Do You Really Think Your Local Bank is “Evil”?

Do You Really Think Your Local Bank is “Evil”?

For the last three years everything you have heard about banks has been negative. The criticism is all over the board. Banks: ruin lives by lending to people who cannot pay it back; mislead borrowers; gouge deposit customers with fees; pay themselves huge bonuses; refuse to lend money to anyone; take your tax money because they are broke and are in most respects just lousy cusses.

Stop and think. Does that really describe your experience with the people that work where you bank? Probably not. The local bank employees are your neighbors and friends. In addition to serving you at the bank, you see them serving on local civic boards and volunteering all over town. You also find your bank to be very generous in supporting local charities and events. The negative stereotype given your local community bank is not just an unfortunate label put on their employees. It has caused your community and our country real financial harm. Here is how.

First, most of us are rightfully of the opinion that there has been irresponsible and wrongful behavior by some financial institutions. However, the media and politicians have made little effort to make the important distinction between your local community bank and the “banks” making all the news. Insurance companies and brokerage firms were never thought of by the average consumer as “banks”. However, they were given this label during the 2008 financial crisis. In addition, states that the ten largest banks in the United States held 84% of total assets for all banks in the U.S. as of December 2010. The other 7,647 banks held only 16% of banking assets. The local community banks simply do not have the size or ability to impact national markets or ruin the economy. They generally compete in smaller markets where customers readily distinguish between honorable and dishonorable behavior. Your local community bankers are known by you. You see them around town and interact in many circles with them. This alone discourages them from being tempted to mistreat you as a customer.

Having been included in the same category as these larger institutions, some of which were never “banks,” your local community bank is now forced to operate under greater legislative and regulatory requirements that actually take away their ability to make loans they would otherwise like to make. The financial industry is increasingly becoming nationalized and is taking your local community bank along for the ride. Having the government run banking, or any industry, gives the business less freedom to be innovative and apply judgment to decisions that impact you, the customers. It means their ability to be profitable is also impaired which in turn makes it more difficult for them to remain independent. If this continues, there will be fewer local bankers to respond to your service and lending needs, fewer well paying jobs at home and the loss of a major source for charitable giving in your community.

Here is what we can do to help our communities and our national economy. Do not take all the news at face value. Dig a little. Ask questions and think independently. Take personal responsibility for our financial and other decisions. Looking to our government to protect us from financial loss will actually diminish our economic opportunity. More importantly, it is a path that will eventually erode our freedom.

About the Author

Kelly Karns is President of Karns Profit Improvement®, an independent Oklahoma-based financial consulting firm that has specialized in growing the profits of community banks in a multi-state area since 1986.