Faltering Manufacturing Sector Stalls CMI Growth

The progress noted over the last three months in the Credit Managers' Index (CMI) came to an end in November, at least as far as the manufacturing sector was concerned. The service sector data was a little more encouraging, but not enough to keep growth from stumbling. The combined index posted less than a 0.1 increase, which was barely enough to push the index from 54.9 to 55.0. "The issue was less about demand and growth than the fact that past issues were starting to catch up again," said Chris Kuehl, PhD, economic advisor for the National Association of Credit Management (NACM). "There was actually a pretty impressive gain in terms of overall sales-from 60.8 to 61.9-even though this factor in the service sector contracted somewhat. There were also gains in new credit applications and amount of credit extended. These indicators suggest real growth in both sectors and match data coming from the Purchasing Managers Index as well as more recent data from the retail community. The declines came from the indicators that point to debt issues and the struggles of companies that have not managed to get through the recession all that easily."

The dollar collection data showed a substantial decline-from 61.9 to 58.6-and for the most part the index of unfavorable factors demonstrated a similar decline. There was an increase in dollars beyond terms and in filings for bankruptcies as well as in other indicators. The pattern is not unfamiliar to the credit community and based on past data, there was reason to expect some of these results to start showing up. This is a critical time for many companies and some are not ready to address the situation effectively. During the worst of the recession, most companies were in the same position: hunkering down to survive. As the recovery started, the majority of those companies that made it through the worst of the decline maintained a pretty cautious position due to lack of real demand. Now there is some sense that an economic rebound may finally be on the horizon and some companies are starting to gear up for that rebound with more marketing, sales efforts and inventory accumulation. If a few companies in a given sector start to make moves, there is additional pressure on others in that sector to match them. If they are not financially strong enough to make that move, they can swiftly fall behind if the expected sales rebound does not occur on schedule.

Kuehl noted there is another take away from the unfavorable factors category. It appears that companies struggling to stay afloat are now having additional trouble getting access to credit, even if they have some opportunity to expand their business. The banks in general have returned to their more cautious ways and there are widespread reports of limited access to capital. The investment community remains unengaged, leaving companies with only their suppliers for credit. "That same set of limitations applies to these companies and that threatens to impose a stranglehold on credit availability in general," he said.

This month's anecdotal evidence also suggests some companies are waiting to see what happens at the congressional level. If tax cuts are not extended, many companies will need to pay out far more than they paid in the past and that has executives holding back a significant amount of capital as a contingency. Presumably, when the tax decision is made, this money will either be put toward the additional tax or released for other uses. There is also discussion over whether other issues concerning small businesses will be addressed-everything from revising the medical reform law to moves to push more stimulus into the economy. One of the areas already recommended for reform is a provision in the health care law that requires most companies to file 1099 tax forms on any contract that amounts to more than $600 a year. NACM views this as a destructive provision for small businesses as it would tend to force them to choose fewer, larger businesses to provide a wide variety of services and products as opposed to several smaller ones, and require additional resources to issue the forms.

The full report, complete with tables and graphs, along with CMI archives may be viewed at http://web.nacm.org/cmi/cmi.asp.

Whitehouse Bankruptcy Bill Held Over In Latest Business Meeting

Sen. Sheldon Whitehouse's (D-RI) bankruptcy bill was held over again in the Senate Judiciary Committee's latest business meeting.
S. 3675, the Small Business Jobs Preservation Act, was on the agenda for the meeting on November 18, but the Committee set the bill aside, choosing instead to advance a bill with broad bipartisan support (S. 3804, the Combating Online Infringement and Counterfeits Act).

Committee Chairman Sen. Patrick Leahy (D-VT) broached the subject of S. 3675 before quickly exiting the meeting, leaving Whitehouse and Sen. Jeff Sessions (R-AL) to discuss the bill's prospects. However, Whitehouse used his statement to request a clarifying amendment to the Bankruptcy Code that would govern a judge's authority to compel a lender to produce a high-ranking staff member to discuss a filing debtor's mortgage before foreclosure.

