The Credit Union Journal: 'What's Your Favorite Wrong Prediction?'

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Don't Bet The House On One Prediction

Bill Hampel, CUNA Economist: "Well, I think my favorite is the guy from Digital who, when the PC was invented, asked who on earth would want a computer in his home. But a current forecast that I find to be entirely laughable is that of the real estate economists who are saying there is no reason to describe current home prices as elevated."

Hampel explained that this statement-which includes predicting that home prices will continue to rise-is based on four things, "three of which I agree are basic, static fundamentals: rapid household formation, rising household incomes (even in the middle of a recession) and fixed supply-the fact there is only so much land that can be developed." But the fourth is low interest rates.

"While they are right that low interest rates lead to higher home prices, it is laughable to believe that something as ephemeral as interest rates can be a basic fundamental, particularly when mortgage rates really have no where to go but up, and that should soften housing prices."

But Hampel has a pet prediction of his own, and it's about to be tested. "A couple years ago I noticed that there were two years that really stood out-they were the strongest years in terms of loan growth in their respective decades: 1984 and 1994," he related. "So, the last few years I've been telling everyone to watch out for 2004. Well, here it comes, and while I do believe that 2004 will see stronger loan growth than the previous years of this decade, I don't know that it will be strong enough to make it the strongest of the whole decade. But I'm already calling 2014."

Many CU Predictions Have Missed Mark

Bob Hoel, executive director of Filene Institute: "I wrote down some of my favorite predictions that didn't come true," he said. "I'm not naming names on who said these things. The first is 'no small credit unions can survive.' Then there's 'liberal fields of membership will ruin the credit union movement.'"

Among some of the other doozies: the elimination of paper checks, becoming an Internet-only world, the end of physical branch facilities, and that the greater number of banker ATMs will eliminate CUs' ability to compete.

As for what the future holds for credit unions, Hoel said he believes that 10 years from now the most successful credit unions will be those that make the commitment to becoming more retail-oriented. "They will get out of the old-fashioned banking, with locations and hours driven by retail considerations with less emphasis on teller lines," he said. "The ones that really discover the art of market segmentation and have programs that are targeted at one or more groups." Among the important groups to target will be young adults, New Americans, women as dicisionmakers on financial matters and the downscale market. "Today we have 33 million immigrants-that's the entire population of Canada. Byt 2025, we'll have 55 million immigrants," he noted.

Hoel also suggested that the most successful credit unions 10 years from now will be the ones that have established, "an artful combination of high tech and high touch. Most members will still like to have access to some human being, but they will do more transactions electronically.

Finally, his last prediction is more of a "hope" than a forecast: "That the credit union charter will continue to improve, allowing credit unions to do more member lending and services, field of membership restrictions will be abolished, a fresh look at capital requirements and PCA, and incidental powers," he continued. "I envision a day when a member can go to the teller and put money in his mutual fund without having to go to some back room, and when credit unions can offer an alternative to needlessly expensive title insurance."

There's Just No End To Traffic

Glen Hiemstra, founder of "My favorite wrong forecast was the demise of the automobile," he recalled. "Back in the 80s, people were talking about how we were going to run out of oil and we'd see cars fade away. Instead, what I think we're going to see is the reinvention of the automobile. We're already seeing it with hybrids, and eventually we'll have fuel cell cars. I was just at an automotive conference and it looks like 2010 will be the first real marketing push for this. This is good news for credit unions because so much of their business is auto lending. Cars aren't going away, they'll be reinvented."

Frank T. Hoban, Bell General Office Credit Union CEO: "I would not have expected the prolonged softness in the economy, especially in the last three years with the interest rates down so much,'' Hoban said. "Of course, the key question is what will happen when they start ratcheting upward o one knows exactly what is going to happen."

The CEO of a $19-million CU in Chicago also offered this prediction: "I think there is going to be more and more consolidation of credit unions verybody I talk to regardless of their (CU) size complains about the same thing. They don't have enough resources." Hoban said the biggest challenge is finding ways to run a credit union smoothly and understand and comply with the complex regulatory issues such as the Patriot Act and the Secrecy Act. "It's difficult at the local level to keep on top of that. You need subject matter experts."

Javier Marin, Spanish-American Credit Union CEO: "As a (former) banker, I didn't think much of credit unions,'' Marin said. "Because I didn't have a full understanding of what a credit union was, I never considered they could be so strong.''

Now the CEO of a $20-million CU in Dover Township, he knows better, Marin said, adding, "The bankers are going to continue to try to battle us, so there are still some issues to be addresses in terms of what bankers expect. A good thing (that will continue) is that credit unions have been able to come forward and be more public. There are a lot of people who have started to recognize the value of credit unions including the I think we are going to see a lot of growth along with a lot of credit union mergers. We are going to capitalize because we have high exposure."

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