Bankers comment on economy, bailout


Waller: Local economy will weather financial crisis

A conversation with Pete Waller, president of First National Bank of the Rockies in Meeker and Rangely:

Question: What was your take on the government bailout? A good thing, or a bad thing? Was it the only option available?
Answer: The “bailout” really isn’t a bailout. The firms that originally purchased the assets that are declining in value, sometimes substantially, will suffer the losses because the government will purchase these assets at current market value. In other words, at substantially below their original or par value. Many of these assets have underlining collateral securing the assets that are worth more than the currently discounted prices. That is why the media is reporting that the government may actually profit from these purchases over time.
The arguments in support of the government intervention mainly stem from the need to add liquidity (cash) into the system in order to facilitate the purchase and sale of these assets. A lack of liquidity or willingness for traders to trade in these securities is what has seized up the markets and caused the current “crisis.” While there will no doubt be parts of the plan that we will not like or agree with, the need to get the financial markets moving again is real. The plan will be like taking bad tasting medicine — necessary but not pleasant.
Q: How do see the northwest Colorado economy faring, based on what’s happening nationally?
A: Our local economy is strong. Unemployment is low and jobs are plentiful. Residential real estate sales have slowed, but that looks to be temporary. It only should take about six months to have the excess housing inventory sold off, then our housing market should stabilize, absent an unforeseen event that would cause the current rate of sales to slow further.
Q: We haven’t seen anything like a run on banks here, but have you heard from people who have expressed concern about the safety of their money?
A: We haven’t seen a “run” on the banks, and we don’t believe we will. Our bank is well capitalized and in good shape to weather this current situation. This is mostly a Wall Street problem, not a Main Street problem. The banking industry is in very good shape to deal with the current problems. Ninety-eight percent of the nation’s commercial banks (banks like ours) are well capitalized, the highest category assigned by the banking regulators. For perspective, in 1990 there were 1,496 banks on the FDIC’s problem bank list, today there are only 117. And, historically, with the FDIC working with the banks on this list, 87 percent of them correct their problems and go back to the well-capitalized category. Over the course of the last 20 years, the banking industry has made great strides in improving the underwriting and administration of credit. That is why we ask for more detailed financial information from our borrowing customers than we used to.
We are talking to people regularly about the safety of their money. One cannot blame people for being anxious and concerned. Most are covered by FDIC insurance. Those who aren’t have been generally satisfied with the explanation of the bank’s financial condition. The bank is well capitalized and is not suffering from the Wall Street woes to the extent that investment banks are suffering. We are beefing up reserves and will be able to work through these difficult times.
Q: As far as foreclosures, what are you seeing locally, compared to what’s going on in other parts of the country?
A: We’ve not seen a noticeable increase in foreclosures. In fact, our bank does not have even one foreclosed upon property on our books. While we’ve noticed somewhat an increase in foreclosure notices in the newspapers, we are nowhere near the levels seen in some parts of the country.
Q: Overall, how do you see the local economy weathering this financial storm?
A: We believe the local economy is well positioned to weather this situation. As long as the energy sector remains intact, our local economy will remain very strong as opposed to other areas of the country. With the investment being made in the energy sector we suspect our economy will continue to provide jobs and help to keep our local economy strong. Additionally, the quality of life that we enjoy here in western Colorado will continue to make this a desirable place for people to live and work and that will keep people wanting to be here.

Clatterbaugh: People see community banks as safe
A conversation with Bruce Clatterbaugh, president of Mountain Valley Bank in Meeker:

Question: What was your take on the government bailout? A good thing, or a bad thing? Was it the only option available?
Answer: The bailout is passed and now we are trying to figure out how to implement the program. Getting the liquidity into the system on a timely basis will be tough. How that enters the system and when will be critical. From a small-town perspective, maintaining confidence in your local bank and keeping deposits at home will be the key to local banks being able to continue to fund local loans. Local banks need to be looked at as a “safe haven” as investors work through the stock market and other investments, this is supported by the higher FDIC limits.
The stock market has taken a fairly significant hit and will continue to do so as the national and world economy adjust to these new times. Each investor will need to determine their level of patience and how they want to stay in the market; eventually it will come back.
Q: How do see the northwest Colorado economy faring, based on what’s happening nationally?
A: Locally, we will see an effect, mortgages will be tougher to get, credit quality will be more important, access to credit will be tougher, especially national accounts, like car financing, credit cards, etc.
Q: We haven’t seen anything like a run on banks here, but have you heard from people who have expressed concern about the safety of their money?
A: People’s perspective of the safety in their community banks appears good. I do not think we will see much pressure and, obviously, if the FDIC raises (protection) limits that will help.
Q: As far as foreclosures, what are you seeing locally, compared to what’s going on in other parts of the country?
A: Foreclosures here should remain down. I do not expect a lot of negative pressure. What does occur will be on homes bought in the past couple of years which have not had an opportunity to cure.
Q: Overall, how do you see the local economy weathering this financial storm?
A: The economy in our market will continue to be above the national economy; however, we will feel the effect in recreation, second home markets and other external areas. This is uncharted water, so a wait-and-see attitude is called for. I think we are still on the short side of this downturn; it will take a while to work through.