"When someone files in bankruptcy court and they have a foreclosure issue, the court has a process that requires them to sit down and discuss the modification," said Whitehouse, referring to a procedure used in his own home state of Rhode Island. "It has resulted in a flood of successful modifications, and it provides for mediation potentially, but just getting people in the room together produces results."

Whitehouse requested the clarifying amendment due to a pending case filed by a lender against his home state that alleges a bankruptcy judge has no authority to require anyone from the bank to be there. The amendment would ensure that the Code gives the judge this ability and effectively shut down the case.

Sessions sympathized with Whitehouse's concerns and Whitehouse noted that they hoped to move the amendment to the Senate floor in the lame duck session, which may signal that his office will not seek further action on S. 3675 before the end of the legislative session.

NACM has worked closely with Whitehouse's office on S. 3675, which would create a new small business bankruptcy procedure, and continues to do so. Should the year end without action on the bill, Whitehouse is expected to pursue a similar measure in the next Congress.

To learn more about S. 3675 and NACM's other legislative efforts, visit NACM's advocacy page here.
Jacob Barron, NACM staff writer

Ireland Officially Requests Financial Bailout

The "Emerald Isle" dubiously and tentatively became the second member nation this year to officially ask for a financial bailout from the European Union's central bank as the global economic downturn continues to plague high-debt countries across the Atlantic.

Ireland's Prime Minister Brian Cowan, after months of putting on a brave public face that the nation would not need assistance, announced Sunday that Ireland agreed to take a bailout package and will commit to a four-year austerity plan to reduce its swelling budget deficit. It is estimated the aid package, to come from the European Union and the International Monetary Fund, will be worth at least 80 billion Euros (nearly $125 million).

Ireland's economic situation became increasingly untenable amid rising budgetary costs tied to widespread bank failures caused largely by the bursting of an overheated, unsustainable housing bubble that ushered in a new wave of prosperity there last decade. The situation is not entirely unlike the real estate bubble that struck in the United States, among many other nations, and helped spark a deep economic downturn. Ireland's credit rating was downgraded by both Moody's Investment Services and Standard & Poor's, which caused defensive Irish leaders to call the ratings' systems flawed and even mock the performance of the big three, which also includes Fitch Ratings, publicly for their own poor performance in predicting the downturn.

Moody's Analytics Economist Melanie Bowler predicted the move likely will help European banks regain some confidence, at least in the short-term, but it also almost assuredly will impede the prospects for any kind of Irish rebound and longer-term growth.

"Multinational companies, the backbone of the Irish economy, may start to look elsewhere," she said. "Following a sharp deterioration in competitiveness in the 2000s, some firms decided to relocate to cheaper locations in Europe. While recent wages cuts and weak price pressures are helping boost Ireland's traditional advantage, the bailout will raise questions about the stability of Ireland as a destination for foreign direct investment."

Perhaps more important is the likelihood that corporate taxes will be increased, said William Reinsch, director of the National Foreign Trade Council trade association. Those companies that made significant financial investments, such as the construction of large factories, may be stuck. However, those without as many strings indeed may look elsewhere. The most sensible way to prevent flight may be to hold back on the likely desire to up those taxes but the need of the badly damaged economy might make such a strategy impossible, said Reinsch.

"What happens to their tax rates is the first question that needs to be asked, but it is not the first question that will be answered, honestly," Reinsch told NACM. "Those who made less of an investment [such as doing little more than locating some research and development operations there] may have incentive to relocate. It's hard to say, as none of that has been broached yet."

Working in Ireland's favor on the business front, however, is the fact that many of the companies that moved some operations are very large. This could render a quick exit strategy difficult to implement or unlikely to occur, based on previous history.


"Some companies are like aircraft carrier -- they don't turn on a dime," Reinsch told NACM. "It takes them a while to evaluate what's happening."

Brian Shappell, NACM staff writer

Obama's Asia Trip Fails to Yield Korean FTA

South Korea signed on to a key free trade agreement with a nation from the West this week. That nation, however, was not the United States to the chagrin of business analysts who believed President Barack Obama's trip to Asia this month was a litmus test of the administration's interest on trade.

