Sept. 30, 2008
Media Feeding Fear Frenzy Regarding Financial Institutions
Mess Has to Be Fixed; Local Banks Still Lending Money
By Tony Rutherford
Huntingtonnews.net Reporter
Huntington, WV (HNN) – “I’ve never in my 35 years as a banker gotten any questions about the safe and soundness of my bank, ” stated Ostie Mathisen, senior loan officer of First State Bank of Barboursville. Speaking prior to the Create Huntington meeting Monday night, September 29, at the Big Sandy Superstore Arena, the banker told of fielding 20 or more calls asking if his bank is safe on a day when the Dow Jones Average plunged 777 points, the biggest single day drop in history.
“There’s a lot of things going on in Washington which is well articulated by the press that is creating a lot of uncertainty in our economy. When there’s uncertainty, there’s fear. When there’s fear, nobody wants to do anything until they understand what the final outcome or product is going to be,” Mathisen explained. “They are telling [us] could, in fact, our economy collapse?”
Although he would not firmly point his finger at the national media, he did say, “I think it’s creating the fear factor.”
Actually, “Our bank is still lending money,” but due to the Wall Street meltdown regarding the sub-prime lending crisis, “it’s a very unique time” for financial institutions and those working at them.
Partly due to the demographics of West Virginia, Mathisen explained that most banks in the state do not face a cash or mortgage crunch. “We do not have the demand for financial products that took place in Florida, California and Nevada. [Property] appreciated [until] they overbuilt, then supply exceeded demand,” the banker said, adding, “We’re small banks. We have 2 million people we service rather than ten or twenty million people. Demographics dictate the type of banks we are.“
From his viewpoint, the sub-prime mortgages “should not have been approved to begin with,” as lenders often did not check financial background or confirm employment for the borrower.
“Easy credit has been a problem. It started 30 years ago. It picked up steam with the subprime mortgage lending where you lent money to people who could not afford to make the payments. Underwriting that was done by people who didn’t underwrite the worst case scenario. They underwrote the first payment schedule. When the first adjustment came, they could not make the payments, and everybody started bailing out … then they securitized the mortgages and people started looking at a mortgages as a security and invested money as a security, there’s no way you evaluate the underlying product and that [brings] uncertainty in the marketplace. Till we define some of these things, we are going to have these fears,” Mathisen said.
Adding to the complexity of the crisis, when the sub-prime lending began in 2005 “billions of dollars of those mortgage backed securities [were sold and] are held by foreign banks and foreign countries. The whole world economy is affected by the American mortgage crisis. We are all interrelated.”
What to do with the crisis? Should Congress intervene?
“Congress has to do something. Not necessarily a taxpayer bailout, but create some product that will overcome the fear of some of these institutions that are hoarding money ; they are unwilling to let that money out until some of this uncertainty is defined.”
He called the turned down plan unfair to commercial banks who have complied with federal regulations as part of their standard operating procedures.
“Now they are making some of these institutions that were investment banks become commercial banks. That’s not fair. When you have a bail out of those entities that go in trouble, it’s unfair if you have regular regulated banks that have been in compliance with federal banking regulations and suddenly these companies become commercial banks and they have never paid the price. [But] underscoring the seriousness of the crisis, the loan officer said, “if that what it takes to save the system, that’s what it takes.”
Former Marshall College of Business Dean and current city councilman Dr. Calvin Kent believes that the vote by the House of Representatives does not end the need for the “bail out. It will come back in probably a more acceptable form. We got a situation where the public is strongly indicating they do not want it. It’s very difficult in an election year for people to be in favor of something where there is such negative public reaction.“
Dr. Kent believes that the attitude will alter when the Wall Street consequences produce consequences in people’s “own personal lives. There is a relationship, but I do not think [most] individuals understand.” The defining moment will come when “businesses can’t get credit, payroll or inventory and people can’t get loans for homes. People will say, ‘gee, this really did have some impact directly on me.’ You may wind up with a situation with a few more banks failing or a few more mutual funds not being fully funded to [drive the urgency] home to people. You can’t do nothing and get by with it,” Kent said.
