PORT ANGELES — The United States will bounce back from the economic recession in 2011 or 2012 with the dollar intact, Washington U.S. Bank president Ken Kirkpatrick told the Port Angeles Regional Chamber of Commerce on Monday.
“Japan, England, Germany, they’re not going to come out until 2013 or ’14,” said Kirkpatrick, a member of the 12th District Federal Reserve Board.
“So the United States is going to come out of this first. It’s going to come out faster and a couple years ahead of time, which is going to add even more strength to the U.S. dollar.”
Outline of mess
In a 30-minute talk during the chamber luncheon at the downtown Elks Lodge, Kirkpatrick outlined how the country got into the economic mess — and how it can get out.
The recession started with a credit boom and housing bubble, Kirkpatrick said. Investors underestimated credit risks, and financial regulation was inadequate.
Furthermore, Kirkpatrick said, the rising home prices, low default rates and a loosening of underwriting standards reinforced the credit boom.
“So that’s kind of how we got here,” said Kirkpatrick, who has served as Washington president of U.S. Bank since January 2002.
After the housing bubble deflated in 2005 and 2006, rising mortgage delinquencies in 2007 stunned investors, and mortgage-backed securities lost value, he said.
Uncertainty about the financial system led to a clamp-down in credit as banks and markets came under stress. More than $11 trillion in wealth has been lost in the financial collapse, Kirkpatrick said.
In response to a question, Kirkpatrick said the banks want to return money from the Troubled Asset Relief Program, or TARP.
“The government is concerned about the banks giving it back because they want to keep the lending door open,” he said.
He added that the larger banks will be subject to “considerably higher regulation” from the government, while smaller community banks will not.
“When you think about it, if you’re too big to fail, you should have more stringent controls,” Kirkpatrick said.
To turn things around, Kirkpatrick said the country needs to accomplish the following:
•SEnSStabilization of consumer spending.
•SEnSBottoming out of the housing market.
•SEnSModeration of the decline in foreign economic activity.
•SEnSProgress in getting rid of high inventory.
The San Francisco-based 12th District of the Federal Reserve encompasses 21 percent of the county’s population and 20 percent its land mass. The territory includes Washington, Oregon, Idaho, California, Nevada, Utah, Arizona, Alaska and Hawaii.
“This 12th district is incredibly powerful, incredible large and the Fed pays a lot of attention to what’s going on,” Kirkpatrick said.
Kirkpatrick said the Fed is concerned with three main things — keeping employment high and inflation low and steady economic growth.
Kirkpatrick concluded his remarks by holding up a $1 bill, which cost 3 cents to produce. He predicted the country will continue to use the greenback instead of switching to a dollar coin.
“This really is our calling card in the United States of America,” Kirkpatrick said.
“This is our card. This is the greenback. This is the dollar bill. The dollar bill is the strongest — it goes around the world — and it stands for three things. It stands for safety and it stands for security and it stands for freedom.”
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Reporter Rob Ollikainen can be reached at 360-417-3537 or at rob.ollikainen@peninsuladailynews.com.
