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Until last week, I had always presumed that bank failures were like passenger trains or draft horses -- topics my grandparents would reminisce about, but so remote from contemporary America that I'd never have to deal with them.
In July, the examiners found $4 million in loans too delinquent to be considered assets at Buena Vista Bank & Trust, just 25 miles up the river from Salida. The bank was given until Aug. 27 to raise cash to cover the bad loans.
Its owners came up $1.4 million short. Nobody wanted to buy an insolvent bank in an economically depressed area. The regulators locked the doors last Thursday afternoon and called in the FDIC to start paying off customers.
The departure of financial institutions is no novelty here. Salida Industrial Bank opened with fanfare eight years ago and closed so quietly that I can't remember just when. The Chaffee County Federal Credit Union foundered four years ago. Empire Savings opened a branch here in 1983, and closed it this summer.
Nobody else has figured out how to make money around here, so it is hardly surprising that the financiers haven't yet found the answer. But this is the first time I've felt disgusted.
Until Aug. 28, our county had three commercial banks. The First National Bank of Salida is controlled by the White family of Pueblo, who have other banking interests, and the Chaffee County Bank, also in Salida, is one of the 29 parts of Affiliated Bankshares of Colorado. Buena Vista Bank & Trust had local owners, and no one was allowed to forget this important benefit.
Its radio ads were to the effect that All the other
local banks are owned by large entities that have interests
all over the place. So when you put money in them, your
hard-earned funds might be lent out far away from home,
where they won't do you or your neighbors any good. But
we're locally owned. Your deposits are put to work right
here, in our own community, to help you build a better
tomorrow.
Given all the other state and federal regulations inflicted on banks, there should be one concerning truth in advertising. But apparently banks are free to fudge in their jingles, even if their financial statements and loan portfolios must please hard-nosed auditors.
Good old locally-owned Buena Vista Bank & Trust was keeping its depositors' hard-earned money at work close to home by financing various Texas enterprises, as well by providing funds to capital-starved communities like Las Vegas, Nev.
Not that the bank entirely neglected the local trade. Its owners and directors were local people. The bank examiners said there were violations of Regulation O, which limits the amount a bank can lend to its own officers and directors. Another customer, presumably local, certainly couldn't complain. He went in Thursday morning and withdrew $400,000 from a bank that would be closed for insolvency a few hours later.
It can be argued that where a financial institution lends money isn't really any of your business. I was once told that by World Savings, which has an office in this county, when I asked why it had taken in millions in local deposits and had made precisely one local mortgage loan in the preceding two years.
But the big banks seem intent on making it our business. A decade ago, they were lending billions to Mexico, Brazil, Poland and a host of other foreign nations. Many of those loans went sour. It wouldn't be any of my concern, or yours unless you were a stockholder, if the bankers had minded their own business and quietly taken their losses. It is everyone's business when they want the taxpayers of the United States to bail them out.
Small-town banks make it our business when they advertise that they're keeping local money in the community. They give that as a reason to pick one bank over another.
It would be a good reason, if it were true. When we peons go in to borrow money from a bank, the lending officer quite understandably wants to make sure that we are worthy of the bank's trust. But is there any way for us to find out whether the bank is worthy of our trust?
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