Posted by: Stacy Perman on October 30, 2008
New York Times business columnist Joe Nocera gave up his Executive Suite column today and instead published an email sent to him by the veteran of a large bank with 35 years in the business. The longtime banker wrote Nocera a fascinating description of how he believes the government has done enough for the big guys and now needs to “pump money into the local community banks because those are the bankers who understand their markets, and know the businesses in their markets.” The writer, who asked for anonymity, offers up a first hand portrait of the machinations of the big banks who helped fuel the financial mess the country is now facing while also making a powerful case for using bailout funds to help small businesses.
So far, despite doling out more than $125 billion in new capital to banks, the government has been unwilling to do anything more than politely ask the banks to make more loans. That approach is never going to work. Since 1999, the government has issued several guidelines to the banks, warning them of the potentially disastrous consequences of diving into the risky subprime mortgage market. It has urged them to curtail this behavior. The banks refused to listen and went head-long into that market, driven solely by greed. For the government to now believe that the big banks are somehow going to have an epiphany and change their behavior is delusional.