When all you read is gloom, turn here for a much different perspective.

Tuesday, December 16, 2008

No Credit Crunch (For Most Banks)

You ready for this? A new report says there is no credit crunch.  Everyone agrees there's a financial crisis, obviously, but access to credit is not the problem.  The new report comes from the financial services consultant Celent, an international strategy group dedicated to helping leading financial firms sustain their business advantage.

The vast majority of the numbers that are used in their report actually come directly from the US Federal Reserve, and in area after area what is uncovered is a tremedous amount of lending.  In other words: a lot of the things being said about the credit crisis or the nature of the financial crisis aren't born out by the Fed's numbers. The report finds that bank lending is at a record high, consumer credit is at a record high, and inter-bank lending is at a record high. Credit is actually flowing extremely well. (According the Fed's own data -- see chart)

What we do have is a few very large institutions that are in financial difficulty and it is those firms that are having a hard time obtaining credit. 

However, their are a huge number of banks out there who didn't make bad bets, who didn't get very involved in the subprime markets, and they're doing just fine with no credit problems at all. 

The Celent report points to a number of institutions that took very, very large risks and in hindsight, very poor risks -- and got caught. They significantly lowered their lending standards, and as a result lost lots of money. But the report points out that it's not all banks that did that, in fact, the majority of banks did *not* do that. Unfortunately, among some of the top banks in the country, there's a fair number that got caught in their own risky business.

The good news is that the majority of banks did not.

Have a look at your local bank's website and you are likely to find a posting similiar to this from FirstBank Holding Company of Lakewood, Colorado:

  • Stability   Strength   Safety

·         Solid History
FirstBank was founded in Lakewood, Colorado, in 1963. FirstBank is employee owned with a long term focus. We have over 100 officers and nearly 600 employees with more than 10 years of experience with FirstBank.

·         Strong Financial Position
FirstBank is well capitalized according to all regulatory guidelines.  FirstBank's assets total $9.3 billion as of September 30, and deposits were $7.9 billion.  FirstBank continues to experience solid growth in both assets and deposits.

·         Excellent Earnings
FirstBank reported outstanding results for the first nine months of 2008.  FirstBank’s net income was $95,146,000 through the third quarter of 2008, up 29% from $73,631,000 last year.

·         Unique FDIC Insurance Options
While most banks can only insure up to $250,000 of your money through the FDIC, FirstBank’s 25 separate charters make it possible for your deposits to be insured up to $6.25 million, keeping your money safe and secure. FirstBank also plans to participate in an FDIC program which will provide full FDIC coverage of non-interest bearing checking accounts through December 31, 2009.

·         No Subprime Involvement
FirstBank does not originate, hold, or purchase subprime mortgage loans or securities. Continued focus on credit quality has enabled us to succeed in all economic cycles.

·         Open for Business
FirstBank has 126 locations in three states serving over 600,000 customers. Our strong financial position enables us to meet the credit needs of the customers and communities


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