No 'Knee-Jerk Reactions' With Economic Strategy Says Customers Bank CEO Jay Sidhu
Jay Sidhu, Customers Bank CEO and Chairman, drew points to why the economy isn't going to get better while addressing the Fed's strategies for tackling the growing situation.
The Fed has eased the stress of a tough economy with lower interest rates, which translates into soon-to-be retirees receiving no interest on their CDs. Sidhu said that in addition to the downsides, the improvements now seen in the economy probably won't last.
"Why are the interest rates low? Because we had a housing crisis, we had a loss of confidence throughout the global world, and then the Fed had to act because the fiscal policy really wasn't being able to address anything in the recession. So the Fed had to act with a monetary policy stimulus," said Sidhu.
"And now you see what's happened in the last four weeks. Ah, the yield curve is steeper by 75 to 100 basis points. You see the dollar is stronger by 10 percent to 20 percent against the emerging markets' currency, and does that mean the U.S. economy is going to do much better? I don't think so. So at the same time this is not, this is a temporary, in my opinion, a temporary situation."
According to Sidhu, the United States hasn't addressed the "fiscal mess" that the economy is in, crafted a plan for long-term economic structural changes, taken on the housing finance situation, or figured out a plan for Fannie Mae and Freddie Mac, all of which are imperative to generating a truly strong economy.
"Those are the main situations, main issues, which I don't think have been addressed at all," said Sidhu.
Much of what has been done to improve the economy is focus on larger banks, of which Customers Bank is not.
"I think the opportunities for small banks are fantastic, but it's for those banks who just look at tomorrow as same as yesterday. They're going to be very tough…The problem is going to be: 'What is your business strategy?' And if your strategy is just to lend money to commercial real estate projects like they did in the past, they're going to be in trouble again."
He said that Customers Bank is growing, and has been consistently in the 30 to 40 percent range for loan growth at a time when most banks are having issues with loan growth.
"You got to stick to your fundamentals, stick to your short-term and long-term goals, and execute superbly. That's what I think our nation needs," said Sidhu.
"Let's not have knee-jerk reactions. Let's look at our long-term and short-term strategy -- and the main thing is: we need economic growth greater than three percent."
Sidhu believes that interest rates will stay low, a plus for the banking sector, but said that at the same time the steepness in the yield curve will "take hundreds of billions out of capital because they've been sitting on investments -- long-term investments, and that's going to hurt the capital ratios."
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