Tuesday, May 12, 2009

Small Banks: Hurt by the bailout

The small banks have to compete with the big ones. The small banks weren't involved with CDOS, MBS, subprime, derivatives, or any of the other casino capitalism scams. The small banks and credit unions are, for the most part, are still solvent and profitable. They have not asked for, nor needed, any taxpayer supplied TARP funds.

The taxpayers are subsidizing these big banks. The big banks can offer higher interest rates on savings and CDs vs the smaller banks, which makes it difficult for the smaller guys to attract capital.

[Youtube] Small bank CEO says bailout is creating an unfair playing field for the small banks

The longer video is available on CNBC.

Now the small banks have to pay higher FDIC premiums to subsidize the big banks. The higher FDIC premiums are causing small banks to show lower or even no profits for the year.

"“At DeMotte [State Bank, an 11-branch operation in the northwest part of Indiana, Bank President] Mr. Goetz is bracing for a steep increase in a crucial overhead cost: the bill from the Federal Deposit Insurance Corporation, which is basically an insurance fund underwritten by banks.

Last year, DeMotte paid $42,000 into the fund. This year, because of failures in other parts of the country and particularly among national banks, that sum will rise to $500,000 or more.

“Isn’t that the American way?” he says, folding his arms. “Whoever is left standing, whoever was prudent, is always the one who has to pick up the pieces.”"

[Article] Small banks subsidizing big bank bad behavior thorugh higher FDIC premiums

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