Some banks may be too small to survive
Small community banks that avoided making risky, complicated loans are still feeling the impact of the crisis caused by larger financial institutions. Bob Moon reports which expenses are hurting small banks the most.
Front of the Oakwood State Bank in Oakwood, Tx. (Kate Archer Kent)
More on Investing, America's Financial Crisis
TEXT OF STORY
Steve Chiotakis: In Phoenix today, community bankers are kicking off their annual convention. Sponsors are promising new ideas to help small banks deal not only with tough economic times, but costly new regulations. Here's Marketplace senior business correspondent Bob Moon.
Bob Moon: For the most part, the nation's smaller banks steered clear of the complicated and risky kind of loan-making that proved to be the downfall of their giant rivals. But they're still feeling the sting:
Michael McGuire: I didn't do it, it's not my problem, and yet I'm paying for it.
Affinity Bank CEO Michael McGuire says that's how many of his fellow community bankers feel these days. He runs a small banking chain in Ventura, Calif., north of L.A. And he's concerned over the higher levels of cash the government is pressuring all banks to raise now. He says that's hurting their ability to lend, at the same time community banks could play a key role in restoring confidence at the local level.
McGuire: If the consumer sees healthy businesses on Main Street, I think the consumer is more likely to get out and spend and be a part of the recovering economy.
Times are even tougher for smaller community banks with maybe one or two branches. Bart Narter with the research firm Celent says they can't afford the growing expense of tighter government regulations and providing costly high-tech services such as online banking.
Bart Narter: The increased complexity is raising the bar as to the minimum viable size of a bank.
Seems these days, some banks are too big to fail, and some too small to survive.
I'm Bob Moon for Marketplace.
Comments
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From burnaby B.C., BC, 03/19/2009
You have to many banks in the united
states you need to down size so that
you can keep track of your money.
From Iowa Falls, IA, 03/18/2009
It is unfortunate that smaller regulated banks are paying the penalty for larger banks who engaged in unregulated financial activity. The same is true of people who tried to manage their finances carefully only to pay the penalty for the excesses of greed. Policymakers should not forget those who were trying to do the right thing.
From Oklahoma City, OK, 03/18/2009
I would just like to say that I bumped into an report from Mr. Moon from back in April that foretold of the credit default swap mess.... I will be paying a great deal more attention to Bob from now on.
03/18/2009
For Pete's sake people. Why penalize a safer way of banking? One that is more connected with the community and not as prone to wasteful spending and dangerous growth as these mega corporations. Perhaps there is a different category they could create for the same regulations. Just as Credit Unions run on their own rules, they can create new divisions.
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