The public is justifiably angry and puzzled about the actions of the federal government since the fall of 2008 when the financial system appeared to be in crisis. I write to give a Louisiana perspective, one that focuses on our own Louisiana banks and thrifts.
First to state the obvious, these banks are operated by Louisiana people, who live and raise families in the communities where they work. They know their customers and remain rooted in their communities through good times and bad.
Some quick simple facts:
1. Louisiana’s FDIC-insured banks and thrifts are a safe and reliable place for customers’ money in these uncertain times. No money has ever been lost in a FDIC-insured account.
2. Louisiana’s banks and thrifts did not cause or participate in the irresponsible and sometimes unethical residential mortgage lending practices we have seen in other parts of the country, by un-regulated financial companies, that caused the crisis.
3. Louisiana’s banks and thrifts have funds available to lend to credit worthy borrowers. It is true that federal regulators of our FDIC-insured banks and thrifts are more closely monitoring the safety and soundness of each institution and their lending practices.
4. Unfortunately, some of the responses by the federal government since the crisis have significantly impacted our institutions.
For example, Louisiana FDIC-insured institutions pay insurance premiums into the Federal Deposit Insurance Fund. In 2007, Louisiana’s banks and thrifts paid approximately $3.6 million; in 2008, $16.9 million; and in 2009, $104.3 million.
This large increase in premiums is in addition to all other federal and state taxes paid. This increase in expenses is coupled with new lending restrictions promulgated by the Federal Reserve to combat subprime residential mortgage lending.
We support the provisions directed at ending abusive subprime residential home lending. But as so often happens, the regulations go beyond that scope and are today making it much more difficult for Louisiana community banks to extend credit to many long term customers.
5. Policy makers in Washington, with complicity by the media, are misusing the word ‘bank’, hurling it as an epithet. For the record, Louisiana banks and thrifts are not the ones at which all this finger pointing is directed.
We have stuck to traditional common sense banking and maintained sound underwriting standards. That conservative approach has benefited the state’s economy and our banks. For that we should all be thankful.
Robert T. Taylor,
CEO of Louisiana Bankers Assoc.