Many words could be used, largely dependent on the political leanings of the analyst, to describe Obama's trip to South Korea for the G-20 economic summit - It would require perhaps the rosiest-colored glasses to consider "success" among them. A major talking point in the run-up to the G-20 meeting, held in Seoul, was the U.S.-South Korea free trade agreement that has been languishing since 2007. Though Obama vowed to have the agreement hammered out before the G-20 convened, no deal was struck even upon the president's exit from Asia. South Korea did forge a new free trade agreement with Peru, which should boost the Asian nation's automotive export prospects. Ironically, it's the auto sector that's a major part of a sticking point, as South Korea has largely rejected importing U.S. cars on the reasoning that they are bigger polluters than domestic cars. The U.S. auto lobby and trade unions have staunchly opposed the agreement, calling it imbalanced.

Obama, for his part, says the Korean free trade agreement remains a priority and that he didn't want to rush into a deal that wasn't mutually beneficially just to get it completed. Unfortunately for the president, who has been branded by some industry experts as anti-trade and anti-business, finishing the trade agreement was seen as an important step to proving the administration is serious about trade.

(Editor's Note: See full story, including analysis on Obama's activity at the G-20 summit, in today's eNews, which will be available late Thursday afternoon).
Brian Shappell, NACM staff writer

Is There an Obama Export Policy Under Development?

(Business Intelligence Brief) For the past two years there has been something of a mystery as far as the president is concerned. Is President Barack Obama anti-business, or does he think that business concerns are invalid? Is the President a free-trade advocate or a protectionist? Is the United States interested in pursuing some kind of trade policy that engages with the rest of the world or not? The biggest mystery is whether the hostility towards trade and global business was really something that reflected the beliefs of Barack Obama or the Democrats in Congress.

Looking at Obama as senator, one would see a pattern of votes that suggested that he was more trade advocate than not and, in the campaign, he was less antagonistic regarding the issue of trade expansion until he elected to contest Hilary Clinton on the subject. Meanwhile, the focus of the Democrats as a whole has been virulently protectionist with some exceptions in states that relied more heavily on the export community.

The ten day Asian trip may signal one of two things. This may either be the emergence of a new Obama - free from having to mollify a hostile Democratic party, or it may simply be an example of saying what the audience comes to hear without meaning to do much to advance the U.S. trade position. The reaction to Obama at the G-20 meetings was as close to an outright snub as any U.S. leader has received in years. Even an unpopular President George W. Bush never got the brush-off that Obama was subjected to. Much of this was anger at the US position on its currency but some was frustration with the lack of a framework on trade after two years of waiting for the Obama plan to develop.

Analysis: The G-20 meeting was humiliating, and the foreign press has been unmerciful. Many analysts in Europe had been hoping to see a radical shift from the Bush years, and and many are betraying their own naiveté as they express shock at the U.S. positions. The fact is that Obama reflects U.S. interests - Bush did and so does Obama. That these interests are not the same as those of other nations should come as no shock. The Europeans are mad at the United States for policies that weaken the dollar (such as last week's quantative easing effort outlined by the Federal Reserve last week) as it makes their export sector less effective. In the past, the shoe was on the other foot, and the United States thundered at the weak Euro.

What should the Obama do now? The simple answer is that the president needs to remember he is also "Salesman in Chief" and must champion the nation in trade - both directions. For two years this has not been the role that Obama has played but, at this last meeting, he seemed to get engaged despite the hostility. An engaged president is vital in the trade arena, and it is good to see Obama taking on such a role -- especially given the anger that was being directed his way.

--Chris Kuehl, of Armada Corporate Intelligence, is NACM's economic advisor

UPDATED: Beige Book Continues Signs of Stagnation

On the heels of the Federal Reserve Chairman Ben Bernanke's confidence-shaking testimony before Congress, the Fed released its Beige Book report on conditions from the last six weeks within its 12 regions on Wednesday.

