LAS VEGAS -
I was not surprised, because we've been prepared for it for a long time. It is based on customer hysteria more than economic needs. It won't mean much, and it certainly won't hurt us, because we've been putting money out at higher returns for several months now. Preparation is everything!
I am surprised. I was looking for a 25 basis point cut. This tells me the Fed might be seeing the subprime and credit problems as just the tip of the iceberg. Fifty basis points is aggressive, and they are trying to be proactive. We are going to follow the market and price deposits down. It will be a challenge.
I think the economy was screaming for it, and the public really wanted it. I don't know if it will make a difference in the housing market in the long run, because adjustable-rate mortgages will keep adjusting anyway. It does not mean anything to us right now. We still have auto lines priced low and CDs up to try to bring in cash. Everyone's in the same game-looking for liquidity.
I was expecting 50. From what I read this week, it was going to be at least 25, or possibly 50. It won't mean anything at all-it will be business as usual for us. We're already the lowest in our market for auto loan rates.
I'm very pleased with it. I am pleased the Fed is active and doing what I consider the right thing in the marketplace. This move will prove to be very beneficial for credit unions and our nation. I thought they would take a more conservative route, but I am thrilled they were aggressive. The economic impact of the rate cut is more downstream for WesCorp. Consumers, natural person credit unions and the economy in general are affected by it. If it is good for them, it is good for us.
I knew 50 was a possibility, but I still thought it would be 25. We are uniquely impacted compared to other credit unions because our balance sheet is skewed towards variable-rate instruments. The loans will reprice down almost instantly, and our cost of funds won't go down as fast. Large changes in the index would hurt us.
