By DAVID CLOUSTON
Salina Journal
Salina bankers seem to be basking in hometown depositors' shows of confidence despite the policy and politics of the crisis in America's financial markets.
"Our deposits have grown in the last 30 days. I think there are customers growing more comfortable with a community bank that knows people and is more conservative," said Lloyd Davidson, president of First Bank Kansas, 235 S. Santa Fe. "We take it as a great compliment."
Small community banks "don't have portfolios full of subprime mortgages," chimed in Kirk Berneking, executive vice president of the Solomon State Bank. "We keep our loans. We're pretty concerned that they're of sound quality."
Wall Street rebounded Tuesday nearly 500 points from a loss of more than 700 points Monday, after Congress failed to pass a $700 billion bailout plan to help lenders burdened by mortgage debt and other bad loans.
Presidential candidates John McCain and Barack Obama on Tuesday recast the proposal as a "rescue plan" to help those lenders. Lawmakers are expected to return to Washington soon and salvage a modified version.
Talk about the anxious state of stocks, and the cost of the rescue package, has migrated from dominating the television news programs to everyday citizens' conversation.
"I see no reason to give (bad lenders) preferential treatment," said Norma Bruns, 90, of Abilene, who stopped by Mokas Downtown Bakery and Bistro, 109 N. Santa Fe, for a bite with her son, Dean, of McPherson.
"I think when people, no matter who you are, when you make bad judgments, you must work through and rise above it," said Bruns. "Just getting bailed out, you don't learn anything. And I'm for learning."
Overpaid CEOS of concern
She remembers the Great Depression of the 1930s well for what happened to her father. He announced that he had put aside a little savings account at their bank for each of the children. Within weeks, the bank failed, and there was nothing. It was a blow, Bruns said.
She said she's not so much worried today about a bank failure, but is concerned that too many corporate executives are overpaid, in relation to what their workers earn.
Her son, Dean, said he has concerns about what the credit crisis might mean for the financial system. But personally, "I don't have enough to be worried about," Bruns, 57, said with a smile.
"We survived the Great Depression; we'll survive this," he said. Bruns works for the board of public utilities in McPherson. His retirement accounts, he knows, "are going to take a hit, but they'll come back."
Handing the Treasury a blank check for $700 billion was a bad proposal, said Salina car dealer Ralph Bennett. He favors a loan arrangement, and giving taxpayers an equity stake in the companies being rescued.
"Put representatives on their boards to represent the taxpayers," he said. "The main thing would be letting people clean up their own mess."
There's no effect so far on his firm's ability to finance customers, and new vehicle sales at the dealership at 651 S. Ohio and at Minneapolis haven't slacked off any, he said.
Still, he said, he thinks government should act in some fashion.
"Because we can't have a meltdown with credit. That's all there is to it," he said.
In 2007, only one Salina bank, Security Savings Bank based in Olathe, posted a loss. But in the first quarter it showed a profit of $3.4 million.
Banks still lending
Other banks, such as First Bank Kansas and Bennington State Bank, posted some of the strongest returns on equity and assets in a decade.
"We still have substantial money to lend," said Dennis Lull, Bennington State Bank president. He said the credit crisis "hasn't curtailed our ability to make loans, nor our interest in making loans. We have not substantially changed our standards at all."
Lull said the area agricultural economy remains strong, and so does the Salina economy as a whole.
"We think it will be business as normal in our local area, as long as things don't totally cascade from the coasts (where the mortgage bubble took root) to the Midwest," he said. "And we haven't seen any signs of that yet."
Nevertheless, fear of a nationwide financial collapse apparently prompted at least a couple of customers, both older residents, to withdraw their accounts at the bank in recent days. Both had less than $10,000 in deposits, Lull said, and would have been "well covered by FDIC insurance. They had been through the Depression and felt a great need of holding cash."
Salina's Central National Bank president Larry Reiswig said Tuesday that he's seen a jump in customers opting for fixed investments such as treasuries and certificates of deposit. The bank earned about $6 million in 2007 and has about $90 million in capital.
Taxpayers could benefit
If Congress votes for a package that includes buying some of the troubled real estate assets from lenders, it could hold them for perhaps a year or longer and then maybe sell them at a profit to another institution, he said.
"If they do it right, taxpayers could benefit and even make some money," Reiswig said.
One way to do that, suggested James Hoffa, president of the International Brotherhood of Teamsters, in an interview with the CNBC television network Tuesday, might be to proceed in stages with a $100 billion pilot program.
First Bank's Davidson thinks the real estate assets could offer taxpayers a significant return -- "if someone is working the credits and cleaning up the delinquencies."
"Will we be made whole? No," he said. But taxpayers will experience a loss either way, he predicts, whether it's in taking a loss on those assets or losing money as a result of the effect on the stock market, in individual retirement accounts and other investments.
n Reporter David Clouston can be reached at 822-1403 or by e-mail at dclouston@salina.com.
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