LAS VEGAS - Congressional hearings on the proposed government bailout of the financial markets were being held at the same time WesCorp was hosting its Economic Forum here, providing its management team the opportunity to share their insights with credit unions on what the plan might mean.
"There is a global crisis of confidence in the financial markets," said Bob Burrell, WesCorp's EVP and CIO. "We've got to have confidence to have a healthy market, and government intervention might be necessary for a healthy economy. Everyone is waiting for the other shoe to drop."
The idea of investors and financial institutions sharing solutions was discussed six months ago, Burrell pointed out. In any case, he reiterated, consumer confidence is paramount.
"The housing market will turn around when people think it will turn around," Burrell observed. "Things will get better as long as people can afford to get a mortgage."
Dwight Johnston, WesCorp's VP-economic and market research, told Credit Union Journal much more work needs to be done before legislation can be approved.
"Clearly, the Secretary of the Treasury and the Fed were not prepared to have a plan and panicked into it," he declared. "What they presented was so sketchy. The hearings are contentious because there are huge, gaping holes and Ben Bernanke is saying 'Trust us.' It needs to address oversight concerns before Congress passes it."
Once a bailout plan is in place, there still will be much that needs to be solved, Johnston said. For example: how will the auction process work? What securities will the government buy and at what price?
"There was disturbing testimony today [Sept. 23] that said everything that is bought will be something that will pay off eventually and it will be priced that way," Johnston continued. "Over the next few months we will see what is implemented, but answers will not be clear until into next year. There will be some optimism and some pessimism, but something needs to be done to restore confidence. And it's not just Congress-we need banks making loans again, especially to small- and medium-sized viable businesses. More and more we are hearing of companies being cut off because banks don't want to fund loans."
Bob Siravo, WesCorp's president and CEO, offered a note of optimism: "There are a lot of smart people working on this, so I'm confident they will do the right thing," he said. "There might be some stops and starts, but something needs to be done because the markets don't like uncertainty."
Meanwhile, Brad Miller, executive director of the Association of Corporate Credit Unions, said his Washington, D.C.-based organization is watching developments carefully.
"The plan is so fluid, and there are few details so far," he told Credit Union Journal. "We don't want credit unions to be excluded, but we don't know the impact on corporate credit unions or credit unions as a whole.
"Where it is going to help is bringing back liquidity into the system as the government buys these assets," Miller continued. "Also, it is good for confidence. This is much larger than a credit union issue, it is an American issue."(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
