In Blow To Small Business, Failure of Colonial Bank Marks 75th USA Bank Closure This Year
August 16th, 2009
In another blow to small businesses, local banks are going down by the dozen this year. Local banks, much more often than the government, are the key source loans for many small businesses. Huge supposedly “to big to fail” banks like Citicorp and Bank of America have been expanding rapidly in other countries and outsourcing jobs, yet when things got tough they flew straight home to Washington and got hundreds of billions in funding. Unfortunately hundreds of communities, smaller banks do not receive such preferential treatment.
According to today’s Wall Street Journal, Alabama based Colonial Bank was by no means a small community bank, having 345 branches in five states, but they were important to that regions growth and prosperity. The government having lost $2.5 billion on Colonial and an unknown future amount of losses due to asset guarantees, has pawned off most of their assets to rival BB&T in a deal too good for them to pass up. Many branches will likely close, and communities that previously had both Colonial and BB&T will now have one less choice.
Colonial was the 75th bank to close this year, up from literally zero in 2006, according to the FDIC. Indeed, this year is worse than the last ten years combined by far for bank failures, and we are not yet even out of August.
This hurts made in USA products not just because the failed banks can no longer make loans, but also because many hundreds of other small banks have cut bank lending. Therefore, American based businesses who are already facing a tough recession are not getting the help from local banks they could usually consider as an option. That means little new investment and even factories closing. It cannot be American-made if a factory suddenly losses a credit line and cannot make payroll. Small business creates 70% of new jobs, not big corporations or the government.
Personally, though MadeinUSAForever.com does not need any loans, I do business with a small local bank and am generally very happy with the service. One day I called with a suggestion and they actually put me through to the president!
Washington has to get their eye back on the ball if they want to see true recovery. Small business is the real engine for our economy and is the future’s big business. Local banks community banks are much more like to be in their corner than huge mega-banks, and thus provide funding for real growth.
Todd Lipscomb
Founder of MadeinUSAForever.com (http://madeinusaforever.com/) a source for American-made products.
Sunday, August 16th, 2009 at 5:13 amand is filed under Uncategorized.
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