Those Who Eat and Those Who Serve

Smaller Banks Thrive Out of the Fray of Crisis
People Shift Money From Wall St. to Main St.

By Binyamin Appelbaum
Washington Post Staff Writer
Friday, September 26, 2008; D01
Banks throughout the United States carried on with the business of making loans yesterday even as federal officials warned again that their industry is on the verge of collapse, suggesting that the overheated language on Capitol Hill may not reflect the reality on many Main Streets.
. . . many smaller banks said they were actually benefiting from the problems on Wall Street. Deposits are flowing in as customers flee riskier investments, and well-qualified borrowers are lining up for loans.
“We collect money from local savers, and we lend it in the local community,” said William Dunkelberg, chairman of Liberty Bell Bank in Cherry Hill, N.J. “We’re doing fine. There are 9,000 financial institutions out there, and most of them are small and most of them are doing fine.”

. . . Smaller banks, by contrast, make few mortgage loans, and their lending is fueled by deposits, rather than borrowing. That has insulated them from the troubles on Wall Street.
“We’re drowning in liquidity because people are pulling money out from other places and depositing it with us,” said Peter Fitzgerald, chairman of Chain Bridge Bancorp in McLean. “Our bank has benefited tremendously.”
The 9,000 bank presidents who are doing just fine and stayed out of the feeding-frenzy of fraudulent mortgages, have one thing in common. They are not likely to sit down over a lunch–ever–with Treasury Secretary and former Goldman Sachs CEO, Henry Paulson.
This is indeed a bailout being engineered in Washington, but it’s not bailing your boat or my boat or Bill Dunkleberg’s boat over there at Liberty Bell Bank in New Jersey. Greg Zehner, a former partner at Goldman and a guy who (one would assume) did share an occasional burger with Paulson, wrote eloquently on why the federal government should let markets right themselves.
But there’s a lot of pressure on Paulson from former collegues and excrutiating pressure from lobbyists who fund our valiant legislators. George Bush has weighed in, John McCain has cancelled his debate in panic and it seems the only voice of reason and prudence is that of Mr. Obama.
He thinks he and McCain should keep the inflated rhetoric that attends the final days of a presidential campaign out of the current congressional fray. McCain is mixing it up as best he can, with nothing to lose but an already abandoned reputation for principle.
And so there you have it. Some 9,000 banks serve and a few of the big guys eat.
Paulson wants to keep them eating caviar and send the check to you and me.

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