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.