January 15, 2014

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Banking and Finance

January 15, 2014

The banking industry is still reeling from the Great Recession, faced with stiff regulation, uncertain economic conditions and political unrest. But, Utah’s financial execs say there’s much to look forward to, such as the state’s strong, business-friendly economy and increasing consumer confidence.

We’d like to thank Hal Heaton, finance professor at Brigham Young University, for moderating the discussion.


Back Row:

  • Hal Heaton, Brigham Young University
  • George Sutton, Jones Waldo
  • Dean Luikart, Wells Fargo Bank
  • Mark Howell, AmericanWest Bank
  • Robert Bowen, Brighton Bank
  • Sherilyn Olsen, Holland & Hart

Front Row:

  • Richard Beard, Bank of American Fork
  • Sheila Camarella, KeyBank
  • Doug DeFries, Bank of Utah
  • Heidi Bleggi, American Bank of Commerce
  • John Sorensen, Home Savings Bank
  • Matt Packard, Central Bank

Not Pictured:

  • G. Edward Leary, Utah Department of Financial Institutions
  • Frank Pignanelli, Utah Association of Financial Services/National Association of Industrial

What’s your outlook for the U.S. economy?

HOWELL: The shutdown is over, the government is open, but there’s nothing really solved. We just kicked the can down the road some more. At some point you have to address the growing debt issue. The impact of that, if the interest rates were to go up—which, of course, if the government’s rating gets downgraded they will automatically go up—just exacerbates that potential problem.

So the national economy is going to keep moving along slowly. But if we can’t come to some resolution on this, it’s not going to pick up, and if we have a catastrophe out of it, we could have a downturn.

BLEGGI: What’s frustrating to me is the government is that Big Brother that I don’t feel like I have any control over. And no matter what we do in small business, no matter what we do in Utah, we still have to succumb to those poor decisions and the way that they’re handled. That’s probably my biggest concern—government.

In the summer the Federal Reserve raised rates 150 basis points in just a couple of months.  Anything else on your radar?

DeFRIES: We just heard this morning that the GDP went up to 2.8, which is better than expected. So we see the national economy growing very nicely, but I’m still very, very concerned about how much is smoke and mirrors—with the emergency stimulus that was started in ‘08 and continues now for five years, what will the economy really look like when government quits buying their own debt? That was supposed to be a temporary tool, and it seems to be a permanent tool that they’re having a hard time getting off of.

It’s great that the economy can perform the way that it is, and we’re all benefiting from that, everyone. I just don’t know how real that is until you get back to a normalized level of buying.

The Federal Reserve has basically created almost $3 trillion over the last five years, with the intent of getting this country going. Typically, that would create massive, raging, uncontrolled inflation at those levels. We’ve never seen that level of money creation in the history of the U.S. But we’ve had very low levels of inflation. Are you worried about inflation?

DeFRIES: I’m not as worried right now because the majority of that money, in my opinion, comes from the reserves the banks are putting in. It’s the only place to go for safe money. So as long as the banks continue to keep their reserves in the 25 basis points, then it won’t be as bad. But the longer you go, the more issue that we’ll have with inflation.     

Would you expect the Federal Reserve, in their December meeting, to start tapering—cutting back from $85 billion a month to something less than that.

DeFRIES: Well, they put these goals out there of 6.5 percent unemployment, a certain GDP growth, and they just keep changing them. It was going to be 6.5 percent. Now it’s going to be something below that. They’ll just keep changing those goals, so you can’t tag any time.

You saw what happened three months ago when there was just a hint of tapering. It’s obvious that the ability to keep rates low helped the economy and helped the government keep borrowing at very low rates, and the rest of the world borrowing at very low rates. But I don’t think it’s sustainable in the long run. Tapering has got to happen sometime, and I’m just afraid that we’ll delay it so long that it will become a bubble that we’ll have to come down from really hard.

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