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CONTACT SCBJ John Wolcott, Editor jwolcott@scbj.com Dave Clark, Assistant Editor dclark@scbj.com

Community Banks are secure and safe

By Marc Gaspard, President
Washington Financial League

Every day it seems there are more stories of the economic downturn and of dubious behavior by investment bankers or others on Wall Street.

Sometimes that behavior is generalized as being conducted by "the banks" as if all banks are the same.

Your local community banks are just as appalled by what we read as you are.

Very few community banks made subprime mortgage loans or invested in the subprime mortgage-backed securities now being referred to as "toxic assets."

The bulk of these high-risk loans were financed by Wall Street investment banks and very large banks.

Like you, community banks are negatively impacted by these irresponsible actions of Wall Street.

Community banks in Washington, while facing challenges, remain a safe, secure place for your money.

They are all backed by Federal Deposit Insurance Corporation (FDIC) deposit insurance, which guarantees with the full faith and credit of the U.S. government accounts up to $250,000.

Accounts with multiple signers, such as a husband and wife, may be insured for higher balances. No one has ever lost money in an FDIC-insured account.

"Cease and Desist" sounds harsh

Unfortunately, at the same time the federal government is making massive investments to prop up some of the large banks that were part of the subprime loan fiasco, it is also taking actions that make business much more difficult for community banks.

Banks are already heavily regulated -- and should be.

Those regulations are being applied very aggressively during the current circumstances.

In some cases, regulators are questioning practices that they determined to be safe, responsible and appropriate just a couple of years ago in a healthy economy.

Across the country, regulators are issuing sternly worded "cease and desist" orders to community banks, including some recently announced in communities across Washington. State.

These orders may contain strong criticism of bank management and practices out of proportion with actual events.

This criticism does not recognize forces outside the banks' control which contributed to the issues cited by regulators.

These orders, while harsh in tone and language, are primarily designed to point out areas in which the regulator wants a bank to make changes in its operations.

Often the bank has already taken extensive corrective actions, but the order is written as if nothing has yet been addressed.

Additionally, receiving such an order does not mean a bank is failing.

A number of banks across the country have received this type of order and continue to operate successfully, meeting the banking needs of the communities they serve.

Regulatory energy should focus on "subprime" banks

It is unfortunate that this regulatory energy wasn't focused on lenders doing subprime lending in time to prevent the crisis, rather than directing it at banks that didn't.

Some of the horses left the barn, but now that the doors are closed, it doesn't do much good to punish the ones that didn't run off.

Washington's community banks are working hard to overcome the economic hurdles placed in their paths by the recession and its financial fallout.

They are responsible and safe. They remain an important part of your community, providing not only banking services but also local jobs and support for local nonprofit organizations and community projects.

They ask you to remember this in the coming months as they continue providing a secure place for your money and a source of responsible loans for homes, education and other necessities of life.

Marc Gaspart is president of Washington Financial League in Olympia. Prior to this position he was executive director of the Washington State Higher Education Coordinating board and the Majority Leader of the Washington State Senate. He can be reached at 360-943-2731 or via www.wfleague.org.