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Small banks also facing big stress

Front of the Oakwood State Bank in Oakwood, Tx.

TEXT OF STORY

Bill Radke: So the stress tests were done on 19 huge American banks, which is not the whole financial system. There are thousands of small banks across this country that businesses and consumers depend on. What are their prospects? Marketplace's Jennifer Collins reports.


Jennifer Collins: Brian Battle has been advising small banks on how to get through the recession. He's a vice president with Performance Trust Capital Partners.

Brian Battle: You go into self-preservation mode, and you don't extend yourself, because you want to live to fight another day.

You mean, like a spy?

Madonna: I guess I'll die another day.

Battle: Sure, yeah sure, and that makes you very suspicious and suspect and very careful, and what sorts of risks you take.

The problem is small banks have lent heavily to commercial real estate projects like office parks and shopping centers. But now, fewer people are shopping -- so stores can't pay their leases and malls are defaulting on their loans. Office parks are losing tenants, too.

Rajeev Dhawan is the director of economic forecasting at Georgia State University:

Rajeev Dhawan: This is a serious problem and that is going to be the next shoe that is going to drop.

Already, there are rumors that President Obama's economic advisers are considering injecting money into small banks. So, the bailout could live on.

I'm Jennifer Collins for Marketplace.

About the author

Jennifer Collins is a reporter for the Marketplace portfolio of programs. She is based in Los Angeles, where she covers media, retail, the entertainment industry and the West Coast.
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