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It's A Wonderful Small Bank
By Bizbox
The New York Times runs an article not for its Business but rather for its Metro section on main street banks, today's Bailey S&Ls.
These small institutions are important for small business owners to watch for two reasons. First, community banks--which have assets under $1 billion and tend to be locally-focused--may turn out to be a crucial source of credit for small businesses. And second, they themselves tend to be small businesses--in maybe the hardest-hit industry--and therefore are good bellwethers for how other small businesses could expect to fare.
The fact is, the very things that kept small banks small over the past few years--a combined unwillingness and inability to engage in the exotic trading strategies and invest in the sketchy assets like the big boys in downtown Manhattan--are what are now keeping the small banks above water. (It helps that, as we've reported, they are getting a cushion to the blow dealt by the decline in Fannie Mae and Freddie Mac preferred shares that many of them own--still a pittance compared to the bailout the big banks are getting.) Lehman Brothers seems like the hare to these banks' tortoise.
You also see in the article what appeals about small banks: their down-home-ness, their ability to provide a level of personal service that larger companies would have a difficult time matching--the classic small business advantages. A pharmacy owner in constant need of credit to bide the time between when it pays for medicine and when insurance companies reimburse it switched to New Jersey's Freedom Bank from Washington Mutual because of that service: “We explained it all, and they could tell we knew what we were doing.”
Perhaps the best way to see the advantages of being a community bank in this economic climate is to look at their rate of growth: Freedom Bank isn't even a year old, and four other community banks have been started just since April in New Jersey alone, according to the Times.
The irony (and it is not a pleasant one) is that because community banks are sitting comparatively pretty, they got less out of the bailout; and few are expected to take the Treasury Department's cash. Still, it's good to know that that they are thriving.
Comments (0)October 21, 2008 5:00 PM
