Archive for the ‘Texas Community Banking’ Category

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Battle Won. War May Have Just Begun

Monday, May 25th, 2009

Friday, May 22 was a historic day for the community banking industry.

A collective sigh of relief was heard when word came down shortly after lunch time of the FDIC board action to reduce the proposed special assessment premium to restore the Bank Insurance Fund to 5 bp.  The original proposal was to impose a one time special assessment of 20 bp on insured deposits.

Since late February when the interim rule was put out for comment, the industry has worked vigorously to suggest alternatives to mitigate the countercyclical effect the assessment would have on all insured financial institutions in these challenging economic times.  The industry weighed in with over 14,000 comment letters.

Perhaps most significant for community banks, the Board adopted an asset minus Tier 1 capital basis for the assessment, which would benefit 8,141 community banks and transfer the “lion’s sare” cost of recapitalization to the large mega too big to fail banks who have for far too long escaped paying on certain liabilities. Only 165 banks will pay more under the new assessment base, the vast majority of those are in excess of 20 billion in assets.

Clearly, a great victory for the industry.  But closer examination of the final rule has us all wondering if the war has just begun.  The FDIC board left open the option to assess another 5bp at the end of each of the third and fourth quarters without further public comment.  Further assessments can be levied at the discretion of the FDIC board if they determine that public confidence in the fund is eroding or the fund balance approaches zero.   A bitter pill to be sure.

For now, we will celebrate the action of the FDIC board.  But it is no time to lay down our shields or swords.  Something tells me this is far from over and the added uncertainty only confounds community bank management who are already confounded by having to bear the burden for any of this mess in the first place.

Posted in bank insurance fund, community banks, FDIC, IBAT, Independent Bankers Association of Texas, special assessment, Texas Community Banking | No Comments »

Systemically Unimportant?

Thursday, April 2nd, 2009

It’s like drinking from a fire hose.

Everyday there seems to be a new announcement from Treasury on the latest initiative to restore the financial system. Last week we learned that the Treasury and Administration would like to have visitation rights and new regulations imposed on “systemically” important non-bank institutions.

Soon, the Treasury will announce their plan for regulatory reform of the banking system. They are expected to announce that the Federal Reserve will be the regulator to oversee “systemically important” financial institutions.

I resent the constant reference to systemically important and systemically unimportant financial institutions. I recognize that the government has replaced too big to fail with too big to close or systemically risky to close.

In my way of thinking there is no such thing as a systemically unimportant financial institution, regardless of its size. Community banks after all are systemically important to their communities. Just see what happens to small business agriculture and consumer lending if the local banks goes down. It has a chilling affect on the economic well being of the community for years to come.  Community banks after all, are nothing more than a mirror image of the markets they serve.

Just ask any of the local folks who have seen their dreams realized thanks to their local community bank.

Posted in business agriculture, community banks, federal reserve, IBAT, Independent Bankers Association of Texas, systemically important, systemically unimportant, Texas Community Banking, too big to fail, treasury | 1 Comment »

Rearranging the Deck Chairs

Monday, March 23rd, 2009

By now, I should quit being surprised… surprised at anything the Treasury and the Administration might try to get this country moving again, and their attempt to restore troubled too-big to close (they have failed) financial institutions.  Today’s Treasury announcement of a new private/public partnership to package and auction  their problem assets is case in point.

I am struck by the irony of this announcement.  Is this not exactly what Treasury originally intended to do by creating the Troubled Asset Relief Program (TARP) late last year to clear the balance sheets of the too big to close?  That plan was abandoned almost immediately after its development for fear that purchasing troubled assets from banks would expose the Treasury and taxpayers to paying too low a price for their acquisition.  Instead they opted for direct investments in the banks themselves.

Now they design an almost identical plan with one exception…private investors will have skin in the game alongside the government and they have guaranteed a market price  by allowing for competitive bids by pension and hedge funds and other would be investors.

I commend the Treasury and Geithner for this initiative… in my view it was precisely what was needed all along, the way TARP was originally intended.  Apparently the Street likes it too.  Markets are wildly up in heavy trading today following the announcement.

Finally, we have an action by the Treasury that just might save (at least for now) the sinking ships.  And all along, all they needed to do was simply rearrange the deck chairs.

It is clear that Treasury will do everything in its power to save the too big too close banks.  And once it is evident that they have, let’s hope a future initiative will be to break those suckers up so they can never be too big to close again.

