Search: Have a question? Find your answer fast.

All articles

2009Nov6 US Banking System

 

This week’s poll asked what people think about America’s banking system. The poll was not scientific and was driven by radio listeners of the syndicated Don Creech Radio Show (www.DonCreech.com) and subscribers to Investor Resources Week In Review email update.
 
Are some banks too big to fail?
Respondents had strong opinions on the need to keep a troubled bank operating. Nearly eighty eight percent responded in the negative. America is still the land of opportunity which is accompanied by the opportunity to fail. Poor management should be allowed to suffer the consequences of poor decisions.
 
If a large bank is in trouble is it best to let it fail?
The responses to this were the same as the first. Size is not the determinant of success. Many large companies have been allowed to fail, and companies with better management teams or business plans have filled the space vacated by failure. Consumers are usually better served by the surviving firms.
 
Should large banks be treated just the same as smaller banks?
Respondents were less starkly divided on this issue. Rounding the numbers gives us roughly two thirds in favor of equal treatment. Again size should not determine outcome but management and efficiently delivering a needed service to the end consumer should win in the business of capitalism.
 
Should large banks be broken up into smaller banks?
This issue was equally divided at 50-50. Clearly, some respondents do not like the lack of personalized service that has developed in national banking system while others have at least accommodated it.
 
Should banking companies be allowed to own banks in more than one state?
Unanimity prevailed on this question. Everyone thought banks should not be confined to state lines. This begs the question of what were the 50% thinking who are in favor of banks being broken up into smaller ones. Operating across state lines generally means a larger company. Personally, I have found it very convenient to bank with a national institution and have easy access to “my bank” virtually where ever I travel.
 
Do you have confidence in the US banking system?
Seventy five percent indicated they are confident in the operation of the US banking system. We know smaller regional banks have been failing and keeping the FDIC busy with takeovers. We don’t know how many of the national firms would have actually failed without last year’s governmental intervention. We do know that Wells Fargo did not need government funds but was forced over the CEO’s objections into taking TARP money.
 
Is the government doing enough to regulate the banking system?
Respondents this week clearly had some divergent views. Roughly two thirds believe the government is doing enough regulating of the banks. Perhaps some have forgotten the Savings and Loan crisis of the 80s. An entire industry was shut down by the government. I am certain the Feds learned a few things from that process. If they were doing much more, it would begin to border on micromanagement. As regulators, I am not convinced they are qualified to do that. If so, they probably would not be a federal employee.