The report's economic roundup painted a less optimistic picture than previously in 2010, as Fed contacts noted the pace of economic growth slowing in regions that had been improving, albeit slightly; two districts experiencing stagnation (Cleveland, Kansas City) and a pair where activity was actually failing to remain stable, let alone make gains (Atlanta, Chicago).

Granted the negative news was nothing new to the commercial real estate sector, indentified as a drag on the recovery in all regions throughout much of this year. And though banks' lending criteria for businesses to garner loans remained restrictive, the bigger issue is that actual borrower demand has fallen to very low levels. Still, the Fed contends that "on balance," the economy still is still in a growth period, a very slow one. Some pieces of positive news came from at least half the nation's regions in manufacturing, especially in those tied to the automotive industry; tourism, save the oil-spill wrought Gulf Coast; and employment opportunities, though there's a lot more part-time (non-benefits) work available. However, such optimism on the jobs front was reported prior to Wednesday's Labor Department report that found unemployment rising in 75% of U.S. urban markets.

District 1 -- Boston
Business activity was seen increasing in recent weeks, with vendors generally reporting increased revenue and work. Commercial real estate reports were mixed, which actually is much more than several other regions could boast. Commercial property vacancies rose in markets like Hartford and Boston on fears of increased unemployment and lower demand for such properties. However, their colleagues in Providence can be described as “upbeat.”

District 2 -- New York
Though economic growth in the second district has shown signs of improvement, the demand for business loans continued to wane. Additionally, the cost of loans again grew. Vendors found sales and inventories at expected levels. And, like the Boston Fed bank, the commercial real estate market for the area appeared somewhat steady for the region, on balance. Most improvements, however, were found in Manhattan suburbs on the New York state side.

District 3 -- Philadelphia
The district reported slight economic growth, and product manufacturers noted an increase in shipments despite a small dip in future orders. Credit quality was seen as improving, though loan balances have remained largely unchanged. Commercial real estate contacts reported steady vacancy rates for the most part and little demand for new construction as companies continue to look for less space.

District 4 -- Cleveland
Overall economic growth and manufacturing remained stagnant during the last six weeks. Still business’ production remains well ahead of the pace through this point last year. Mild improvements in commercial real estate from the spring started to shrink more recently. Most interest in new construction presently is relegated to government-funded infrastructure and some industrial categories. Demand for business loans remained soft, though there have been signs of increased interest, said Fed contacts.

District 5 -- Richmond
The district’s economic performance was categorized by the Fed as “mixed or modestly improving since the last report.” Manufacturing continued to show strength here, especially for those supplying homebuilders that are building to replace depleted inventories or new product designs to fill a growing consumer demand for smaller (more efficient) houses. The commercial side of real estate continued to struggle mightily in Richmond, Baltimore and metropolitan areas of North Carolina.

District 6 -- Atlanta
Economic activity slowed in the district, with low optimism apparent in most industries, save tourism. There is fear of the impact of the ongoing Gulf Coast oil spill cleanup, though. Business loans and use of credit cards appeared to drop during the latest Fed tracking period. And commercial real estate continued to spin its wheels with little in the way of reasons for optimism emerging.

District 7 -- Chicago
The pace of the economic rebound here has dropped of late. Part of that comes from a slowing in business spending, though capital spending specifically on information technology has increased. Real estate activity, already low in the area, took another hit during the latest period with only public, infrastructure-related construction on the come. However, the district was one of the few to report an uptick in business loan demand and credit quality.

District 8 -- St. Louis
The eighth district continued its improvement, notably in manufacturing and automotive sales. Demand for and ratio of business loans, however, continued to dwindle. Also slow, unsurprisingly, is the long-struggling commercial real estate sector. Contacts don’t expect any demand for new commercial construction for at least another year.

District 9 -- Minneapolis
Economic growth was slight for the recent period in the district. The manufacturing sector, notably construction equipment producers, saw a solid increase in activity. However, commercial real estate was weak and declining. About the only good news was found in Sioux Falls, SD, where a bump in commercial permits was found, and with a Minnesota/Wisconsin-area contractor that deals mostly in heavy infrastructure.

