Too Small to Succeed: Neighborhood Banks Becoming Extinct

There were hundreds of local banks that have struggled to survive the volatile economic wave over the past two years. Since 2008, 238 banks have failed, which translates to 613.2 billion in assets. Not to mention the amount of losses that had to be covered by the FDIC for depositors (the maximum insurance of $250,000 per account for each name on the account, which was increased from $100,000 prior to the recession). In 2009 alone, 140 neighborhood banks across the country were forced to shut their doors, accounting for nearly 60% of the total number of banks that have failed during this 2-year period. Apparently, they were too small to succeed. Totally passed over by the TARP bail outs distributed to banks identified as “too big to fail”, the small and midsized banks were left to sink or swim, with little or no support from the Federal Government.
It may appear to the layman, that neither the Bush, nor the Obama administration saw a need to include the little guys, who made up over a half a trillion dollars in assets. Meanwhile the small banks are the backbone of many communities throughout the country. It is the small bank that often provides construction loans, and mezzanine loans for housing development projects and small businesses that make up a more than 50% of our GDP. This year has seen 73 banks close, and we are only in the second quarter. I am not a big fan of banks, given their unsavory role in the near collapse of the financial markets, but I always take a stand for the overlooked and underserved.


K. Reilly
Cohn-Reilly Report

___________Comments

Charlie said.....
Great article! The media has not given this topic much headline space, but it is very important how this has affected regional areas around the country.

Katherine said.....
Thanks. Yes, you're right. The small neighborhood banks are a vital part the economic vitality of a community. They are responsible for fostering business development and growth, while stimulating the local economy. I am not quite sure why this has been completely under reported, but I suspect it’s not "sexy" enough for the Media. This isn't really an attention grabbing topic. Without an association or public figure advocating for the plight of the small bank, they don't have a voice to bring the much needed attention to this issue.