Bankers have long been some of the most respected business people in the community. Long known for supporting civic activities ranging from sponsoring sports teams to holding blood drives, bankers have built up a lot of good will over the years.
But what is it like to be a banker these days? With polls showing a large amount of dissatisfaction with the federal bailout, do folks in banking find themselves defending their industry?
“These are trying times, to say the least,” said Mississippi Banking Commissioner John Allison. “It has certainly shaken some confidence. I think everyone is upset with the bailout. As a matter of fact, I wasn’t totally sold on it and am still not totally sold on it. But something had to be done.”
Allison says in talking to Mississippi bankers, he does not think there have been a lot of stones thrown at them. It is really the megabanks that have been the most guilty of engaging in risky lending practices, and those banks are coming in for the largest share of criticism. In contrast, Allison believes there is still public confidence in Mississippi banks.
“As a whole, the perception in Mississippi is that banks are doing what they are supposed to do,” Allison said. “We have some pretty good sized banks for a state the size of Mississippi. But they all operate in a community-oriented fashion with a focus on customer service, knowing the customers, and helping the community. I think that bodes well for Mississippi banks. There are always some sour apples in the barrel. Someone could get turned down for a loan, probably for legitimate reasons, but they get a cocklebur in their saddle blankets and bad mouth the bank.”
One idea behind the bailout was the some banks are “too big to fail.” The Troubled Asset Relief Program (TARP) was supposed to help ease frozen credit markets. But the results have been disappointing with some banks using the money to purchase other banks. A lack of accountability for how banks are using the money, disgust at CEOs earning millions in bonuses while making bad businesses decisions and concerns that some bank are hoarding the money rather than loaning it are concerns.
As a regulator, Allison personally as well as his counterparts across the U.S. believe bank closures are sometimes necessary. Some banks should be allowed to fail.
“It has been part of a system in effect over 100 years,” he said. “It always kind of works itself out.”
Banks in Mississippi that have received TARP funding include Trustmark Bank, Cadence Bank, M&F Kosciusko, Regions Bank and Sun Trust. Another seven or eight banks have applications in, but may have not yet decided whether or not to take it.
Banks who are not taking the bailout have been using it as evidence that the bank has been responsible and strong, and hence don’t need it. But it can cut the other way, too. Since the TARP program is only for healthy banks, some people might think a bank did not apply because it feared being turned down.
Allison said taking TARP does not mean a bank is in trouble. The positive spin those banks have put on it is that they did it in a defensive mode to help weather the storm.
One banker who refuses to defend the bailout is Chevis Swetman, president and CEO, The People’s Bank, Biloxi.
“To be quite honest with you, we don’t like the bank bailout either,” Swetman said. “People say, ‘I’m just mad as hell about this bailout.’ I tell them, ‘I agree with you. I am, too. It really hasn’t worked the way intended.”
Swetman said the issue most community bankers have is very simple. The Federal Reserve and U.S. Treasury are rewarding the bad behavior of the investment banks and commercial banks that got the country’s financial markets in trouble in the first place.
“If you take the top nine or 10 banks, these are the ones that were heavy into the subprime lending,” Swetman said. “What is happening is the ones that created the problems are the ones that are receiving the lifeline, and the only thing that is doing is encouraging bad behavior. The question community bankers ask is, ‘Where is it said the government must come to your rescue when you make stupid and irrational financial decisions?’”
Contact MBJ contributing writer Becky Gillette at email@example.com.