The Economy

Delayed gratification and the future of interest rates

We are taught in business school that interest rates are the expression of the time value of money. Time value of money ultimately boils down to “delayed gratification.” The lower the interest rate, the more we are comfortable delaying gratification in using our money for goods and services for ourselves. To be willing to delay the use of their money, people ask for interest to allow others to utilize their money until a later time. So, in 2021 when we experienced the lowest interest rates in modern financial history, does this sync with our society’s expanding patience for delayed gratification reaching new record highs? [Continue]

Climate change beckons bankers

May 1, 2008, was the first time I ever heard a speech on climate change in the context of a banking meeting. The annual “Day with the Superintendent” was taking place in West Des Moines, and former Iowa Governor Tom Vilsack opened a 45-minute speech by declaring “climate change is real.” I think the speech caught a lot of people off guard, as evidenced by the tepid audience applause at the conclusion of his remarks. In 13 years, the climate change discussion has moved to the center of the policymaking agenda. [Continue]

Losing sleep but not heart

Revenue related to mortgage refinance is likely to be less this year than it was last year. A decline in rates motivated homeowners to refinance in 2020, but there’s really no room for rates to drop more. Federal stimulus makes it difficult to assess true credit quality. Businesses, particularly small ones, that seem to be skating through the pandemic may actually be operationally stressed. [Continue]

Experts see economy taking flight with federal help

We can all be excused for feeling déjà vu — 2021 does feel a little like 2009, the last time a new administration came into the White House with the votes to move legislation through both the House and Senate. Both years represent periods of economic uncertainty, and a national health crisis, although the coronavirus pandemic is much more serious than the swine flu turned out to be.  [Continue]

Fed actions forestalled burgeoning crisis

The arrival of COVID-19 brought with it not only a public health crisis, but an economic crisis. The virus has altered the way we work, shop and interact with friends and family. As a result, economic activity slowed and the outlook dimmed. Businesses, expecting sharp declines in profitability, increased their credit usage, and consumers reduced their spending and increased their savings. [Continue]

Being ‘better’ … once again

Pandemic, civil riots, contentious (and contested) elections — and this wasn’t a dystopian movie script. This describes the year 2020. And because of this, the phrase “Hindsight is 2020” has been permanently removed from usage by many people; we don’t want to see this with clarity again. [Continue]

No time to wait

Nobody knows when the pandemic is going to clear up. Some are saying there will be a vaccine soon; others are saying we will be dealing with masks, social distancing, quarantines and travel bans for years. I have decided to stop waiting for things to get better; it’s time to make the most of the present, regardless of the conditions we can’t control. [Continue]

The 2 percent solution: An argument for reparative investment

There are about 4,700 banks in America. Only 21 are Black-owned and they have less than $5 billion in assets. The total amount of assets in U.S. commercial banks is $20 trillion. So if you think about structural racism and access to capital — and 70 percent of African American communities don’t even have a branch bank of any type in those communities — we said, “Why don’t we think about how to address it?” [Continue]

Snapshot of Wisconsin student debt offers broad insights

Nationally, it’s widely reported that there are 45 million students who owe approximately $1.7 trillion in student loan debt. In Wisconsin, we have more than $24 billion in outstanding student loan debt, according to the Consumer Financial Protection Bureau. Making matters worse is the fact that the Financial Industry Regulatory Authority reports 53 percent of Wisconsinites live paycheck-to-paycheck each month. [Continue]

Centralized, tailored decisions needed to avoid CRE crisis

A white paper on the challenges facing commercial real estate published this spring by McKinsey & Company argues that the imperative to physically distance from our workplace colleagues due to the coronavirus has changed the demand for many types of space, creating an “unprecedented crisis for the real estate industry.” [Continue]