Usually one can get some sense from a news article who is full of it and who has a legitimate point. But this Oregonian article about the economic wreckage caused by the Bank of Clark County failure leaves me scratching my head about what the truth actually might be.
While the U.S. Treasury funnels billions to Wall Street in the name of economic stimulus, its sister agency, the FDIC, is forcing some solid, local businesses into a damaging limbo.
Since taking over the failed Bank of Clark County in January, the Federal Deposit Insurance Corp. has frozen borrowers’ lines of credit and declared active loans in default, demanding immediate repayment. And in some cases, it has denied borrowers access to thousands of dollars of their own money locked in Bank of Clark County accounts, former customers claim.
But the FDIC insists it is flexible and responsive:
FDIC officials were vehement that they are sympathetic to the plight of the borrowers and highly flexible to their needs.
“If the loans are performing, the terms and conditions of those loans remain intact,” said Ron Bieker, deputy director of the FDIC’s department of resolutions and receivership. The FDIC will happily extend a line of credit, he said, as long as a borrower qualifies and provides updated financials and an appraisal of their collateral.
“We’re very sensitive to these issues,” he said.
It does sound like some business owners may have been caught in a nightmare if they weren’t fortunate enough to have been tipped off about troubles at the bank, as many well-connected bidness guys and gals were. Their frustration is certainly understandable, although nobody seems to be placing much blame with the directors and management of Bank of Clark County, who were an elite group of Clark County’s best business minds.
If you read the full article, another thing worth noting is that it sounds like the credit markets are still not performing very well down in the trenches, as these businesses can’t seem to get loans for legitimate business needs. So we’ve spent trillions on the big institutions and the little folks still can’t get credit.
Long term, this sad episode points out the need for sound regulation of financial institutions. Short term, maybe a Congress-critter or two could take a look at these complaints and, if warranted, see what can be done to ease the situation. Sure, in hindsight people would have been better off not doing business with Bank of Clark County, which was basically a pet project of the developers and the local movers ‘n shakers, but honest business folks can’t really be faulted for doing business with an FDIC insured institution.
The damage to the local economy needs to be mitigated somehow. It doesn’t make sense to lose more jobs over this.
Jon–
There is quite a history of local banks…banks started under the guise of supporting the “local” community. In reality, they were set up to capitalize on the “invest local”, they marketed themselves as “serving the long-term interest of our Community” and any other BS they could dream up to get deposits and make loans as fast as possible to build up the worth so they could be sold at a huge profit. Take a look at the former Mariner Bank in Pt. Townsend. Lots of folks were in on it…from the newspaper to realtors to movers-and-shakers. They promised this was part of utopia….despite their leader, Jim Grabicki, having a long history of flipping banks like this.
3 years later…sold to Kitsap Bank.
This is merely one recent example.
Frankly, I don’t feel a bit sorry for “local banks”…or any bank for that matter. I invested numerous times in Wells Fargo because they have had stricter underwriting and steady growth & dividends…not too greedy. In my humble opinion they are the cream of the crop. I bought in again a couple weeks ago. It’s still a great value @$19.50 with a current dividend @9.1%!!
Rog Rabbit has jealously skewered me for flipping this stock the past year or so several times. I was reacting to the overall market…and it worked out. However, I believe it is a very good long-term play. It’s costly from a tax viewpoint paying Ordinary Tax rates on ST plays….but I’d rather do that than ride it down.
Buy Wells Fargo is it gets back under $17 for sure.
99% of Congress has NO interest in looking out for the complaints of anyone but the very richest corporations. Why else would they keep giving away money to these same large companies with no conditions or oversight?
The most recent letter I got from Sen. Murray claims she’s going to send a strongly worded letter to AIG. And every letter I’ve gotten back from her and Cantwell in response to my numerous calls and letters acts as if they aren’t in position to do anything about any of these give aways.
And that’s why I don’t think they should be.
When FDIC bureaucrats won’t let you take your own money out of the bank, you’ve gotta wonder how much FDIC insurance “protects” you. You can buy better “protection” from the mob — at least, with those guys, you get what you paid for. If you pay them to rub someone out, he’ll be erased.
@1 Why shouldn’t Grabicki flip banks? That’s what Republican tax-law writers want him to do, isn’t it? The tax laws they wrote during the GOP’s years in power reward flippers with huge tax breaks while crushing wage earners with back-breaking taxes. Clearly, Republicans want us to flip, not work or produce anything of value. So I’m a flipper, too! Grabicki flips banks; I can’t afford to buy a bank, so I flip stocks. It’s the same thing, except little guys and rabbits can get in on stock flipping and reap the same tax advantages, and unlike people who flip banks and companies, we don’t put people out of work. Just call me “Flipper”!! Wanna see my impersonation of a porpoise? I dive in and out of the market, skimming off a dollop of capital here, a serving of capital gains there. Sure beats working for money. I don’t see why anyone would work or produce anything under Republican tax laws.
Small-town banks ply you with smiles, free coffee, and donuts to get your deposits and loan business. The sharps who run these banks take your money and loan it to themselves. When the shit hits the fan and midnight calls go out to their cronies, your phone doesn’t ring and when you wake up in the morning you find out that you weren’t one of the “good ol’ boys,” you were just a sheep to be shorn of wool and carved up into mutton steaks. Stay away from little banks unless you want to become a victim of small-town cronyism.
This rather suggests that the current problem is somewhat different than the one after the 1929 crash, and which the FDIC under its original charter and defined mission isn’t perfectly suited to handle.
Back then, the biggest issue was bank insolvency and the prospect of millions of ordinary people losing their deposits. In this crisis (at least so far) the emphasis is much more on maintaining or restoring the flow of credit both to businesses and individual borrowers, because there ain’t no such thing as paying cash anymore.
One thing John isn’t telling everyone is that there is no Bank of Clark County anymore. It’s now owned by Umpqua Bank, who’s stock is up 17% today!
7 So this raises the question of who’s really calling the shots at the moment. Are the incumbent customers being denied access to their money because of rules still being imposed by Uncle Sam, or are the management of Umpqua Bank continuing to do this stuff as a way to pump their own share price?
1 Cyn, my hat’s off to you. That’s a very perceptive observation. Of course, “flipping” banks (or other businesses), just like flipping houses, becomes rather a different game in a down economy. In this particular case, it was more of a “flop”…and would have been far worse had the gubmint not stepped in. No doubt there’s some gaming going on by the execs to exploit the whole situation so it turns into just another means of making private profit on public risk.
If we could just get the democrats to pay their
share of taxes we wouldn’t have budget issues.
Goddamn they are a cheating bunch of bitter,
jealous ZERO talent bunch of fools.