I had a meeting with one of my community bankers yesterday, to discuss renewing some business lines of credit. If you thought I was unhappy about the lending situation I find myself in, you should have seen my banker. Depression, helplessness and exhaustion showed on his face. The FDIC, he says, is doing everything they can to drive community banks out of business.
FDIC Chairman Sheila Bair explains to community banks that they just don't have the Wall Street cred required to skirt playing by the rules.
After surviving the “audit from hell” two years ago, and then trying to comply with FDIC rules, he finds that every six months they change the rules on him again. The rules changes, it seems, forces him to put more decades-long borrowers in good standing with performing loans out of business or into bankruptcy. Many people who have never missed a payment on their loans are not being renewed for a variety of technical reasons, few of which it seems are based upon the borrower’s ability to continue paying the loan.
In addition, I heard many stories of shenanigans that have been pulled by bigger banks to force borrowers to technically default and lose their pledged collateral. The big boys see bargains to be had are using every trick in the book to get their hands on them.
So my good and decent community banker, who has worked with local folks for decades in our county, one who truly cares for his customers, finds he must curtail business with small businessmen and women, in order to attempt to comply with the ever-changing, noose-like regulations and ratios that the big banks we bailed out get a pass on. And what happens if the FDIC decides that this bank is not in compliance for too long a time? It will be shut down, and a faceless, bigger bank will swallow up the assets. One less small bank, and more power to the chosen few of Wall Street.
Community banks are the life-blood of small business, and small business employment is the life-blood of our economy. By showing such favoritism to large banks, our government is in essence undermining our fragile economy. 8,000 community banks serve 10,000,000 small businesses. What if each one hired one employee on average? Do the math.
Is this transfer from small banks to big, TARP banks done purposefully? Well, knowing the big banks we bailed out essentially wrote the rules for this administration’s FDIC, you can come up with the answer yourself.
Note: we’d love to hear from any community bankers with their horror stories, and also from small businesspersons, and real estate developers and investors. Leave your comments below, or use the contact form to send in a guest article.
