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Small banks more prone to failure?
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Kai Ryssdal: There was a report out this morning from the Congressional oversight panel, the group that's in charge of keeping an eye on the TARP, the bank bailout of a year and a half ago. In a nutshell, it goes a little something like this: The $700 billion that was allotted to keep the financial industry up and running did a bang-up job taking care of the big banks, those "too big to fail" ones. Smaller firms not quite as systemically important? TARP didn't really do much for them. They're having a hard time making quarterly dividend payments, let alone paying the money back. In fact, the report says the TARP may actually lead to more takeovers and failures of small banks.
Marketplace's Jeremy Hobson reports.
Jeremy Hobson: Today's report says one in seven small banks that took money in the bailout
has already missed a dividend payment to the government. And those dividends will only get more expensive as time goes on.
Elizabeth Warren chairs the Congressional Oversight Panel that wrote the report. She says all this means some small banks will likely be swallowed up or shut down.
Elizabeth Warren: When the smaller banks are weak, their lending remains constricted, and these are the banks that disproportionately lend to small businesses.
And since small businesses are a key engine of economic growth, she warns the demise of small banks could stymie the recovery.
But not everyone is so concerned. Andy Stapp, an analyst at B. Riley, admits that small banks are an important resource for local communities.
Andy Stapp: But a lot of these are being taken over by larger community banks, so you know, in that regard I don't think you lose anything.
Bart Narter agrees. He heads the banking group at Celent. He says losing one in seven small banks wouldn't be the end of the world.
Bart Narter: Banks of under $100 million in assets simply aren't of a viable size anymore.
Narter says small banks have been losing deposits to the mega-banks for decades, long before there were TARP dividend payments.
Narter: In the good old days, you had a branch and you had an ATM and you were done. Now you need Internet banking, you need mobile banking, you have all this regulation you have to comply with, so small banks have been disappearing at a very fast rate in any case. Nothing to do with TARP.
Still Elizabeth Warren's panel warns fewer small banks will concentrate even more power at the large Wall Street institutions. She says that could set us up for more financial crises.
In New York, I'm Jeremy Hobson for Marketplace.
I can see both sides of the above 'arguments',if you like shared monopolies, but having said that I don't believe that having our community banks and credit unions swallowed up by the likes of BoA, Citibank, Chase, etal, is a good thing. Not only in VT but in all the States. On July 17th, between 4-7PM I am hosting a rally for Democracy For America, DFA, [Howard Deans brainstorm]in a campaign, Move Your Money,being held all across. I believe that we should not allow the big banks to take over our country, not that they aren't already doing a bang-up, [bank-up] job of it. We are asking people to Move Your Money, from the large bank into the Community Banks and Credit Unions. I believe there is still a place for banks who know their customers, where you can walk in and talk to a familiar face, people who have known you for years, sometimes generations. When you need help, a loan, a new car, what ever, the people at these institutions are much more likely to take a look at your personal experience with them instead of running it through the 3 major Credit Bureaus, which themselves can't even agree not only what your credit is like but who you are! If you have had a hard time perhaps missing one car payment, one "Credit Card" payment the likely answer you will get from them will be a resounding, "NO!", Or perhaps you may get a yes with a hefty APR that no-one in their right mind should say yes to, but will because they need what ever it is they are seeking or they wouldn't be there in the first place. And isn't this partly why we got into trouble this time. I know that I was in another country when Citibank decided to lower my limit by about $10,000, and to UP my APR from 9%-29%. Wow, then started charging me over the limit fees and late payment fees when I wasn't even late. But that was ok, because with the lowered limit and the up'ed APR I was a bad risk? I have had many people right here in Barton tell me the almost exactly the same story. Heaven forbid if you also had a card from "BoA"[or another big bank], as well. They saw your fees kick in with Citibank and decided they should jump on the band wagon and do the same thing. Except this time it went from 0% to 29+%! The only safe place I had left that wasn't going to take my "VISA" away was my local Community Bank! We have to take back our country, take back our "money" and show the big banks that we are not 'forced' slaves to their every whim!
So join me July 17th at 41-45 State St. in Montpelier, VT to carry a sign for awhile, pledge to Move your Money and take control of your own finances and just maybe your life! Thanks for listening...[Yeah, I have more info but certainly not the space here to keep beating the horse that died months ago.]