District 10 -- Kansas City
Weak commercial and residential real estate performances acted as a drag preventing overall economic growth from advancing in the region – and another slide was predicted by industry contacts. Manufacturing-based businesses continued to find some gains, though the pace of growth slowed for the second straight month. Still, new orders have held stable for vendors. Demand from such businesses for bank credit remained low.

District 11 -- Dallas
Despite cautious optimism, the region’s economic expansion continued “at a moderate pace.” Non-construction based businesses have had reason for optimism. A few firms are in the commercial real estate market went out of business or are on their last legs, with few predictions of an uptick in the sector any time soon. Business loan demand, as well as all other categories, was soft, and loan performance was holding stable with levels noted in previous months.

District 12 -- San Francisco
After months of deterioration, the district finally reported a slight uptick in economic activity. Still, commercial real estate activity remained unchanged “at very low levels.” A Fed contact noted that those commercial property sales that did occur in the last six weeks fetched “surprisingly high” prices. Banks believe loan demand from uncertain businesses will not pick up until there are clearer signs where the economic rebound, or lack thereof, is going.

Brian Shappell, NACM staff writer

Struggling Banks Risk Loss Of Top Performers

The staff of a supplier's bank, or their customer's bank, can often serve a vital role in the extension of credit, whether it's to reduce risk or just to iron out the wrinkles in the transaction and hopefully create the most profitable solution for all parties involved. In the wake of the financial crisis, however, training budgets have fallen by the wayside and a new study, conducted jointly by the American Bankers Association (ABA) and the Corporate Executive Board (CEB), shows that the nation's banks are at risk of losing their top talent, which could have negative ramifications far beyond the banking industry.

The study showed that while successful companies in other industries spend an average of $1,100 per employee on training, banks only spend an average of $650 per employee. This underdevelopment of top-performing staff increases the risk that they'll leave the industry and, in the long-term, reduce overall productivity. "The study raises the question: what is being done to prepare the next generation of bank leaders?" said Doug Adamson, executive vice president of ABA's Professional Development Group. "High-performing employees have told us that in order for them to stay and be more productive, they need to be recognized as top performers and have well-defined development plans in place."

Additionally, the survey showed that training and development should mean more to the banking industry than it might to other industries due to the sector's heavy reliance on internal hiring. A hefty 60% of banks hire their employees from within, according to the study, which also noted that 40% of bank CEO respondents believed that they weren't doing enough to help their employees grow.
One culprit of underdevelopment was half-established talent management policies. "We were surprised to learn that while bank CEOs are acutely focused on the importance of talent in today's market and clearly link talent management practices to their institutions' overall success, most banks have talent management practices that are only partly in place," said Adamson. "Banks will continue to compete on the quality of their employees and must help talented employees reach their full potential to build talent pipelines for the future."

In addition to surveying CEOs, the study also involved employees themselves and their opinions of their occupation, industry and overall productivity. "One quarter of high potential employees are considering leaving their organizations, and those folks put forth 21% more effort than their disengaged peers," said managing director of CEB's Financial Services Practice Russell Davis. "Today, every bank risks losing its future talent base." The study also showed that the economic downturn has fundamentally reduced employee productivity, with the number of employees exhibiting high levels of discretionary effort declining by 53% over the past four years.

More on the study can be found at the ABA's website (www.aba.com).

Jacob Barron, NACM staff writer. Follow us on Twitter at http://twitter.com/NACM_National.

Republicans Win House, Gain in Senate; But Questions Abound for Industry


The Republican party can claim a fairly resounding victory in Tuesday's midterm election by taking a majority in the House of Representatives and cutting into the Democrat's super-majority in the Senate. However, though small business appeared to pine for such results, the 2010 race may have left more questions than answers. Chief among them may be: Will there actually be a massive improvement made for small businesses in the areas of manufacturing and credit? The jury on that could remain out well into the 112th Congress.

Republicans gained at least 60 seats in the House and about a half-dozen more in the Senate with some close races still being tallied. On the surface, the GOP victory appeared to be just what the doctor ordered for small businesses, especially in manufacturing. In fact, a pair of studies released in the week before the election from Discover and FTI Consulting, indicated just that.

