Hampel said he thinks California's big-gest home value losses are behind the Golden State. Like fashion trends, California tends to lead the nation in economic trends, and Hampel said California "might not see any more substantial home declines," although he cautioned that San Francisco and San Jose, two areas where homes gained value in 2007, might lose value in 2008 and 2009.

Hampel stressed the long-term repercussions of escalating debt compared with disposable income during his presentation. Back in 1960, he pointed out, household debt outstanding was 50% of annual disposable income. Today, debt has risen to 125% of annual income.

"I'm not risk averse, but I am worried about this," he said. "The average household today has more than twice as much debt as it did 60 years ago, and that obligation really hampers consumer spending."

The economist, who makes no secret of the fact that he thinks 11% net worth ratios are too high, said credit union capital is more than adequate to weather today's economic woes.

"You've been saving up that capital for a rainy day; well, it's starting to rain," Hampel said, adding, "For an umbrella to protect you against the rain, you've got to open it up. You must use that capital or you'll get soaked."

Hampel demonstrated how net worth ratios would be affected by loan losses and less net income, showing a matrix that used what he thinks is a likelihood of credit union ROA: only 40 basis points over the next two years. Even if assets grow 14% in a low-income environment, capital will only fall to 9.2%, which is still well within adequate capitalization guidelines.

"The magic number is six–seven if you want to be conservative–and nine is still plenty high," he said.

The CUNA economist predicted delinquencies and charge-offs will soar, telling directors to steel for charge-off rates to climb to 0.75% in 2008 and lower slightly in 2009, to 0.65%. Second-mortgage charge-offs will rise the most, followed by gains in credit card charge-offs. However, first-mortgage charge-offs, particularly for fixed-rate loans, should remain fairly low.

"We have a history of no losses on mortgages," Hampel said. "They could reach 0.10%, which sounds scary, but is still very low."

Hampel specifically cautioned against raising fees or turning away deposits in an attempt to offset decreases in net income, saying if credit unions use their capital, they will gain market share over banks.

"There's a very real opportunity to take in new loans," he said, "and we're not talking about bad borrowers. Good borrowers will be looking for loans, and you need to be careful, but there are big opportunities coming."

Hampel predicted that deposits will rise as consumers attempt to insulate themselves from further economic woes. "Consumers will build up deposit balances, not because they value saving again, but because about half the population is worried they might lose their jobs."

Hampel also predicted a surge in deposits in May and June as a result of economic stimulus checks, but said he thinks most consumers will spend the money, rather than save it or use to pay off debt, as other economists have predicted.

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