"Time tried, panic tested." I first encountered these words in the late '70s while working as a state bank examiner. This phrase was the promotional tag line for the old Bank of Mansfield in western Arkansas. At first blush I thought them a bit lame and out of touch with the times, but I subsequently realized that the words linked the bank to its past and delivered a reassuring message to many of its customers who still remembered the tough life experiences during the Great Depression. Soon thereafter the words developed relevance with me as I found myself working alongside fellow examiners in the closing of a few Arkansas banks in the challenging economy of the early '80s. Better economic times followed, job changes came my way, and these words were filed away in the recesses of my mind.
Today we again find ourselves in trying times. In anticipation of hitting "the bottom" the markets seemingly find new lows each day. The ranks of the unemployed continue to climb. While the onset of "panic" does not appear widespread, I'm sure it has found its way into several households. Yet I still find myself optimistic about the future. At the center of that optimism is the general performance of Arkansas banks in both good times and bad. We may seldom gain exposure to a state of euphoria when the economy is soaring, but then neither do we fall into the depths of despondency during significant downturns in the economic cycle.
Arkansas' commercial banks saw their earnings climb some 16% from 2007 to 2008. Of course sizable losses associated with the ANB Financial failure adversely impacted Arkansas bank performance in 2007, but the annual improvement is noteworthy when considering that industry income significantly declined in all of our neighboring states over the same period. In discussing this matter at our Association's Group 3 meeting last week in Fayetteville, Tim Yeager, holder of the ABA Chair of Banking at the University of Arkansas, noted that our state's banks are "holding their own" and that their 2008 performance numbers are "really remarkable."
Recognizing that the bulk of the problems in the financial sector lie within the framework of Wall Street conglomerates and other money center institutions, I get particularly miffed when I read a headline such as "Bankers Called on Carpet" (Arkansas Democrat-Gazette, February 12, 2009). Such innuendo leads the public to think that all "bankers" are culprit to the underlying causes of the current national crisis and that all banks are unruly in their behavior and in need of disciplinary action. Nothing could be further from the truth. We must continue our efforts to educate all interested parties on the differences between Main Street community bankers and those on Wall Street so that there is a genuine understanding that the vast majority of banks around the country are safe and sound.
We bankers traditionally prefer "things" to move at a slower pace than that being experienced at present. We like music that is easy to dance to. A steady rhythm allows us to better adapt our footwork to the music leading to a smoother and more deliberate dance. The current rapid beat is causing a frantic step that reminds me of watching kids dance the "jerk" or the "mashed potatoes" on American Bandstand when I was a youngster. Being a top performer in the current environment is challenging. For those wishing to go "dancing with the stars," it is necessary to sharpen your fashion sense.
Several Wall Street mega-banks are cloaked in a "too big to fail" wardrobe that could be going out of style. Is it possible that some may have outgrown their britches? Putting on too much weight is considered a red flag when it comes to assessing one's general health and it appears that there has been some ripping at the seams in some of these outfits. Being too large can make some situations a bit uncomfortable and often slows one's reaction time. On the other hand being runway model thin doesn't assure good health, but it does help with one's flexibility and maneuverability.
Fashions change just as the economy changes. Have you noticed that men's neckties are getting narrower as the economy wanes? Adopting the latest "fad" may allow you to keep up appearances, but you can never afford to abandon the basics while attempting to stay in vogue with the current trend. The conservatism represented by the basic pinstriped suit and the little black dress depicts the "style" to which Arkansas bankers adhere. Staying true to a conservative "look" and keeping that basic style in our respective closets prevents us from panicking over what to wear on any given occasion, never mind the state of the economy.
To maintain decorum and keep up with the latest trend of bank failures, FDIC Chairperson Sheila Bair recently announced that a twenty basis point special assessment for all banks would be necessary to keep the Deposit Insurance Fund viable and in the black. No banking panics have been experienced since the establishment of deposit insurance in 1933. However the size of the proposed special assessment created uproar. The "cover charge" to gain entry to the dance is always a consideration. A quick turn at the end of the runway reminiscent of one performed by fashion models resulted in dramatic change in the FDIC's position within 72 hours of the announcement of the special assessment. The altered stance came from a proposal to ramp up the FDIC's permanent line of credit with the U. S. Treasury to $100 billion from the present $30 billion and temporarily increase it to $500 billion through December 31, 2010 giving the agency flexibility to cut the size of the proposed special assessment in half. Senate Banking Committee Chairman Christopher Dodd plans to introduce legislation effecting the FDIC's increased borrowing capacity to facilitate reduction in the special assessment in short order. Cooperative conversation between bankers, Congressional leadership, and regulatory authorities paved the way for this more palatable solution to the FDIC’s initial proposal. Such action is reflective of the type of adaptable behavior needed by all involved to sustain and enhance bank performance going forward in this uncertain environment.
Around the country people are angry over the present circumstances. Shouting matches are commonplace on our televisions. I try to filter out this “noise” in search of an understanding. The “philosophers” I follow are comic book heroes and songwriters of the '60s. Absent Superman, Wonder Woman, or the Green Lantern arriving on the scene to rescue those experiencing troubles I will turn to some forty year old song lyrics offered up by John Lennon in the Beatles tune "Revolution."
You say you want a revolution
Well you know
We'd all want to change the world
You tell me that it's evolution
Well you know
We'd all want to change the world
You say you got a real solution
Well you know
We'd all want to see the plan
You ask me for a contribution
Well you know
We're all doing what we can
When "things" aren't going our way, we all "want to change the world." Some have revolutionary tendencies in considering change, others prefer an evolutionary model. Those with "a real solution" must step up and share the plan. At real issue in the present economic quandary is that all the plans submitted to date are subject to change without notice. The frequency of new plans being put on the table is fast and furious. It is easy to get confused and miss a step on the dance floor. What is apparent is that "we're all doing what we can" to address the problems within the system and to restore confidence in it.
When we find "the bottom" of this present recession, some are sure to pursue this business of banking a bit differently. Others will be trying on new outfits, but at the same time sticking to the basics. Who knows, some banker may reintroduce the fabled words, "time tried, panic tested" as its tag line, words in which a new generation can now find appreciation. In the end I call your attention to the repetitive refrain of the song "Revolution."
Don't you know it's gonna be all right
Don't you know it's gonna be all right
Don't you know it's gonna be all right
And it will be! Whether dancing with bank customers or regulators, keep on dancin’!
Around the state and across the Miles, there is work to be done. Let's go have some fun!
No comments:
Post a Comment