ANAHEIM, Calif.-Don't look for a sustainable economic recovery. At least not yet.
William Haraf, commissioner of the California Department of Financial Institutions, predicted charge-off rates at credit unions and banks will continue at an elevated rate through 2013 or even 2014.
"When I'm looking for key drivers of a sustainable recovery...right now they are hard to find," he told attendees of the California and Nevada CU Leagues' Annual Meeting and Convention here.
Part of the problem, he explained, is by 2005 the personal savings rate in the United States had fallen to zero. "So coming into this downturn a lot of households had loaded up on consumer debt."
Haraf said he expects the problems in residential real estate to peak before those in commercial real estate.
Comparing lessons learned by consumers during the Great Depression to those of the current recession, Haraf, said, "From the financial shock they received, our grandparents learned the importance of saving and not getting overextended. Some of that had eroded, which led in part to the problems we have had."
Meanwhile, California has seen a number of mergers of troubled institutions with CUs based out of state. But Haraf said the goal remains finding in-state merger partners. We'd rather do the transaction within the state, but in California finding a healthy credit union with the ability to absorb another credit union is limited," Haraf said.
