Scrutiny on Credit Unions’ Ability to Help Members: CUNA GAC

CUNA economists predicted slow loan growth and tight margins this year even as they expect the economy to surge.

But whether or not their forecasts are exactly on the money, CUNA Chief Economist Mike Schenk said the more important measure will be how well credit unions are using their institutional and financial assets to improve financial well-being in their communities.

Schenk told attendees of a virtual CUNA GAC presentation Tuesday that credit unions are passing the test — so far.

Schenk presented a graph showing that consumer loans reported in the Fed’s G-19 Consumer Credit Report dropped from March to May with banks showing a sharper drop than credit unions. By September, credit union lending was 2% higher than March levels, while bank lending was 1% lower.

“Credit unions behaved the way policy makers expect them to behave in crisis situations,” Schenk said. “We were chartered after all with member ownership for a reason, because policy makers knew that if we had that different focus, we would treat capital differently. We would look at it as a war chest to be built up in good times and used in tough times. That’s exactly what we’ve done.”

While credit unions’ heritage is based on serving members, policy makers have been increasingly taking a similar interest. And data showed there’s work to be done.

Schenk cited a survey fielded Jan. 11-18 by the Financial Health Network found that 17.5 million people considered financially vulnerable experienced a decline in their financial situation since the pandemic began, with many concerned about their ability to afford basic necessities, including food, health care and housing.

The network’s research “shows this situation has deteriorated in significant ways for millions of Americans, especially those who are most vulnerable,” Schenk said.

“A lot of women have dropped out of the labor market to take care of kids. The difference between men and women in the labor market is significant and growing.

“Disparities are also widening among households by race and ethnicity,” he said.

“Credit unions will be expected to prove on a daily basis that they are focused on financial well-being for all,” he said. “This is the core mission: We need to recognize it; we need to embrace it; we need to celebrate it; we need to tell as many people about it as we possibly can and as often as we can.”

Schenk and CUNA senior economist Jordan van Rijn said households will benefit from the proposed $1.9 trillion federal relief package supported by President Biden.

“The risk of not spending enough is greater than the risk of doing too much,” van Rijn said. “Previous stimulus has done a lot to let people stay in their homes and stay current on their bills.”

Many economists said they now believe (and others were saying at the time) that the $800 billion stimulus that Congress passed in early 2009 during the Great Recession was too paltry, and prolonged the misery of unemployment, foreclosures and defaults that lingered well past its official end in June 2009.

This year’s relief would follow the $2 trillion relief package passed in March 2020 and the $900 billion in December. The current round includes $1,400 checks for people making $75,000 or less per year and a federal supplement to unemployment checks of $400 per week.

Schenk said it also includes other measures that will improve the lives of many Americans, including expanding the SNAP Food Stamp Program.

“There’s a lot of engagement under the radar screen, and those activities will be extremely helpful to average consumers, especially those on the bottom rungs of the ladder and on the front lines are going to get a lot of help,” Schenk said.