CU Economists Meet With Fed Staff

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A group of the credit union industry's leading economic observers on Tuesday shared their views on credit unions' role in delivering financial services to consumers during a meeting with officials of the Federal Reserve Bank of Kansas City.

Participating in the 90-minute meeting with members of the Credit Union Economics Group (CUEG) were: Thomas M. Hoenig, CEO of the Federal Reserve Bank of Kansas City, and staff members Craig Hakkio, SVP/Director of Research; Esther George, SVP, and Diane Raley, VP/Public Information Officer.

Kansas City is home to one of 12 Federal Reserve Banks nationwide that, together with the Fed's Board of Governors in Washington, D.C., serve as the country's central bank. The 10th Federal Reserve District includes the states of Colorado, Kansas, Nebraska, Oklahoma, Wyoming, the northern half of New Mexico and the western third of Missouri.

"Meeting influential policymakers like the Federal Reserve and conveying current trends in the consumer finance sector is important for all credit unions," said Tun Wai, CUEG member and Director/Research and Chief Economist, NAFCU, who opened Tuesday's discussion with Fed officials. "We believe CUEG provided President Hoenig and his 10th Federal District staff with insights about consumers and credit unions they might not have otherwise received."

Among the topics the six CUEG economists discussed during the informal, interactive session were: lending trends and consumer finance; credit unions' balance sheet performance; risk mitigation practices and the group's economic outlook.

Two trends in lending were identified by Dave Colby, CUNA Mutual Group Chief Economist. He told Fed staff that credit unions have experienced growth in adjustable-rate mortgages as rates and home prices increase, and there has been a slowdown in vehicle loan portfolio gains due to competition from manufacturers and home equity loans being used as a substitute. "On the consumer front, we sense a tone of caution in our members as job and income concerns remain and there is growing frustration with low deposit yields and weak equity market performance."

Bob Burrell, EVP/CIO WesCorp, said interest rate risk levels remain fairly modest at most credit unions. Those credit unions experiencing the largest increases have utilized secondary mortgage markets, term borrowings and interest rate hedges to mitigate some of the risk.

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