Tom Dluzen interviews CNBC's Larry Kudlow

Tom Dluzen interviews CNBC's Larry Kudlow for Credit Union Business Magazine



When the economy is booming, even ineffectually managed financialinstitutions can succeed. During a downturn, however, theseinstitutions, unprepared for challenges such as credit or interestrate risk, find themselves in an untenable situation and often facethe risk of failure. It is difficult to express the importance of a well thought-out strategic plan, including an Asset Liability Management(ALM) program that permeates virtually every decisionthe credit union makes. Less attention should be paid to what thecompetition is doing, and more consideration given to how a loanor deposit interest rate special will affect your balance sheet.For example, if you have too many long-term assets on thebooks, perhaps a marketing campaign to promote fixed-rate mortgagesis the wrong strategy, particularly when interest rates are athistoric lows. When economic times turn sour, forward thinkinginstitutions are usually in a much better position to “weather thestorm.”Arguably, proactive economic forecasting is more importanttoday than at any time in U.S. history. This means taking the time to follow this link to the entire article http://creditunionbusiness.com/archives/lki_310.pdf

Fed says inflation tame, no need to raise rates soon

Federal Reserve policy makers last month saw an inflation slowdown across the U.S. economy that may persist in the coming months, tempering any need to reverse record-low interest rates. At the same time, the Fed said its pledge to keep the main rate low for an “extended period” wouldn’t keep it from taking action when needed to keep inflation in check, according to minutes of the March 16 Federal Open Market Committee meeting released April 7th. A few officials warned of the risks of increasing borrowing costs too soon.

The inflation outlook, coupled with Fed officials’ concerns about unemployment and long-term joblessness, signals Chairman Ben S. Bernanke and his colleagues are still looking for evidence of a sustained rebound from the worst recession since the 1930s. Fed staff economists reduced their 2010 and 2011 forecasts for inflation excluding food and energy, projections that were already below 2009 rates. “If you expect moderate growth and high unemployment and decelerating inflation, which is still likely to be the best guess at the moment, you won’t be interested in raising interest rates right now,” said former Fed Governor Lyle Gramley, a senior economic adviser at Potomac Research Group in Washington.

At the meeting last month, central bankers left the benchmark federal funds rate target, covering overnight interbank loans, in a range of zero to 0.25 percent, where it has been since December 2008. Fed officials cited the job market, lower home prices and tight credit as restraints on the recovery, the minutes said.

By Scott Lanman
April 7 (Bloomberg) --

Bankers not following BOA's lead on overdraft protection

Don't expect community banks to follow Bank of America's lead and drop their overdraft protection programs in advance of upcoming regulatory changes.
Many smaller banks say they plan to keep offering such services because demand is strong and overdraft fee income is essential. Consultants say that these banks, unlike Bank of America, do not necessarily need to curry favor with the public by getting rid of the service.
Marcia Johnson, the corporate operations officer at Glacier Bancorp, a $4.1 billion-asset company in Kalispell, Mont., said it considered dropping overdraft protection on its 221,000 checking accounts. But overdraft fees generate considerable income, and the bank decided offering protection was better for customers than going without.
"We envisioned some of the situations — being in the grocery store line and having all our things on the belt and being declined," she said. "Our thought was that we wanted to go through the process to give them the opportunity to opt in."
At the $11.6 billion-asset TCF Financial Corp. in Wayzata, Minn., which has 1.7 million checking account customers, overdraft fees account for about 40 percent of net income, said Jason Korstange, director of corporate communications. The company does not plan any change in its program, other than notification and an opt-in form.
Consultants predict that community banks that embrace the rule change and reduce their fees may stand to gain the most in terms of revenue and accounts.
"Those banks that are lowering that price, they're going to win Bank of America's checking accounts," said G. Michael Moebs, the founder and principal of Moebs Services, a Lake Bluff, Ill., company that consults for 2,000 credit unions and banks. "I believe very strongly that community banks are going to pick that revenue up."
Under changes in the Fed's Regulation E — which enforces the Electronic Funds Transfer Act — by July 1 banks must obtain permission from new customers for automatic overdraft protection on nonrecurring debit card transactions and automated teller machine withdrawals.
By Aug. 15, banks must obtain opt-in approval from existing customers.
A Moebs survey found that, of the 11.4 percent of banks that have begun preparing for the rule change, a little more than half plan to raise overdraft fee amounts, 18.4 percent said they would cut fees and 11 percent would offer overdraft protection for the first time. About 13.5 percent planned to drop the service.
The Consumer Federation of America, in a press release last month, urged banks to follow Bank of America's lead "instead of launching a hard-sell campaign to persuade its customers to opt-in to the most expensive form of overdraft coverage

By Kate Davidson