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Posted in IBAT, Independent Bankers Association of Texas, TARP, taxpayer, Texas Community Banking, treasury, wall street | No Comments »

Zombie Banks

Tuesday, March 10th, 2009

The early morning flights always creep me out somehow. There is an eerie quiet about them…businessmen lost in their morning papers; half the plane pretending they can sleep on airplanes. Others like me, working on laptops or looking busy.

This morning I boarded a flight in Austin at 6:00 am en route to DC with several of IBAT’s executive committee members. There has been a lot of talk about zombie banks.  Those are the banks that have already failed but are too big to close. You know, banks like Citicorp. Why is it so hard for bank regulators and politicians to be honest?  To say that ‘Citi has failed, but we just can’t close them because of the “systemic risk” they would pose to the financial system?’ Systemic risk is a fancy phrase for hand grenade…pull the pin on that sucker and watch all  around it to go down. But I digress.

DC is not my favorite place in the world. Oh, I love the hustle and bustle of the city, but trying to get work done in this town is difficult at best. Whoever said “if you need a friend in Washington DC, get a dog,” got it right. This is no place to search for people that care about your problems or your industry’s problems, because solving your problem will likely create problems for someone else. But still, we plug along believing in what we know and have proof of…that government is run by the people that show up.

All community bankers throughout the country are still numb from the events of the past eight months. We watch as the Treasury and the Administration search for answers to the financial crisis, and hope that there is still a place for local community banks when all is said and done.

This latest tremor is one of seismic proportions, and the future of our community banks is at the epicenter. The Federal Deposit Insurance Corporation (FDIC) announced that the insurance fund was running out of money and it would need to tap all banks with an increase to 20 cents for every $100 of insured deposits to replenish. It didn’t take bankers long to do the math…  and for most it would hit their earnings this year anywhere from one-third to one-half. How smart is that at a time when we are trying to get banks to lend again? It is pretty hard to lend money when you have to cough it up to the government so they can bail out the very banks that have depleted the fund.

We’re wondering just how much thought was put into this interim ruling by the FDIC. There are so many other ways to replenish the fund without causing unfair hardship on the only banks that didn’t create this mess in the first place. Sure, bankers, not taxpayers should accept responsibility for replenishing the fund. And we shall. But let’s look at the dozens of alternatives that have already been suggested.  These alternatives would soften the earnings blow to our community banks, the only banks still lending money.  Our community banks played by the rules and made nice while the zombies succumbed to distortion and greed.  Makes us all wonder if there is some sinister plot to make all community banks zombie-like too.

So we shall walk the halls of the Congress spreading the word to anyone who will listen. Our message will be a simple one…yes we have a crisis, but don’t make the community banks irrelevant in the efforts to restore and rebuild the financial system. Small business and agriculture need community banks. Today our country needs them like never before.

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Posted in bank regulators, FDIC, IBAT, Independent Bankers Association of Texas, TARP, Texas Community Banking, zombie bank | No Comments »

Must We Bear the Burden?

Tuesday, March 3rd, 2009

Hello Friends

I have received tons of e-mails and phone calls from you about the FDIC’s announcement last week to increase the assessment on insured deposits by 20 BP… and I totally understand.  What I am hearing is that too many of you are projecting that this assessment would impact somewhere from 30% to 50% of your bank earnings forecasted in 09.

On Monday afternoon, I participated in a conference call with FDIC Chairman Sheila Bair.  The ICBA Board of Directors and other state association directors also sat in.  Chairman Bair told us the FDIC rationale of the assessment, with some detail, and also explained all the other options that were available to the FDIC Board before they took that vote.  I found this session very productive with a lot of questions answered.

This week I am meeting with the IBAT Board of Directors in Dallas to consider options for mitigating the negative earnings impact on our member banks.  And I must reiterate here, what upsets me the most is our banks are not the banks that caused or in any way contributed to the irresponsible practices of the Wall Street banks.  I think we all can agree that our banks, the Texas community banks, should not be penalized by this unbearable FDIC assessment.

I still need your imput too.  I’m asking for your suggestions.  We need collective action options for the IBAT Board to consider.  And please share with me what you have determined to be the potential financial impact of this 20 BP assessment on your bank.  You may do so by simply commenting to this blog or by emailing me at cwilliston@ibat.org.

