Betting On a Better Year

Lending looks better in 2011—it can’t get much worse.

January 18, 2011

I asked a financial industry peer about his forecast for 2011.

“Well,” he said, “There are three possibilities. First, it could be as bad as 2010—resulting in more bank failures, foreclosures, and the like. Or it could actually be worse than 2010, in which case the entire financial system is, yet again, placed in peril.”

“And the third option?”

“Improvement in 2011, which is also called ‘my business plan.’”

He, like many others, doesn’t buy into a strong recovery, based on his knowledge of the local economy. Rather, he’s betting on a better picture because he has no other option.

I also think 2011 will be a much better year than 2010. My reasoning is simple: To think otherwise, I’d have to lock the door and just cry.

Lending, in particular, simply has to improve. So here’s my own forecast of what will happen, by loan type, in 2011:

• First mortgages: Congress, emboldened by the success of mid-term elections, will tackle the Fannie Mae/Freddie Mac debacle by declaring them a “mess beyond words,” and then appointing a commission to report back on how to fix them (right after the next election). Banks will fix their “robo-signing” fiasco by disclosing that their CEOs are, in fact, robots. Meanwhile, home sales will slowly increase through the spring and summer, as people finally realize they need a place to live.

• New autos: General Motors and Ford, free from governmental interference, will stun the world by building cars people actually like. Sales will ramp up—especially for midsize and economical cars. With increased sales, low-interest programs will fade from the market, only to be replaced by advertisements featuring washed-up television stars and hamsters who dance to rap music.

• Used autos: With pent-up demand for new cars, buyers will begin dumping their old autos faster than the Democrats turned on Pelosi. This will have a threefold effect: Used-car prices will drop due to higher supply, deals will abound, and the whining from my three teens for their own cars will become unbearable.

• Credit cards: The slow rollback of the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 will stop suddenly, after an investigative reporter finds a memo from a major credit card bank titled, “Consumers: Yes, they are as dumb as a box of rocks.” Democrats, keen to embarrass their Republican colleagues, will request the formation of a rock-protection agency. Consumers, on the other hand, will ignore Washington and continue to avoid new debt.

• Business lending: The credit union industry—stymied by bank lobbyists fighting an increase in the credit union business lending cap—will give their bill a name no politician would ever vote against. Unfortunately, the “Clean Air, Fresh Water, and Cute Puppies Bill” will get attached at the 11th hour to the “Reckless Oil Drilling in the Gulf of Mexico Bill” and be defeated. As such, business lending will be flat.

As I said, overall, 2011 should be a much better year than 2010. According to my own budget, it must be.

A personal note: My boss and mentor, Bruce Cramer, retired at the end of 2010 to spend his time operating a family-focused, free day care in his home. Bruce has been with O Bee Credit Union for 24 years. He’s done much for the com­munity, the mem­bership, and the credit union. I wish Bruce and his family the best.

 JAMES COLLINS is president/CEO at O Bee CU, Tumwater, Wash. Contact him at 360-943-0740.