The Domino Effect

Every action has a reaction, and the events around us affect our members, staff, and services.

December 4, 2012

Some people like to play with dominoes, and enjoy setting them up on end in an interesting pattern—to then tap the first domino and watch them fall in sequence.

As a librarian, I might like to do this with books as depicted in this entertaining vignette, a fun illustration of cause and effect relationships, interconnectedness, impacts and consequences, and chain reactions.

We need to consider that every action has a reaction, and that events around us will affect our members, staff, and services. Consider that available research studies alert us to these potential impacts and allow us to consider how to best position our credit unions for optimal performance and success.

This week, think about how each of these studies may provide a clue as to how the next domino may fall. Do you see patterns emerging in mortgage services, for instance, as one event impacts the next?

Will dominoes spiral in different directions as you consider how to address consumer segments and needs? Perhaps you will implement more than one method as a result of your trend analysis.

Mortgage patterns

The economy continues a ripple effect for mortgage holders as noted in “Modified-Mortgage Defaults Soar 24% in Looming Housing Challenge.”

Delinquencies are now presenting themselves in “reworked mortgages held by bonds without government backing” according to BloombergBusinessweek. Threats to climbing property prices may be a result with increases in those receiving aid. "We’re now seeing a wave of re-defaults from the modifications over the last two years that failed,” says a JPMorgan analyst in the article. “This wave should last through 2013.”

“A national mortgage settlement has provided $26.1 billion in relief to more than 309,000 homeowners,” according to a study cited in On the Money, a blog at The Hill.

Reportedly, homeowners are appreciating the relief as “banks have provided more than $10.5 billion in principal reduction, lowering monthly payments on more (than) 118,00 loans and actually reducing loan balances by more than $88,000 on average.”

Debt forgiveness has accounted for in excess of “$19.4 billion of the overall completed consumer relief.” Further, “nearly 31,000 homeowners with loans totaling $4.19 billion are in active modification.”

Overall, the “Steady US Housing Recovery is Boosting Economy,” reports Bloomberg. Even though our housing market has a long road to health, “it’s helping prop up an economy that’s being squeezed by a global slowdown and looming spending cuts and tax increases” as recent reports indicate sales of previously occupied homes “rose solidly in October” and builders enjoy greater confidence now than at any other time in the past 6.5 years.

Economic chain reactions

Jobs, too, are critical sources for chain reactions in our economy. But what leads to joblessness? “Origins of Job Market Troubles Hard to Pinpoint,”says the Washington Post. Our job market was in trouble long before the recession, says a new study.

A falloff in employment is noted beginning in 2000, “when the proportion of U.S. residents of working age with jobs peaked after decades of rising steadily” and then declined drastically.

But why the drop in our labor force? Possible explanations include tax burdens that discourage workers, declining wages, and even an increase in incarceration rates.

Another interesting paper about impacts and consequences is found in “Interconnectedness and Contagion,” from the Committee on Capital Markets Regulation.

The study analyzes and discusses possible solutions to “financial contagion,” noting that “a distinguishing feature of contagion is its ability to spread indiscriminately among firms in the financial sector and notes that contagious runs can occur even if there are no direct linkages to the original institution.”

Consumer consequences

Continuing in the vein of contagion, see “America’s Invisible Epidemic: Preventing Financial Elder Abuse.”

This testimony before the Special Committee on Aging given by The Financial Services Roundtable/BITS says that an increase in the aging population will create a “large pool of potential victims for financial exploitation.”

Often, family members are the perpetrators of this type of abuse, and “financial institutions are often the first line of defense against the financial exploitation.”

Financial institutions can watch for problems when senior customers make transactions in person that may reflect unusual spending patterns, unpaid bills, and account changes.

Succinct evidence on the disturbing trend of elder abuse is found at “Fast Facts: Financial Elder Abuse—A Growing Problem,” Some statistics of note:

Elder consumers aren’t the only group vulnerable to financial chain reactions. “Divorce and Women’s Risk of Health Insurance Loss,” from the Journal of Health and Social Behavior says that the loss of insurance some women experience as a consequence of divorce “is not a short-term disruption. Women’s rates of insurance coverage remain depressed for more than two years after divorce. Insurance loss may compound the economic losses women experience…and contribute to as well as compound previously documented health declines following divorce.”

Approximately 115,000 women in America will lose private health insurance following divorce.

Watching falling dominoes—or books—can be a fun pastime. But the domino effect in reality can be either a dismal string of circumstances that leaves victims in its wake, or a combination of events that can lead to happier outcomes provided we know when and how the next shoe may drop.

It’s time to get connected.






Lora Bray is a research librarian at CUNA.