Improper grammar. Second paragraph - "people loosing their jobs" should be "losing" their jobs. Last paragraph - "than" working, not "then" working... Bad, bad.
    Anonymous