The Trick Right Now: It's Hard To See Road For The Potholes, Colby Says

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CHICAGO-As an economist, Dave Colby is accustomed to being asked what potholes he foresees in the road ahead.

Colby joked that with the economy being what it is, these days he has trouble seeing the road.

Apparently, so do many CU leaders. When Colby asked an audience during NAFCU's annual meeting last week how many would say they are being "very cautious" in looking forward, 90% of the hands were raised. Just one person in a room of more than 100 said he believes the recession is over.

CU management isn't alone. "Look at credit union members," said Colby. "They are putting money into the credit union, even though you are trying to push it away. It's all going into liquid deposit accounts, because they think rates are going up. You are making mortgages, but not holding them, because you think interest rates are going up."

Looking to the economy, Colby said his primary concerns include:

• Wave Two Unemployment Shock. "The public sector-government, police-have kind of been sheltered from the kinds of hard decisions the private sector has had to make. When we start seeing long-time state jobs, teachers getting laid off, county workers getting laid off, it's tough enough for them. But what is consumers reaction? They pull back from buying."

• Unintended consequences. Businesses like a fixed sense of rules, and the rules aren't fixed right now. As a business, you back away."

What's ahead" A "very fragile recovery," answered Colby Colby. "Consumers are proceeding with caution. Businesses are proceeding with caution. Banking is proceeding with caution. We're not sure about our jobs, retirement, energy costs. We're not going to have any big ticket buying until there is some degree of certainty."

And while he doesn't expect credit unions will lose their federal tax exemption, Colby does expect it to get scrutinized. "We have spent, spent, spent, and I guarantee every tax-exempt organization is going to be reviewed."

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