Whatever analysis one follows of last Tuesday’s elections, it is fair to conclude voters are looking for results. How does the economy grow faster and produce more jobs?
Both newly elected and those returning will be looking for more effective and immediate ways than the ideologically driven programs now defining most recovery efforts.
Delivering on that need could make credit unions a potent political force. Can credit unions help political leaders deliver to their constituents' circumstances, now? Is there another way than the $600 billion quantitative easing by the Fed last week or extending tax cuts that reaffirm voters’ current status quo?
The key challenge is to explain what credit unions can do on this issue for the voters in a state or district, not to ask the congressman or senator what they can do for credit unions.
Defining the Game We Want to Play
If credit unions can define the game they want to play rather than succumb to traditional money-raising, industry-centric lobbying messages that will dominate Capitol Hill visits in the next 60 days, then the unique role of cooperatives could be dramatically enhanced.
The message to Congress is simple: Voters want more spending money in their pocket. We can do that and are doing that daily. Credit unions are proactively making available the lowest rates in history so members paying more than current interest levels should come in and refinance their auto, their car, their mortgage.
These savings can be substantial. The money goes right into the members’ pockets. Most members live paycheck to paycheck, the savings is spent in the community on groceries, a couple of tanks of gas, or maybe a home repair for winter. The consumer’s debt burden is lowered, spending is multiplied in the economy and the credit union has an earning asset that far exceeds the overnight 25 basis point return. Demand is put back into the economy, month after month after month.
Examples abound around the country of this occurring at record volumes, from CEFCU in Peoria, IL, to Wright-Patt Credit Union in Dayton, OH, to Member’s First in Mechanicsburg, PA, to Educators in Racine, WI, to SECU in Raleigh, NC.
Once the word is out, the rest of the financial market will also step up — it doesn’t want to lose its credit-worthy customers. Credit unions are merely lighting the match.
Ask Congress to Use Their Bully Pulpit to Get the Word Out
Credit unions should not ask to be singled out in this effort. Rather, when contacting staff or the member directly, take in examples to show the extraordinary offers now available. Here are rates from one credit union I visited last week:
- 30 year fixed: 4.5% and no points or 4.125 with 2 points
- The lowest adjustable rate is 3.125 and 2 points.
Other credit unions are offering 10 and 15-year-fixed products as low as 3.5%. Some 5/1 ARMS are slightly less. When showing these rates, demonstrate the immediate spending power they put into the household monthly.
An October 22 New York Times article on mortgage refinancing estimated that two-thirds of outstanding mortgages could benefit from today's lower interest rates.
Credit unions can help Congress tell its newly energized voters that there is help, especially those with debts. Give them typical rate information, help them tell their constituents where and how to look for these offers (often they are not on the web). Suggest voters first try to contact the existing lending institution and request a loan modification quote. Congress has approved the macro-policies that created these rates, but consumer America needs help to go after their fair share of interest relief.
Low Rates are Powering Corporate America’s Recovery
Corporate America’s financial success and the stock market’s accompanying rally have been in part fueled by the ability of the largest firms in America to refinance their debt, significantly lower their interest payments, and pass that savings through to the bottom line. Just recently some of the most cash-rich companies in America (Microsoft, Cisco, Google, Walmart) have sold additional debt with three-year fixed-rate tranches costing 0.75 to 0.85%. After subtracting the interest on the debt from taxes, the debt is virtually free. These corporate financings have reached almost a trillion dollars in each of the past two years. The cash is sitting on the balance sheets.
Consumer America has not had the same advantage or expertise, yet consumers are 65-75% of GDP. Business investment fluctuates between 12-15%. Consumers do not need more debts, but only the same opportunity as Corporate America has had to reduce their existing debt burden.
Delivering at the Grassroots of the Economy
Credit unions can not only craft and document the opportunity district by district and state by state. They can also deliver on the opportunity, for credit unions operate at the grassroots of the economy. They are connected, intensely local in their focus, and have cash to lend. All politics is local; so is most consumer spending. The purpose is not to ask to single out credit unions. The purpose is to help Congress deliver the prospect of real relief to its members, now.
The overriding interest that every member of Congress must respond to from Tuesday’s election message is for politicians to do something better. This is the opening for credit unions. When credit unions help members of Congress deliver on voters’ expectations, it also reminds them of credit union’s public policy role. Helping Congress now with its priority will provide the standing to address other industry topics. But that should be down the road. First, let’s get consumers back on their feet.