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Where is the Outrage II?

We recently blogged about how we taxpayers saved the large Wall Street firms only to have it thrown back in our faces with unconscionable bonuses and the continued reckless behavior of politically connected “too big to fail” institutions.

It is clear to us and to many who analyze economic behavior that the consumer driven U.S. economy is going to sputter until new jobs are created.  It is widely acknowledged that small business, not the giants that we saved, are the engine of job creation.  Since the hundreds of billions of dollars of TARP funds were given to those that are “too big to fail” last fall, commercial and industrial loans have fallen every single month (St. Louis Federal Reserve Bank).  Those TARP funds have been pocketed as bonuses or simply went into shoring up the capital bases of these institutions that now prowl the countryside looking for takeover targets (to get even bigger).

At the same time, there is a segment of the financial community that has never shirked their responsibilities when it comes to small business and community lending.  We call these folks “community banks”.   Unfortunately, government regulators and many in Congress look at these folks as “too small to save”.  But are they?

Generally, community banks are owned by locals, are often the largest or one of the largest public entities within the communities they serve, and are, more often than not, responsible for the financing and building of their communities.  You can consider them the communities’ lifeblood when it comes to local lending.  Shelia Bair, the Chairwoman of the FDIC recently said: “Community banks are the life blood of our nation’s financial system, supplying much needed credit to countless individuals, small businesses, non-profit organizations and other entities in large and small towns across the country.”  We doubt she means what she says, because the regulatory authorities, including the FDIC, have shown a hostile attitude toward community banks by: 1) Granting only a miniscule amount of TARP funds to community banks, even to those banks whose capital bases were severely impaired by the government takeover of Fannie Mae and Freddie Mac only weeks after Barney Frank, Chairman of the House Financial Services Committee, assured the public that Fannie and Freddie were solvent; 2) The heavy handed tactics now being employed by the regulators which make it impossible for community banks effected by the Fannie and Freddie caper and by the severe economic contraction to raise needed capital.  It is almost as if the regulators view their oversight of 8000 institutions as too burdensome and wish to reduce the number of their charges by half because they are well on their way to accomplishing that goal.

So, we are outraged at the way America’s community banks are being ravaged, not by economic conditions, but by their regulators and, by the inaction of the Congress.  And you should be outraged too, because without these institutions, small businesses will not be able to get the financing that they need to create the jobs America needs!

Democrats now control both houses of Congress.  They say they represent the “little guy”.  So far, we see them only protecting the rich and greedy on Wall Street.  Congressman Frank, House Majority Leader Pelosi, Senate Leader Reid, prove us wrong!

Robert Barone, Ph.D.

Ancora West Advisors LLC is a registered investment adviser with the Securities and Exchange Commission of the United States.  A more detailed description of the company, its management and practices are contained in its registration document, Form ADV, Part II.  A copy of this form may be received by contacting the company at: 8630 Technology Way, Suite A, Reno, NV 89511, Phone (775) 284-7778


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