“Cautious optimism” describes the mood of bankers in Nebraska, according to Larry Marik, chairman of the Nebraska Bankers Association and chairman of First National, Columbus. “Traditional banking, community banking in the state of Nebraska is very solid,” Marik said during the NBA’s annual convention in Omaha last month. “Agriculture obviously is a piece of the economic engine and at this point and time agriculture is doing well. We’re optimistic about crops this next year. Livestock is back to making some money for producers. That really starts the economic engine for all the other parts to work well. Manufacturing has slowed some, as it has on a national basis, but not to the extent where there have been plant closings and layoffs. Retail numbers are good and unemployment is in the low 5s, which is half the national average.”
Federal Reserve Bank of Kansas City President Thomas Hoenig was a key speaker at the convention and in his view the recovery will be systematic, not booming. Hoenig believes there is still too much leverage and he is concerned about the American savings rate, which is only at about 3 percent now. He fears that if that number goes any lower we will see releveraging. Hoenig also said a zero interest rate is not healthy or sustainable for a long-term stable economy. He sited 2002–2004 when the Fed kept interest rates low “for the foreseeable future.” It fueled speculation and encouraged leveraging. “At least take the language away,” said Hoenig, referring to the recurring phrase “for an extended period” in the FOMC meeting minutes. If the language is gone then the market does not have that assurance and has to think about its actions, according to Hoenig.
Turning to the Senate reform bill, Hoenig said the current proposal to end too big to fail is a start but is not enough. Hoenig said he supports the Volker Rule because when you add high-risk investment bank services to low-risk traditional banking services the low risk then becomes high risk. Finally, Hoenig said taking away the Fed’s regulatory role at the regional level would be a mistake. “The bill makes the Fed the central bank of Wall Street,” Hoenig said.
NBA president George Beattie said the NBA’s most urgent concern with regulatory reform is “getting through this period where we are going to get something we don’t particularly like but making it the least onerous we can for banks. We still haven’t gotten this thing to focus on the shadow banking industry and they’re still going to come back and do what they’ve always done. So now you’ve hurt the banks ability to compete but you’ve still left the door open for the shadow banks.”
“All these regulations they are saying are here to protect consumers but what it’s going to do is create more cost, which in turn is going to filter down to the consumers,” said NBA Chairman-elect Kendell Holthus, executive vice president of Cornerstone Bank in York.
As the NBA’s 2010–2011 chairman, Marik’s top priority is to restore pride and trust within the banking industry, which has been shaken during this recession.
“Never before in my 30+ years have I answered more questions of customers and people in coffee shops or wherever I move day-to-day about our bank, about safety and soundness, about this mortgage thing, about what a derivative is,” Marik said. “And on the other side there is the young consumer who may not have any practical experience with Depression time or that era or any period of financial stress, and they are asking, “How does this compare and what are we really looking at going forward?”
Holthus agreed. “Just get the word out that traditional banks are here to stay,” Holthus said. “We have strong capital and we’re here to take care of our customers.”
Kari English is associate editor of BankNews.
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