A few days after print publication, Knight's syndicated newspaper column, which moves twice a week, will be posted. The most recent will appear at the top.

Wednesday, July 11, 2012

Bucking banking anger at local level

Bill Knight column for Thurs., Fri. or Sat., May 17, 18 or 19

Being a banker today must feel like being a good ballplayer or newscaster when Barry Bonds or Fox News gets so much attention. Between exorbitant CEO salaries, ethical scandals, apparent fraud with few consequences, and general economic insecurity, people who run community banks can get swept up with public distrust with banking.

Further, like younger Americans turning away from everyday devices ranging from wristwatches to newspapers, youth has a disconnect with Big Business in general and banking in particular. However, that attitude could lead to much-needed changes.

A lot of hard feelings stem from the $700 billion Troubled Asset Relief Program (TARP), authorized by President Bush and Congress in 2008, which may have averted a global financial meltdown, but did diddly for most folks. TARP met with strong opposition from progressives and Tea Party types alike because it seems to have rewarded large – even corrupt – institutions that played a role in creating the crisis.

It doesn’t help when the nation’s largest bank, JPMorgan, last week conceded it lost $3 billion in risky trading. But hometown banks are different than such financial behemoths, and in downstate Illinois, community bankers concentrate on customer relations.

“Our bank makes it a point to know our customers by names, not just account numbers,” says Tom Palermini, Marketing Officer with State Central Bank in Keokuk, Iowa, and serving Western Illinois. “We consider communication a two-way street. This is more important than ever as this area has faced some of the most challenging economic circumstances in decades.”

A Kewanee banker agrees, adding, “Other than very early on in the financial crisis, when customers were concerned about deposit insurance and bank failures, have I ever felt that our customers were lumping all of the banks together.”

Kevin Yepsen, president of Kewanee’s Community State Bank, which also has locations in Neponset and Galva, continued, “Survival will come from concentrating on what differentiates ourselves from the ‘megabanks.’ The customer needs to understand the importance to their own survival that the community bank, its directors, officers [and] employees are making local decisions supported by, in most cases, local ownership, and understand a customer’s business is more than numbers. It is people, their families, and in some cases [it] impacts the entire community. This is how by working together both customers and community banks can thrive.”

* However, feelings today are much different than decades past, according to a 2012 study by Stanford University’s Lindsay Owens in Public Opinion Quarterly. Her work, “Confidence in Banks, Financial Institutions and Wall Street, 1971-2011,” examines shifts in public opinion about the financial sector during times of instability, synthesizing data from surveys on banking, finance and Wall Street to place recent events in an historical context. Owens’ key findings:

* Changes in consumer confidence are driven more by banking scandals than economic contractions like the bursting of the tech bubble in the early 2000s;

* From 2006 to 2010, the percentage of Americans with “hardly any” confidence in banks and financial institutions increased from 13 percent to 42 percent, an historic high.

* The percentage of Americans with no confidence in the financial industry (excluding banks) jumped from 4 percent in 2000 to 26 percent to 2009. Those with a “very negative” view of banking (excluding the financial industry) rose from 11
percent in 2008 to 21 percent in 2009.

* Maybe most troubling to communities with solid community banks, Americans in 1991 trusted their local banks (37 percent) more than larger commercial banks (10 percent), but by 2010, support declined for both local banks (to 31 percent) and commercial banks (8 percent).

Indeed, today’s depositors, investors and borrowers seem understandably angry. During the Great Recession, the percentage of Americans who rated the ethics of bankers as either “very high” or “high” fell from 37 percent in 2006 to 19 percent in 2009. That’s a worse drop than during the 1980s-’90s Savings & Loan Crisis, when banker ratings decreased from 37 percent in 1985 to 27 percent in 1992.

Meanwhile, other research shows many Americans think service is more important than profits, especially younger people.

A 2011 study by Deloitte Touche Tohmatsu asked about the purpose of business, and it found that 51 percent of people born after 1981 cited societal development, while only 39 percent cited profit. The study further said that 92 percent of Millennials believe success should be measured by more than profit, compared to 71 percent of business leaders of other, older generations.

Whether building sound local relationships or addressing young people’s concerns, it may be time to strengthen regulations on giant financial corporations and give local bankers a break. Most of them are no more like JPMorgan than hard-working parish priests are like bishops who enable predators.

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