Bank exec details stresses that could hamper economic recovery

Andrea McGrew, Marketing Analyst & Social Media Coordinator for Midwest Orthopaedics at RUSH, talks with Anna Shaleva, Chief Lending Officer Illiana Financial Credit Union, at the Illinois Chamber of Commerce small-business conference at the Tinley Park Convention Center in Tinley Park, Illinois, Tuesday, September 25, 2012. | Joseph P. Meier~Sun Times Media

Updated: October 27, 2012 6:16AM

Rising inflation, staggering federal debt levels and a still-struggling housing market continue to hobble the economic recovery, a Chicago-area bank executive told business people at a Tinley Park conference Tuesday.

Still, overall, “people are feeling a bit better about where they are” financially, Ed Wehmer, president and chief executive of Wintrust Financial Corp., told those attending a small-business conference sponsored by the Illinois Chamber of Commerce.

Wintrust is the parent of several banks including Beverly Bank & Trust and Old Plank Trail Community Bank.

Wehmer said that while large businesses are sitting on stockpiles of cash, they’re hesitant to make substantial investments by hiring or expanding until after the November elections, when they’ll have a clearer picture of the nation’s tax and regulatory structures.

He noted that if that money “was put to work, it would put a lot of people to work.”

Wehmer said that while home sale prices are slowly creeping back up, low appraisals are scuttling many home purchases, and prices won’t improve significantly until the current inventory of foreclosed homes works its way through the market. That is taking longer in states such as Illinois, where foreclosure cases have to work their way through the courts, and banks have to shoulder the cost of keeping those properties maintained, Wehmer said.

“You got to get (prices) off the bottom and get things moving on the housing side,” he said.

Wehmer said there is a lot of “pent-up demand” for homes, and that the nation could actually see a housing shortage because so many new-home builders scaled back construction once the economy tanked.

“Within the next two years you are going to have to see homebuilders start building again,” he said.

Worrisome levels of federal debt could hamper the fledgling recovery, which Wehmer said will be slow and “not without pitfalls.”

“We cannot keep borrowing and not expect bad things to happen,” he said.

Even more debt will be built up with the Federal Reserve’s current plan to drive down already-low mortgage interest rates, he said. The current round of what’s called “quantitative easing” has the Fed buying $40 billion in mortgage bonds each month in a bid to give the economy a lift, but Wehmer, speaking after his public comments, said he doubts the Fed’s efforts will “do a damn thing” to bolster the economy.

He said he’s also concerned that higher prices, particularly for food and energy, such as gasoline, could further hamstring the recovery.

“Inflation is here and it’s here to stay,” Wehmer told the audience.

Yet rising prices haven’t put a significant dent in consumer spending, Wehmer said. Heading into the holiday shopping season, major retailers are planning to add larger numbers of seasonal workers compared with last year, suggesting they anticipate healthy sales. Wehmer said that while consumer spending is rebounding, shoppers aren’t pulling out credit cards when they buy.

“Americans are born to spend, and we’re back to boom-times levels of spending, but we’re doing it with cash,” he said.

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