Academic journal article ABA Banking Journal

Economy: Not Just Recovering, Restructuring

Academic journal article ABA Banking Journal

Economy: Not Just Recovering, Restructuring

Article excerpt

Economy: not just recovering, restructuring

An ongoing restructuring of major industries was one reason why the current recession/recovery cycle was unlike others said three participants in an economic outlook panel during the ABA Annual Convention. The panelists, all bank chief economists and members of ABA's Economic Advisory Committee, said that in previous downturns there has often been some sort of shock (plunging oil prices, for example), a correction, then a recovery In this cycle, restructuring has led to a more secular versus cyclical downturn.

Panelist Alan Gayle, senior vice-president, Crestar Bank, Richmond. Va.. observed that the restructuring began many years ago in the manufacturing heartland, then spread to the coasts.

Farming, finance, and defense were other industries cited as going through a restructuring, as indeed are most large corporations. As a result, "nobody has been spared in this [downturn]," noted Stuart Hoffman, senior vice-president, PNC Financial Corp. Pittsburgh. One possible exception, he said, is the health care industry. The good news, said Arturo Porzecanski. senior vice-president, Republic National Bank, New York. is that "we may be sowing the seeds" for greater growth later.

Meanwhile, though, the country is having a "rolling recovery," said Porzecanski, "much like we had a rolling recession." Rate effects. Panel moderator James Chessen, ABA's chief economist, asked the panelists for their views on rates.

PNC's Hoffman observed that the current rate scenario can't Jast forever. He expects to see short-term rates rise beginning next spring. Nevertheless he expects to see another 12-18 months of above-normal spreads and his bank has been trying to lengthen its liabilities to lock in the wide spreads. …

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