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November 25th, 2008

Small Banks Angry About Their Lack of Aid

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Monday’s government investment into Citigroup was the latest display of federal aid that has many small bankers across the U.S. wondering, “where’s our money?” The recurring loans to prop up numerous large financial institutions have made it a lot harder for smaller-community banks to compete in the current marketplace:

“We haven’t committed these sins but yet, our reputation is tarnished and yet, we still aren’t too big to fail,” [Cindy Blankenship, chair of the Independent Community Bankers of America] said. “We’re the good guys and I’m furious about it. There is no equal treatment. I’m not too big to fail. If I had gone out and done what the big banks did, I would have been shut down.”

Small bankers are also concerned that Federal funds made available to prop up faltering banks may be used up by large banks by the time they apply for Federal cash:

“It appears on the surface that the funds are being used to save a few big companies, and that’s that,” Menzies said. “It almost looks like community banks are excluded from the process.”

With all the big banks grabbing so much money, Menzies said, “I have to question if there will be funds left for the community banking industry when we get through all this.”

It’s hard not to sympathize with the frustration many small banks are feeling — it’s nearly identical to the frustration good-credit consumers have been dealing with, as more and more government programs have been designed around the delinquent, irresponsible borrower who is well behind on their mortgage.

Since the Treasury Department has encouraged the consolidation of banks in order to create fewer, more stable institutions, the entire banking landscape has, and will continue to change.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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