Fallout: The Financial Crisis

Mid-tier banks face their own troubles

Mitchell Hartman Jan 22, 2009
HTML EMBED:
COPY
Fallout: The Financial Crisis

Mid-tier banks face their own troubles

Mitchell Hartman Jan 22, 2009
HTML EMBED:
COPY

TEXT OF STORY

Steve Chiotakis: Megabanks have released some pretty dismal numbers of late. And now smaller, more regional banks are posting some sour information too. Ohio-based Fifth Third Bancorp this morning posted a $2.2 billion quarterly loss, its third straight. But mid-tier banks, as they’re known, have other things to take into account that differentiates them from the bigger siblings. Here’s Marketplace Mitchell Hartman.


Mitchell Hartman: The banking sector as a whole is suffering, with banks writing down assets and setting aside loan-loss reserves as fast as they can. But as Erik Oja of Standard & Poor’s explains, not all banks are hurting the same.

Erik Oja: A lot of these mid-tier banks specialize in bread-and-butter commercial lending. They’re a lot less complex than, say, a Citigroup or a JP Morgan in terms of their securities holdings and their exposure to derivatives.

Oja says the mid-sized banks in the most trouble are those that chased the housing bubble outside their regions, lending to builders in places like Florida, Nevada, and California. That includes Comerica and Fifth Third, and Marshall and Ilsley.

But Oja says even banks that stuck with safer lending in local markets will be playing clean-up throughout 2009, setting aside additional reserves as borrowers get behind on their loans or stop paying altogether.

I’m Mitchell Hartman for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.