By Charlie Warner
Argus News Editor
Last week when the United State House of Representatives voted down the proposed $700 billion Wall Street bailout, the stock market took a nose dive like it never had since Black Tuesday, Oct. 29, 1929. On Sept. 30, the U.S. stock market lost 777 points, which translated into a one-day loss of $1.2 trillion.
The drastic drop in the stock market sent shockwaves around the world. Those old enough to remember the Great Depression, or their parents or grandparents talking about it, wondered if history was about to repeat itself. The following day, the stock market rebounded significantly, making up 75 percent of the losses from the previous day.
Since then, both the Senate and House of Representatives have passed restructured bailout bills. During the past week, as Wall Street speculators, financial gurus, and the media have worked all the numbers, and made a myriad of predictions as to what might happen, Main Street Americans have been wondering how this situation might impact their daily lives.
According to four different Caledonia-area bank executives, business is as usual. They have received numerous calls from nervous customers. And those customers were assured that the much publicized financial situation on Wall Street won’t pose any adverse affects to them.
“We’re still making loans. Like most Midwestern banks, we didn’t get involved in the purchase of sub-prime loans,” reported Mike Werner of Bank of the West in Caledonia. “The economy here is solid. The farmers are looking at good crops and commodity prices. Houston County is Midwest conservative, when it comes to their finances. I don’t feel we will be affected by this, as they might in the larger metro areas.”
Craig Schroeder of Merchants Bank of Caledonia echoed Werner’s comments.
“Yes, we have had customers call and ask about the availability of money for loans, and if their deposits are safe. We haven’t had to change any of our lending practices. Like most banks in the Midwest, we didn’t get involved in the sub-prime loans. It just wasn’t worth the risk involved.
“Although there are several challenges in today’s economy, Merchants operates in a conservative part of the country that is still relatively stable, compared to other parts of the country,” Schroeder continued. “Because of this conservative approach, we have only had to make minor changes in how we do business.”
Schroeder added that even though Merchants Bank is part of a group of banks in Minnesota, the Caledonia bank has its own board of directors, made up of local customers, who make decisions locally.
“It’s business as usual for us here,” Barry Fruechte of New Albin Savings Bank reported last Friday. “Here in the Midwest, it is hard to comprehend the scope of this. It’s hard to believe that there was that much purchasing of sub-prime loans.
“I feel the situation resulted from too many people making bad loans,” Fruechte pointed out. “Many of these loans were made by people who were in it just to make a commission. It didn’t make any difference if the loan was going to fail or not. These people received their commissions, regardless. Smalltown banks don’t operate that way. That’s why you don’t see smalltown banks in trouble. We just don’t do business like that.
“We’ve been fielding calls from customers, and we’ve been letting them know everything is fine,” Fruechte added. “Things are actually going very well for us. We have had a good year, and don’t feel it [the financial situation on Wall Street] will impact our customers.”
Ron Chamberlain, of Eitzen State Bank of Eitzen and Caledonia, said last week, “At this point, there will be no change in the way we conduct our day-to-day business. We have received a few calls from our customers, and we assured them that this situation wasn’t going to affect them.
“Banks are much more conservative here and require downpayments when applying for loans,” Chamberlain continued. “We didn’t deal with any sub-prime loans, which I feel is the cause of many of the failures we’re hearing about.
“I think increasing the FDIC insurance on deposits to $250,000 is a good move,” Chamberlain stated. “It hasn’t been raised since 1980, when it was set at $100,000.”
Werner and Schroeder brought up two interesting facts concerning the mortgage issues.
“As of today (Oct. 1), the FDIC says there are 8,423 banks in the United States. Of those, only 13 banks have failed in 2008. That kind of gives you a different picture of how things are, doesn’t it?” Werner asked.
Schroeder noted that according to the most recent figures, only one in 11 mortgages are behind in their payments or have gone to foreclosure.
“That means 10 out of every 11 persons with mortgages are making their payment on time,” Schroeder concluded.
You can contact Charlie Warner at
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