Our Economic Engine Has Been Choked Too Much

This column presents a conservative viewpoint about items of interest in our community and our lives. Focus is on items impacting your pocket book, your personal freedoms, and your rights. I hope you will read the column regularly and it occasionally influences your opinions and actions.

The funding and financial support provided to hundreds of thousands of small businesses across the nation has historically been provided by the thousands of banks spread across the land. Many of these banks are not the “too large to fail” New York variety, but are instead the small “hometown” banks which are an integral part of the financial health of their local communities.

The Washington elites tout the need for jobs creation, and with each unemployment report they seem to be desperately seeking good news on jobs creation in the private sector of the economy. Jobs creation will never occur under the existing banking climate.

This “economic engine” for our economy has been choked into an inoperative condition by federal overregulation since the housing crisis nearly bankrupted the nation two years ago. It seems that government can never find the range of “common sense” in its regulatory processes. They always seem to have the pendulum of control swung too far to the left….or too far to the right. This has certainly been the case in their approach to banking regulation.

During the “Boom” period of highly speculative investing and easy credit which prevailed during the ten years or so prior to the bursting of the “housing bubble”, the liberal “federalcrats” decided to convert the entire banking system into one huge “Habitat” program by forcing banks across the nation to make high risk home loans to people who had little chance of paying off a mortgage. Owning a home was made into another expensive and ultimately disastrous, “social entitlement” for America’s poor. Banks were harshly criticized and even penalized if they did not introduce into their loan portfolio’s the required number of minority and low income loans. Credit was easy to get, and loans were often knowingly made for more than the property was worth.

Then the financial system fell apart…bailouts…fear of depression and complete failure of the banking system… Wall Street plunges…banks and brokerages fail…our world changes.

Today those same Federal Bank Regulators who “forced fed” bad loans into every bank have introduced a set of operating rules and standards for these hometown banks which has effectively shut down the system. As a result, small businesses are unable to expand, and in many instances are unable to maintain the needed cash flow for continuation of operations. The lack of available financing is causing many small businesses to close, thus costing our nation jobs instead of creating those jobs the administration is seeking.

One aspect of the lending process in which new, strict regulations appear to be regulating in an especially “bureaucratically stupid” manner is the property appraisal process. They have forced appraisers to use ultra, ultra conservative measurements, have forced borrowers to have multiple appraisals performed, and have prohibited appraisers from living near the area where the property is located….thus increasing the inaccuracy of the appraisal due to lack of knowledge of local conditions.

Regulators are also requiring banks to have many properties with existing mortgages reappraised even if the loan is current and the borrower has never had a late payment. When these reappraisals demonstrate that the property value is deemed to be inadequate to cover the outstanding balance of the mortgage in effect, the bank is then forced to demand an immediate payment for reduction of the loan principal to a satisfactory balance….or the loan is “called”. This action often results in failure and forfeiture, even though the borrower was properly paying the debt. Bureaucratic idiocy.

The ability of local bankers to make business decisions based on their knowledge of the individuals, the nature and potential of the business, or any other personalized aspect of the evaluation is gone. It is purely a “numbers game”, with the rules dictated by federal banking authorities. Bank owners can no longer run their own business… big brother is in charge.

This is the environment in which Jeff Kindelspire has been desperately trying to get needed financing to complete his project at Kindel Lanes for the past two years. His creditor, Bank of Jackson County, resisted the pressures exerted by federal bank authorities for as long as possible, but the bank was finally forced to take foreclosure action against that popular local business. They had little choice in the matter. Thus, another small business was caused to fail.

Banks need to make loans for survival. That is their primary source of income. Because these restrictive regulatory practices have almost shut down the lending processes, many banks are in trouble. Bailout funding has only been available to banks deemed too large to fail by the Administration, or those “special” banks who have relatives of politicians on their bank boards, or have strong union or politically powerful investors.

What should be done to resolve this desperate situation?

In my opinion, more control should be returned to local owners and managers of banks. The overdone restrictions on appraisals should be relaxed somewhat, recognizing the decline in marketability of many properties in today’s market. Loan security and initial payments on equity should be set at the levels which were required in the 1970’s, around 20%. All loan considerations should be made on an ability to repay basis with no regard given to minority status or low income condition.

Special “stimulus” programs should be made available to banks in conjunction with the Small Business Administration loan guarantee programs to increase funding availability to small businesses. This will increase employment, stop business failures, and enhance local economies. Even if some of these loans fail….it is better than spending money on sidewalks no one will ever use.

Those risky low income loans which the government previously forced banks to make as part of their national “housing entitlement plan” in which they turned the entire banking system into a welfare program, should not be counted against the bank’s financial condition today. Those government imposed loans should be pulled off the bank’s portfolio of loans and transferred to a government account. This will help struggling banks improve their ratings, and properly place responsibility on the shoulders of the government where the blame should rest.

If they will focus on revitalization of the local banking systems across the nation they will be “Getting It Right”.

Rudiments: Odds and Ends Worth Mentioning-

● (Always Say Something Nice)...I am very pleased to discover funding is available for the repair and remodeling of our County Court House. In its present condition it is a scar on the face of Marianna.

● The Administration just passed a $27 Billion bailout of state funding for the School Systems. Many are saying it is primarily a “Gift” to the teachers union and SEIU. Proof that campaign donations do pay returns.

● The foreclosure action against Kindel Lanes is a sad event. If you want evidence of the recession and hard times in our community, this is an example. Other recent examples would be the closing of Cornerstone Restaurant, Jema’s, Century Lighting, Angie’s Kitchen, Habana, and the changes at Peoples First Community Bank, and the Bank of Bonifay are all examples.

● Our nation is still sinking…..When I listen to the news each day I think I have the same sensations that passengers on the Titanic must have experienced. I can hear the band playing on the upper deck from Washington. They are trying to calm my nerves and telling me all is well, while I continue to hear deep rumbling sounds around me, and feel the deck tilting as our economy tries to remain upright. I know it can not continue to remain afloat under the overwhelming weight of government, over regulation, horrendous wasteful spending, and continuing corruption. All they seem to be doing to try to save the day is…. rearrange the deck chairs.

● Another local horse has that mosquito borne equine virus. Health officials are telling us to stay indoors during the evenings, and to clean out our gutters. ….Why don’t they tell business owners to fill in those EPA mosquito ponds they had to build behind their buildings? They have created a public health danger and are ignoring it.