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As Long as We Remember...

March 18, 2009

Think Globally, Bank Locally

Kevin E. Dayhoff

If you are banking with any of the ginormous intergalactic financial institutions that are at the center of the current financial crisis, then you are part of the problem.


As the current economic malaise continues to deepen, now, more than ever, it is critical that when you spend your money, you spend at a local business.


Lost in the doom and gloom spewing forth from Washington is the fact that many local banks are doing well.


For certain, many are challenged by the economy – and that is all the more reason to do business with them.


The broad sweeping bristle-brush being used to paint anger and frustration all over Wall Street, Washington, and the major financial institutions that are at the epicenter of our current economic crisis, should not be applied to our local institutions.


Local banks and businesses are owned and operated by our friends, family, and neighbors. You rub elbows with them at the local social, civic or sports event. You go to a church or synagogue with them. If you have a problem or a need, more often than not, you can find a real live person with whom to discuss your current situation.


Try that with the intergalactic bank. You know, the bank that in spite of the fact that it is in your neighborhood – when you call customer service and flounder your way out of voice mail jail, a person on the other end first wants to know from what planet are you calling. That is, of course, if you ever get a chance to talk with a real live person…


If you are not already convinced that irresponsible behavior should not be rewarded with your business, consider this.


According to a news report from ABC News on December 19, 2008, after Goldman Sachs “accepted $10 billion in government money, and lost $2.1 billion last quarter, … it handed out $10.93 billion in benefits, bonuses, and compensation for the year.”


I’m not making this up.


The same article recounted: “Morgan Stanley is in the same boat, having received $10 billion in government money. Their bonus pool this season is around $2 billion...”


It gets worse, while all of these banks were taking taxpayer bailouts and giving away the money in bonuses as quickly as they could write the checks, ABC News reported: “Of the 16 banks that were contacted by ABC News and asked how they were spending the hundreds of billions of taxpayer dollars, only one bank pointed to a specific loan that it made with the cash.”


Juxtapose this with a recent ABC News story from February 4 that noted that a “Federal Reserve study released just this week showed that banks are continuing to make it harder for people to get all types of loans… But … a handful of executives – mostly at smaller banks – are doing everything possible to help their communities out.”


The news article goes on to say: “Large Banks Have Yet to Lend. America's largest banks have not been as willing to spend. The banks have come under intense criticism for refusing to detail how they are spending the taxpayer money.”


The February ABC article addressed the issue much closer to home: “It is a similar story in Maryland where three small bank brands owned by Shore Bancshares took TARP money… The banks – Felton Bank of Delaware, The Centreville National Bank of Maryland and The Talbot Bank of Easton – are all lending as vigorously as they did in the past, according to CEO Moorhead Vermilye.”


Mr. Vermilye said: “We have continued to loan money and support the community…”


“Other regional banks in his market ‘have pulled their horns in’ and Vermilye's banks have swooped in to fill the void. The loans are going to small businesses and homeowners.


“The residents of Talbot County are looking toward us to keep them viable… We've done exactly what the Treasury wanted us to do,” said Vermilye.


The same ABC article noted that “BB&T has also increased lending… ‘In the spirit of TARP, our aim has been to target areas with liquidity and funding challenges that are beyond our banking network,’ spokesman Bob Denham said in an e-mail. ‘BB&T has been able to provide commercial and industrial loans, auto finance for consumers, insurance premium finance for small businesses, and commercial and small business equipment finance.’”


Amy Klobuchar, a Democratic senator from Minnesota, and a member of the Senate Commerce and Joint Economic committees, wrote in “Banks that had a brain,” on February 24 in the Washington Post. “… These Main Street banks did not dance down the yellow brick road to Wall Street dealmaking or Washington hobnobbing. When the pavement on Wall Street began to buckle and collapse, these banks did not panic and run to Washington with tin cups in outstretched hands. They continued to conduct their business, behaving the way, well, banks are supposed to....


As I walked by the television set the other day, a commentator was recalling a recent poll that said something like: as yet another bailout is being discussed in Washington, only 38 percent of Americans supported the idea, although 68 percent lamented that Congress would probably pass it anyway.


If Washington is that far out-of-touch – and has no idea where Main Street America is – perhaps we need to give it a clue by taking our money and our business away from any of the ginormous financial institutions that caused the current mess.


Instead of bailing them out, they ought to fail, and go into bankruptcy. If a financial institution is too big to fail, then it is too big to manage and needs to be broken-up into manageable units.


Think globally, bank locally.


Kevin Dayhoff writes from Westminster. E-mail him at


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