A column about history, culture, policy, and things in between.
Last Sunday's edition of The Milwaukee Journal Sentinel published a lengthy article about a local bank's efforts to work through its woes. I found it an interesting read, and thought I would offer a perspective from the business community. My comments speak to the U.S. banking industry in general over the course of the last year, and it is only fair to note that there are certainly shining exceptions to this story.
What most banks did with the billions of Federally provided largesse was to immediately shore up their horrifically unbalanced balance sheets. Those statements became so unbalanced through the combination of years of an overly easy Fed and a Bachnalian orgy of lending; lending which forsook all of the time-honored principles of this once proud and conservative industry. You know - things like collateral and down payments and equity to debt ratios that had a toe-hold in reality. What the banks have NOT done is put the money "to work". In fact, many of them went out of the business of LOANING money and into the business of COLLECTING it, while at the same time increasing interest rates to long standing customers at a time those clients were fighting for their very existence. This continues to a large extent today.
THAT is what most banks have done with the money Congress so eagerly gave them at the start of 2009. And they are now engaging to the extreme the very tools and practices that might have prevented this meltdown in the first place.
It is a sad drama that has not played well in our local business community. Already we see the formation of smaller, better capitalized banks, many of which have started or been strengthened by capital that now eschews the "big boys". Such institutions are well positioned, and when the economic worm has sufficiently turned, many long-standing client/bank relationships will be turned on their ear.
Even here in little old Waukesha County.