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State's Community Bankers See Strong Economy for 2008
By Christopher L. Williston
President and CEO
Independent Bankers Association of Texas
Perception is reality. Listen to any reports swirling around electronic and print media about the state of the economy and most would have you believe that the sky is falling . . . “Credit Crunch seems inevitable.” “Banks amass huge losses from sub prime activity.” “Banks prepare to raise fees to cover huge credit losses.”
I don’t take issue that some banks have tightened their credit reins. Nor that the lack of credit availability is a sure fire way to plunge the nation into a recession. When banks quit lending, business activity and expansion come to a screeching halt. I do take issue with the implication that “all banks are the same”. They are not.
Our organization, the Independent Bankers Association of Texas, recently held a series of town hall meetings across the state—from Weslaco in the Rio Grande Valley to El Paso in the desert Southwest to Kilgore in the Piney Woods of East Texas. Nearly two-thirds of the chief executive officers of Texas community banks attended those meetings and almost three quarters forecast that the state of their local economy would be —good to vibrant and dynamic over the next 12 months. Less than one percent predicted that their local economy was poor and headed for recession. Translated, the 650 Texas community banks are ready, willing and eager to lend to keep Texas communities strong.
Our main street banks, over 7,000 community banks located across the nation, have largely been unaffected by the subprime crisis … they neither originated these loans nor purchased the bonds generated by these activities. Based upon public data and press reports, this current downturn was a “big boy’s game”.
The primary players were the largest of the regional and national banks and mortgage companies, along with the Wall Street investment firms. Sadly, the “house of cards” created had no chance of standing over the long term, and the ultimate implications will no doubt be painful for a multitude of parties—including those large institutions participating in what is now apparent as “unsafe and unsound practices”, many of whom have reported substantial losses.
Community banking will not come out of this unscathed. The economy has always operated on a cyclic basis. Overheating leads to correction—and correction to eventual recovery. There will no doubt be pain from falling home prices, slowdowns in consumer spending and disruptions in the credit markets. We fervently hope that as Congress addresses potential moves to mitigate some of the market disruption, and ensure that things don’t “get out of whack” to such a degree in the future, that there is recognition that community banking has not caused the problem, nor should it be penalized in “the fix”.
While it is true that the mega financial institutions provide needed capital for large commercial enterprise transactions and serve as important players in the financial services landscape, it is the nation’s community banks that fuel, sustain and foster the growth of local communities as the primary lenders to small business and agriculture, industries that are the catalyst for new job creations and sustained economic growth.
Indeed, we are advised by some of our members, especially in the mortgage lending arena, that business is booming. Apparently many consumers are turning back to “the basics”, and seeking the stability and experience offered by their community banker.
Be leery the next time you hear or read reports about “banks” not lending and predictions of doom and gloom economic conditions. Texas community banks have and will continue to concentrate on community and people first.
And that bodes well for our Texas economy.
Christopher L. Williston is the President and CEO of the Independent Bankers Association of Texas, representing more than 2,200 Texas community banks and branches.
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