In Defense of Our Local Banks

What troubles me a little these days is that the doom & gloom from the media and public anger against the “banks” is dragging down the good practice and reputation of your local bank. Are we reaching a point where the local banker will have to wear sunglasses and a baseball cap as a disguise to go to the grocery store?

Much of the crisis in the financial sector can be traced directly to “investment banks.” Oh sure, there have been regular banking institutions that have participated in questionable loan practices, but it’s unfair to paint the entire system with a broad brush. So what is an investment bank? Here’s my definition:

Financial institutions that help corporations issue stocks and bonds in order to raise money. Unlike regular banks, they do not accept deposits or make loans. Examples of investment banks: Merrill Lynch, Goldman Sachs, Morgan Stanley, Lehman Brothers (oh yeah, they’re all gone).

The complex thing here is that the mega banks like Citi, Bank of America, etc. also dabbled in investment bank activity and as such, made a ton of money like everyone else and now many of the investment decisions are being questioned. It also doesn’t help that the greed of the big players is being played out on the world media stage.

Yet, I still maintain that it is unfair to do a tribal hate dance on all of our banks. Here in New Hampshire, our banks and credit unions are very strong and willing to lend money to qualified borrowers. Noticed I said “qualified.” This is how they lend their money. This is how they have always lent their money. In the past few years, because of competition with sub-prime lenders and other non-bank lenders, borrowers demanded that their banks give out loans even though they did not qualify under formal guidelines. Those loans ultimately ended up in the investment market - by investors driven by their own greed.

I’ve been angry about this for over 10 years. And it has created a culture where we have stop saying “No” because we found new ways to say “Yes”. But let’s not lump our local banks into the mix as we, as a nation, look to affix blame and enact change.