For contrast, here's a story on community banks that did things a little differently. Jim Rendon of The New York Times reports:
"In the midst of the worst banking crisis since the Great Depression, community banks have generally fared well. That’s because they typically shunned the lending practices that led to high default rates. They rarely participated in the securitization of loans, credit-default swaps and other overvalued financial products that put the global financial system in crisis. Instead, they stuck to the fundamentals. They considered the character and history of their borrowers. They required collateral. Without community banks, the current financial crisis would be a lot worse. And even though they operate in a different sphere from global financial giants like Citigroup, some economists now say that they may have a lot to teach our largest institutions."
I just find it interesting that between the first bailout and this request, a few executives made sure they got out with nice golden parachutes. Just doesn't seem right to me.ReplyDelete
I really enjoy reading your blog. Being a current Genesee County resident, it's good to see that some of our "expatriates" still have a concern for the area.ReplyDelete
I’d like to comment on your post about Citizens Bank. Citizens did not participate in credit default swaps, subprime loans, etc. The honest simple truth is the Michigan economy has been in a recession/depression since 2003. Sixty percent of the bank's revenues come from the state; it’s easy to figure out how that would impact things. When good businesses are closing their doors and can't pay their loans or a builder/developer can't sell new homes because of the market; that impacts Citizens Bank. At the end of the day you can have collateral up one side and down the other and not be protected from what we're seeing in Michigan.
I worked at Citizen's pre-crisis (and pre-Republic merger) in the commercial lending department... and they did write default swaps.ReplyDelete
I don't know that Citizen's held the swaps, but they wrote the deals.