Discover's Small Business Watch saw its monthly measure of small business confidence in the economy increase by 10.4 points to a level of 84.2. The study's directors attributed the strong gain directly to the perception that Republicans would almost certainly retake the majority at least the House. Meanwhile, FTI Consulting's study found 64% believe economic conditions would improve and 60% thought employment levels would rise if Republicans won a majority in either house of Congress. A similar ratio of respondents indicated they believed GOP policymakers were more likely to be cooperative with the business community going forward.

Should those responses prove accurate, the most likely short-term legislative changes would come in a significant revision of unpopular health care-related provisions requiring a 1099 for any business transaction over $600 as well as passage of a small business aid package that was pushed by the Obama White House in October. The latter appeared to die in Congress more from pre-election partisan gamesmanship than actual objection on either side to helping struggling small businesses. The change in Washington, DC might also inspire lawmakers to push for quicker resolution on long-pending free-trade agreements with Panama, South Korea and Columbia.

Byron Shoulton, senior vice president and international economist at FCIA Management Company, believes those Democrats who have opposed breaks for businesses and/or increased exporting, something the administration has shown increased interest in, may have to compromise more than any time in the last two, perhaps four, years.

"I do believe the current mood favors tax cuts on small businesses among other likely incentives to help boost the economy and regain consumer confidence," said Shoulton. "The new majority has every reason to move boldly to help small businesses as much as possible. I expect they will." However, Shoulton admitted that some "new arrivals" to Congress may come to Capitol Hill trying to prove something to the voters who elected them on an anti-incumbent, anti-Washington platform and other simply may not want to ease the pressure on President Barack Obama.

Economists Xiaobing Shuai, of Chmura Economics & Analytics, and Ken Goldstein, of the Conference Board, appeared even more pessimistic regarding the idea of compromise among federal lawmakers.

"Because both parties are moving away from center, it is difficult to see anything big coming out of Congress," said Shuai. "Both parties will be posturing for the Presidential election in 2012."

Moreover, Goldstein said matters are complicated further by the reality that it's not just Democrats and Republicans battling - It's both traditional parties being joined in the mix by the emerging Tea Party membership, which didn't exactly toe the GOP line or get much support from party stalwarts during the 2010 campaign season. The latter group could be unlikely to play ball, so to speak.

"This three-way free-for-all is made for gridlock," said Goldstein. "Some of the victors specifically campaigned on NOT compromising. Small business must therefore look to the Federal Reserve and the local banks, not to Congress or the White House. It also suggests looking for legislation to be passed in both houses and NOT vetoed could be waiting for Godot."

Brian Shappell, NACM staff writer

Fed Holds Rates, Launches Another Effort to Rescue Economic Rebound from Stagnation or Reversal

The Federal Reserve's Federal Open Market Committee emerged from a two-day fiscal policy meeting Wednesday to announce it would not change the long-steady target for the federal funds interest rate and, more significantly, was launching a new wave of Treasury securities purchases at a price tag of $600 billion. The latter, perhaps intimating the Fed's lack of confidence in a sharply divided and changing Congress to quickly push beneficial legislative changes, is designed to bolster what it admits has been "disappointingly slow" economic growth.

From the Fed release: "Information received since the Federal Open Market Committee met in September confirms that the pace of recovery in output and employment continues to be slow. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts continue to be depressed. Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate. Although the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, progress toward its objectives has been disappointingly slow.

To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities. The Committee will maintain its existing policy of reinvesting principal payments from its securities holdings. In addition, the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to support the economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Sandra Pianalto; Sarah Bloom Raskin; Eric S. Rosengren; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Voting against the policy was Thomas M. Hoenig. Mr. Hoenig believed the risks of additional securities purchases outweighed the benefits. Mr. Hoenig also was concerned that this continued high level of monetary accommodation increased the risks of future financial imbalances and, over time, would cause an increase in long-term inflation expectations that could destabilize the economy."