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Media Feeding Fear Frenzy Regarding Financial Institutions
Mess Has to Be Fixed; Local Banks Still Lending Money
By Tony Rutherford
Huntingtonnews.net Reporter
Huntington, WV (HNN) – “I’ve never in my 35 years as a banker gotten any questions about the safe and soundness of my bank, ” stated Ostie Mathisen, senior loan officer of First State Bank of Barboursville. Speaking prior to the Create Huntington meeting Monday night, September 29, at the Big Sandy Superstore Arena, the banker told of fielding 20 or more calls asking if his bank is safe on a day when the Dow Jones Average plunged 777 points, the biggest single day drop in history.
“There’s a lot of things going on in Washington which is well articulated by the press that is creating a lot of uncertainty in our economy. When there’s uncertainty, there’s fear. When there’s fear, nobody wants to do anything until they understand what the final outcome or product is going to be,” Mathisen explained. “They are telling [us] could, in fact, our economy collapse?”
Although he would not firmly point his finger at the national media, he did say, “I think it’s creating the fear factor.”
Actually, “Our bank is still lending money,” but due to the Wall Street meltdown regarding the sub-prime lending crisis, “it’s a very unique time” for financial institutions and those working at them.
Partly due to the demographics of West Virginia, Mathisen explained that most banks in the state do not face a cash or mortgage crunch. “We do not have the demand for financial products that took place in Florida, California and Nevada. [Property] appreciated [until] they overbuilt, then supply exceeded demand,” the banker said, adding, “We’re small banks. We have 2 million people we service rather than ten or twenty million people. Demographics dictate the type of banks we are.“
From his viewpoint, the sub-prime mortgages “should not have been approved to begin with,” as lenders often did not check financial background or confirm employment for the borrower.
“Easy credit has been a problem. It started 30 years ago. It picked up steam with the subprime mortgage lending where you lent money to people who could not afford to make the payments. Underwriting that was done by people who didn’t underwrite the worst case scenario. They underwrote the first payment schedule. When the first adjustment came, they could not make the payments, and everybody started bailing out … then they securitized the mortgages and people started looking at a mortgages as a security and invested money as a security, there’s no way you evaluate the underlying product and that [brings] uncertainty in the marketplace. Till we define some of these things, we are going to have these fears,” Mathisen said.
Adding to the complexity of the crisis, when the sub-prime lending began in 2005 “billions of dollars of those mortgage backed securities [were sold and] are held by foreign banks and foreign countries. The whole world economy is affected by the American mortgage crisis. We are all interrelated.”
What to do with the crisis? Should Congress intervene?
“Congress has to do something. Not necessarily a taxpayer bailout, but create some product that will overcome the fear of some of these institutions that are hoarding money ; they are unwilling to let that money out until some of this uncertainty is defined.”
He called the turned down plan unfair to commercial banks who have complied with federal regulations as part of their standard operating procedures.
“Now they are making some of these institutions that were investment banks become commercial banks. That’s not fair. When you have a bail out of those entities that go in trouble, it’s unfair if you have regular regulated banks that have been in compliance with federal banking regulations and suddenly these companies become commercial banks and they have never paid the price. [But] underscoring the seriousness of the crisis, the loan officer said, “if that what it takes to save the system, that’s what it takes.”
Former Marshall College of Business Dean and current city councilman Dr. Calvin Kent believes that the vote by the House of Representatives does not end the need for the “bail out. It will come back in probably a more acceptable form. We got a situation where the public is strongly indicating they do not want it. It’s very difficult in an election year for people to be in favor of something where there is such negative public reaction.“
Dr. Kent believes that the attitude will alter when the Wall Street consequences produce consequences in people’s “own personal lives. There is a relationship, but I do not think [most] individuals understand.” The defining moment will come when “businesses can’t get credit, payroll or inventory and people can’t get loans for homes. People will say, ‘gee, this really did have some impact directly on me.’ You may wind up with a situation with a few more banks failing or a few more mutual funds not being fully funded to [drive the urgency] home to people. You can’t do nothing and get by with it,” Kent said.
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