As head of the California Bankers Association, President and CEO Rodney Brown and his peers in statewide banking groups have been calming fears and pushing for relief, hoping to see some of the federal financial bailout extended to the country's small and regional banks.
Brown is joining sacbee.com's roster of "Ask the Experts" columnists. Starting today, he'll be available online through October to answer your banking questions. (To post a question for Brown or our other online financial experts, go to www.sacbee.com/ask.
Brown, whose 380 bank members represent about 85 percent of the state's deposit-based financial institutions, gave some views on the banking system.
Is this the worst confidence-rattler you've encountered in your years in banking?
Yes. In 36 years, this is the most challenging time I have seen for our economy and the financial services industry. And yet the industry has never been better equipped to deal with it.
During our last major downturn in the late '80s, the capital adequacy was substantially less than it is today. The absolute amount of capital within the industry and the capitalization per bank … is probably 4-5 percent greater than it was 20 years ago.
We've seen 13 banks fail this year, including Washington Mutual last week. People are nervous. How do you allay those concerns?
By continuing to get the message out: About 98 percent of banks are very healthy, and they control 99 percent of the deposits in this country. Local and regional banks are often painted with the same brush as larger financial institutions that are the root cause of all of these (subprime mortgage) problems. …
Bankers have worked very hard for weeks to equip their employees with information on deposit insurance, financial help and the well-being of banks. … We need to restore confidence, which is part of what the Treasury plan will do.
What's your take on the federal government's restructuring plan that's being so hotly debated?
We support the broad concept … but the $700 billion ought to apply to whole loans, not just subprime mortgage securities, so the whole industry can be freed up to make new loans and allow the credit markets to flow. Let's say I'm a community bank in Fresno. I don't have any of the mortgage-backed securities that larger financial institutions do, but I've got a loan to a developer to create a housing product. When the subprime market mess bubbled up … that got stuck in the pipeline. If you have a loan that's not performing … you should be able to put that into the government's restructuring plan so you're free of that debt and can rebuild the availability of credit.
The recent bank closures come at a time when a surprising number of Californians – 11 percent by some reports – are still "unbanked." Does this keep people using non-conventional banking services, like payday lenders?
It has less to do with what's going on today than with people not realizing they're probably paying a significant amount (in fees) to do their banking somewhere else. It's deeply concerning to me to see people going to (payday lenders or check-cashing centers) and spending money (on fees) that could be better spent on their family.
Call The Bee's Claudia Buck, (916) 321-1968
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