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Nebraska town fights to keep bank

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Kai Ryssdal: Big Wall Street banks have gotten the lions share of the attention since the credit crisis hit more than a year ago. As a group they do have enormous influence in the macro-economy. But a lot of the banking in the U.S. happens away from Wall Street, in smaller towns and cities where banks are much more a part of the community.

According to the FDIC, 33 banks have failed so far this year. Possibly hundreds more in the next couple of years. In most cases another bank takes over and life goes on pretty much as usual. But what happens when the bank that fails is the only one in town? Marketplace’s Amy Scott has that story.

AMY SCOTT: It’s early in the week, but Tom Schroeder is already taking orders for his famous Thursday pizza night.

Schroeder owns the Danish Baker in Dannebrog, Neb. It’s sort of a coffee shop, restaurant and card parlor all rolled into one. Dannebrog is a town of about 350 people a few hours drive northwest of Lincoln.

TOM SCHROEDER: A lot of gingerbread architecture. A lot of big trees. People walk their dog, and kids ride their bicycles on the sidewalk. And we don’t expect people to hurt us.

But recently Dannebrog’s only bank let the people down. Sherman County Bank collapsed a few months ago after some farm loans went bad. Another Nebraska bank called Heritage took over but decided it didn’t pay to keep the two-teller branch open. So for more than a week now, Dannebrog’s been bankless. Tom Schroeder is still figuring out how to handle his money.

SCHROEDER: After pizza night, I have a very large deposit. I wouldn’t feel very safe if I had to take it home with me and drive it to St. Paul or Grand Island the next morning. Plus the fact that I don’t really have time to go to St. Paul or Grand Island.

Those towns are 15 and 25 miles away. Tom’s wife Carol Schroeder is village chairperson. It’s like the mayor. She’s concerned about the many elderly people who can’t drive far or bank online. And she worries about Dannebrog’s future.

CAROL SCHROEDER: If we don’t have a bank, what I would see happening is pretty soon then the grocery store would fail, and the restaurants would have a very difficult time making it. The gas station. You know, I’ve seen a lot of small towns die, and I think it starts when you lose a bank.

About 12 miles away, the town of Farwell has already seen its school close, and the only church in town. Even the one bar shut down for a while. Farwell, too, just lost its bank. Amy Scheer owns Lukasiewicz Furniture, Floors and Appliances. She says the bank was more than a place to get change or make a deposit.

AMY SCHEER: It will be a big change. Kind of a social change too. It’s kind of a neat spot where you could visit with people, find out what’s going on, who’s sick, what was new in town. That’s something that I’ll sure miss, and you don’t replace going to another bank.

People in neighboring Dannebrog are fighting to avoid a similar fate.

On a recent evening about a 100 people packed into the fire hall. After Heritage Bank announced it would close the Dannebrog branch, Carol Schroeder and others put the word out that they wanted a new bank in town. At this meeting, they heard pitches from a regional bank and a credit union.

CREDIT UNION GUY: That’s what we’re about. We’re not there to make money off you. We’re there to serve your needs…

One Dannebrogian Bob Petersen liked the idea of a credit union. He owns a lumber store in town. Petersen says back in the 1980s, a bunch of townspeople got together and formed their own credit union. That was after the last bank failed.

BOB PETERSEN: We’re not the kind of people who sit and wring our hands and whine and cry. We’re generally a lot of people that are motivated, and with a cause will step up to the plate and do their job.

In the end, the people voted for the credit union to move in. But ultimately it’s not up to them. The FDIC owns the building. The bank’s failure will cost the insurance fund about $28 million. Officials want to recoup as much of that money as they can. They plan to auction the building to the highest bidder.

I’m Amy Scott for Marketplace.

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