Wall Street Shaky; Local Banks Solid
By Mike Scott
The chaos continues on Wall Street, despite the much-lauded federal government’s intervention, promising a $700 billion “rescue package” to stabilize the economy. On Monday, the Dow Jones average slipped below 10,000 for the first time in four years, as investors moved away from the market towards safer investments.
The evening news of the past few weeks has been dominated by the weakness or outright failure of a few of Wall Street’s largest players. Candidates of both parties point fingers and claim to know how to solve the problem.
The government’s “rescue package” is designed to stabilize the markets by allowing the federal government to purchase some of the bad investments, mostly real estate loans, held by a number of investment banks. The plan would have the government hold the investments until their values increase again, and then sell them back, presumably at a profit.
The immediate benefit of that action was supposed to be to encourage banks to start loaning to each other again.
What effect does all this have on our local banks in Clark County? Not very much, according to them.
“I don’t know that it will have much of an impact on us,” said Peoples Bank of Wyaconda President David Alderton, Jr.
All four local banks report business as usual. Home and car loans are being made, and their loan requirements haven’t changed. Borrowers with a down payment and good credit should be able to get a loan at any of the local banks. And, of course, your deposits are FDIC insured.
The big differences are that community banks haven’t fallen into the habit of making “sub-prime” loans, and that local banks face a different set of regulations. Those “sub-prime” loans were made to individuals with little down payment and who otherwise might not have gotten a loan, often for real estate. Many times, the loan values exceeded what the borrower could realistically repay.
When the real estate market became saturated, housing prices fell, leaving many owing more on their home than it was worth.
“We’ve always made a point of doing business in a prudent and safe manner,” Exchange Bank of Northeast Missouri President Paula Fox said.
“We’re strong and secure,” echoed First Federal Bank’s Maria Shirey. “We haven’t made any sub-prime loans, and we’ve always followed conservative underwriting standards.”
The banking “crisis” isn’t with local banks, said Kahoka State Bank’s President Bev Laffoon.
“The majority of the scare of the financial crisis lies primarily with those financial institutions that are not being regulated--in other words, answer to no one, and most times those are investment banks,” Laffoon said.
Laffoon recently joined approximately 50 other Missouri Bankers who travelled to Washington to meet with legislators.
“Smaller community banks have always been the backbone of this country and will continue to be. They are more conservative, they are regulated and therefore must perform up to certain criteria and standards,” Laffoon said.
All of the local bankers indicated they would be happy to answer any questions their customers might have.
“I’d much rather people ask us questions. We’re here to help you,” said Paula Fox.