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Preparing For The Economic Recovery

According to during the depression, “…9,000 banks failed during the decade of the 30s. It’s estimated that 4,000 banks failed during the one year of 1933 alone. By 1933, depositors saw $140 billion disappear through bank failures.”  Back then banks were not part of the solution, so unfortunately they failed. Today there are more opportunities for banks and credit unions to help, especially during this particular downturn. Thanks to incentives from the federal government (eg. The Cares Act), lending institutions have great reasons to get involved. Moreover, these institutions have a higher purpose – sustainability. 

As we head into potentially one of the worst economic downturns in modern history we have choices to make, both as consumers and lending institutions. Credit Unions, in particular, have obligations to their communities that large banks do not. At this time of need, there is a call for financial help – who will step up? Do we pull back and wait until things get better, or do we help our credit union members come out on top?

Through the Dot Com crash, 9-11 and the “Too Big to Fail” banking crisis, companies that weathered the storm and doubled down on their marketing efforts came out stronger and with more market share than their competitors. According to the Low Income Investment Fund those who came out on top during a downturn took, “…the time needed to advise borrowers, restructure terms to best suit the situation, and postponed implementing legal recovery…to minimize balance sheet losses.” It turns out that hiding during the storm is not the best strategy.

Much of what is happening is out of our control. That being said, what we can control is how we prepare to react to new market conditions and compete at the highest level. According to Ashwin Adarkar, Paul Hyde, Marukel Nunez Maxwell, and Abhilash Sridharan, “While it is clear that all banks will have to adapt capacity as the model adjusts, at least in the interim, the most thoughtful institutions are doing it strategically.” This idea of a “thoughtful institution” is already part of the credit union mantra, so it’s a good fit. 

With rates at historical lows, dealerships full of new and used cars, and houses sitting in a deserted market with no buyers – accessible lending is the only solution. We need to prepare to bring awareness to credit unions with a powerful message. CUNA’s, Open Your Eyes awareness campaign is a great example of a higher calling for “thoughtful institutions” and their role in such difficult times. According to Jacob Passy from Market Watch, “Mortgage rates have fallen throughout 2020 thus far, mainly in response to concerns related to the economic impact of the COVID-19 outbreak that began in China and has spread around the world.”

So let’s thoughtfully prepare product promotions, best auto rates, home loan rates, refi-rates to the benefit of small businesses and consumers who will eventually need such products. Awareness is a byproduct of advertising, so let’s inform our members. With government support, this all becomes a higher calling as well as a sound strategy.