Systemic risk in the American Dream
March 27, 2009 Leave a comment
Today, the NYT profiles a bank in Georgia that has been there for 104 years but went under last week.
Here is the key graph, in my opinion:
To Glascock residents, it now seems as if the crisis has extended a slimy tentacle from Atlanta to their quiet community of farms and sawmills 120 miles to the east, where “sprawl” is something one does in the den after work. “It wasn’t the loans at this bank,” said J.H. Usry, 74, a retired hairstylist. “But we’re part of it and that’s brought us down too.”
It was a small town bank; real “It’s a Wonderful Life” type stuff. According to the story, for a long time, people didn’t even have account numbers and folks just knew each other. It’s all very quaint. So what went wrong?
But in 2000, the Griffin heirs decided to sell the bank — a decision opposed by Lee Griffin and his brother, Skip (Erasmus Eggleston III), who worked at the bank. At the time, the bank had only about $11 million in assets, but it had a charter, and to lenders in a hurry to cash in on the expanding real estate market, that was its most attractive possession.
The bank was bought by an Atlanta-area mortgage lender, who changed the name to FirstCity and moved the headquarters to Stockbridge, an Atlanta suburb where 20 other banks have offices. FirstCity proceeded to focus on real estate, which ultimately made up more than 90 percent of its loans.
Most of the bank’s money came from “brokered deposits,” investments obtained from third parties that shop around for the highest rates, rather than more reliable “core deposits,” which come from local customers. Of the bank’s three branches, where core deposits are typically made, the one in Glascock had the most money.
When historians look back, it will be this era in which they determine America died. This story is a fantastic metaphor about what we are losing in our small towns as giant corporations chew up and shit out what we used to refer to as “the American dream.”
Glascock residents did not particularly like the new bank’s style. Frankie Porter, the treasurer of the Gibson United Methodist Church, said she was taken aback when she tried to get a loan for a new roof for the fellowship hall and was asked to put up collateral.
“Before, I would have went in, signed a piece of paper and gotten the money,” she said. “They knew the background of all the people that are borrowing from when they were growing up. My mother had the same telephone number for 40 years. They knew who they were dealing with.”
Yeah, I’ll say it, corporations are killing the country. They have been since Reagan essentially unleashed them on the world by cutting tax rates and encouraging them to gobble up everything in sight with little to no regard for people, rules or ethics.
This is the exact same thing that has happened at newspapers. The problem was not the small town, profitable newspapers, the problem was the rapid expansion by greedy screwheads trying to make a quick buck that brought everybody down.
On Tuesday, Sheriff Dean Couch pointed to a white “FirstCity” banner still hanging above the door of the bank building in Gibson. “That was our downfall,” he said.
Let this story go forth like the mark of Cain, a warning to all those screwheads and sellouts who mortgaged all of our long term security on short term profits and lies. We know what went wrong. Let’s never let it happen again.
Thanks Bush Administration!