Remember that the FDIC vote take last Friday was an interim decision that has been left open for comment for the next thirty days.  I am moving quickly, with your IBAT Board, to determine appropriate steps on behalf of all of you.  So please post your feedback and let me know what you have determined the impact to your bank will be from this decision.  If you have already taken the time to e-mail me, then don’t post a comment here.

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Posted in bank regulators, FDIC, IBAT, Independent Bankers Association of Texas, TARP, Texas Community Banking | No Comments »

Real Hope For A Change

Wednesday, February 25th, 2009

Hi friends:

There is nothing like getting out in the real world to gain real perspective relative to what is really going on in with the economy across Texas.

I am in Day two of the second round of regional meetings with chief executive officers and other senior personnel of community banks.  IBAT Chairman Milton McGee and I will see over 625 bankers in Austin, Shiner, Corpus Christi, Houston, the Rio Grande Valley, Longview, Sulphur Springs and Dallas this week.

I have to tell you I sense an incredible spirit of optimism about the financial events of the day despite the constant media battering that continues to spread a word of doom and gloom and pessimism.  True, it is not all Pollyanna… but community bankers have seen this all before having lived the hard times of late 1980’s which fell disproportionately on our great State.

What’s different this time is the diversification of the Texas economy.  We are not reeling from hyper-inflated real estate values and energy prices, and agriculture meltdowns. There is clearly a softening of credit demand, but community banks in Texas are liquid and ready to lend and help their customers through these challenging times.  We don’t need the government to tell us to lend.  Community bankers do it intuitively as they know they must do to leverage their resources and generate a decent return for their shareholders.

Everyone acknowledges that there will be bumps along the way.  But community bankers have always had one strategic competitive advantage over their mega bank competition…they know their customers and their communities.  If there is pessimism and anxiousness, community bankers fear the backlash of bad laws and government overreaction to fix everything by imposing new levels of regulation that will do nothing but stifle their ability to do what they do best…serve the customer.

I’m confident that community bankers will lead the recovery if government will just get out of their way.  That’s the message we are hearing and so it is our responsibility to spread the good word of optimism and hope.

And so we shall.

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Posted in FDIC, IBAT, Independent Bankers Association of Texas, TARP, Texas Community Banking | No Comments »

Jumping on the Bandwagon

Monday, February 23rd, 2009

Hi friends.  Welcome to my inaugural blog, The Missing Linc.

The name was chosen to honor my Dad, a journalism major at the University of Illinois who penned a daily sports column by the same name for the The Daily Illini newspaper.

I have yet to determine the frequency of this missive.  I have determined the content, however.  I will focus on observations and opinions of the U.S. financial system, and of course, implications for community banks.  And so we begin.

I’m a talking head TV  junkie.  Call me strange, but I get jazzed by listening to opinion news programs that weigh in on the events of the day.  Few are “fair and balanced” as they claim to be so often I opt for PBS or National Public Radio. At least they don’t talk over their guests and actually allow them to answer a question or two.   But lately, I have about had it with all of them.

They would have us all believe that this country is going to hell in a handbasket and that all banks are in trouble and in need of a bailout.  True, some are…the too big to fail banks that started all this mess with their risky and greedy subprime tendencies.  But all banks are not created equal.

The nation’s 8,000 community banks for the most part are alive and well and doing what they have always done…lending to small business and agriculture and hometown folks that they know.  And while some community banks (about 400 to date)  have taken government money made available to all banks, they did so to put back to work in their local communities, not because they needed it to survive. Spurring lending activity was precisely what the Treasury, the Administration and the Congress were hoping they would do.

Now I am not blind or naive to believe that this nation has not fallen on tough times.  Nor do I believe that all community banks will survive in this financial environment.  But I am confident that most community banks are healthy and better positioned to withstand the current storm.  The community banks will lead us out of this crisis so long as they are not painted with the same brush by bank regulators, news media and lawmakers.

All of us just need to keep perspective, and interject some optimism about the future of this country and putting our faith and trust back into our local communities and local financial institutions on Main Street.

But mostly, we all need to stay off  the media bandwagon of doubt and despair and  trust the American Spirit and the American Free Enterprise system….the greatest economic engine in the world.

Posted in bank regulators, IBAT, Independent Bankers Association of Texas, Texas Community Banking | 6 Comments »

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