Friday, March 6, 2009

Main Street Help Still not Addressed

As the Obama Administration continues to tinker with multi-national banks offering more bailout money and programs, Main Street Businesses continues to layoff workers, declare bankruptcy and close their doors at an alarming rate. Yes it is true that the Nation needs banking, however, there is a world of banking that did not play the financial games that the multi-national banks played, thus they have well balanced books are are doing quite well. Small community based banks still thrive in most of America, but if all the attention is given to the multi-national banks and Main Street is allowed to continue to disintegrate these Community Based Banks who ran their banks they way they should have been will fall into fiscal trouble.

The Business Models of the Community Based Banks are simple, take in deposits from local business and local depositors, loan out that money to the same customer base and make a profit off the margins between the interest paid on deposits and the interest received on loans. These banks did not play the stock market, create and trade Credit Default Swaps, play currency hedges, speculate in commodity markets, pay their Executives Billions of dollars in compensation, and they did not lose it all. The Community Banks kept their books balanced, paid living wages, charged reasonable interest rates and paid reasonable interest rates on their deposits.

The Obama Administration has followed the Bush model thinking that the fiscal health of the Nation is tied to the health of a few large multi-national banks that offer little to the local communities. Just as the Obama Administration thinks that it is a viable solution for the Auto Companies to file Bankruptcy, it should also consider this alternative for the multi-national banks that caused the current crisis. The Federal Government would be better off supporting Americans real small businesses, those that employ a handful of employees in hundreds of thousands of local stores and companies. This would maintain the financial health of communities that would reinforce the financial health of local banks. A strong economy is built from the bottom up not from the top down.

The more the Government tries to correct the problems of the multi-national banks the worse the problem seems to become. What would be the difference in a Citi Bank worth $1.25 a share and one worth $0, or a Bank of America worth $3.50 a share and one that is bankrupt. There would not be much of a difference in the long run, and in the short term if all of the hundreds of billions of dollars that have been given to a select few National Banks could have been spread out throughout middle America supporting the continued existence of local business that will support the continued existence of the local banking industry. As it is now, each new program that is announced to prop up the multi-nationals seems to be causing more pain on Wall Street. Not only is it causing a bad reaction to the share price for these banks it is also causing desperate reactions in the share prices of major US corporations who were the bank bone of America's Industrial Giants such as General Electric.

If the Bankruptcy of the American Automobile Companies is a viable option than the Bankruptcy of the few Multi-National Banks should also be an option. Thew Federal Government continues to pour money into these banks with no results in sight. As they let this money be squandered trying to balance their books caused by the irresponsible behavior of these multi-national banks, middle America continues to die. The result will be a few zombie National Banks that will still be alive in ten years surrounded by empty retail spaces throughout America coupled with local banks that have lost their customer base.
Add to Google

No comments: