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Local bankers explain nation's financial crisis

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JAMES P. LEUTE
October 1, 2008
— A shoulder to lean on and an armload of information.

That's what local bankers are offering customers in the wake of the nation's ongoing financial crisis.


The presidents of M&I and Johnson banks in Janesville said Tuesday their customers definitely are paying attention to what's happening on Wall Street and in Washington, D.C.


"We're spending a lot of time educating people," said Mary Wilmer Sheedy of M&I. "That's our job, and we've found that people are hungry for information."


That information has centered heavily on the intricacies of the Federal Deposit Insurance Corporation, the government entity that insures checking and savings deposits.


While the FDIC generally offers coverage up to $100,000 per depositor per bank, there are exceptions for more coverage, Wilmer Sheedy said.


Federal lawmakers are debating a costly bailout of the nation's banking industry, which has been harpooned in large part by defaults on risky mortgage loans. As national investment banks have gone under, customers are concerned about the stability of their own assets on deposit at local banks.


"Every person's situation is different, so you can't generalize about coverage," she said. "We have lots of resources that we can provide, and generally people are OK after they've talked with us."


Kurt Bauer, president and chief executive officer of the Wisconsin Bankers Association, said Monday's House defeat of the $700 billion Emergency Economic Stabilization Act didn't help consumer confidence.


Monday's 777-point drop in the Dow Jones Industrial Average represented a loss of more than $1 trillion in market capitalization, although Tuesday's gains mitigated it to some extent.


"Everyone invested in the market through a 401(k), IRA or other retirement plan lost huge sums of money on paper," Bauer said. "Wisconsin's depository banks—which are very different from Wall Street investment banks—didn't make subprime loans, which means we didn't cause this crisis, nor do we need ‘bailing out.' But, the economy does."


Johnson Bank, President Larry Squire said, never got into that subprime lending business.


"We stayed boring and stuck to what we knew best," he said. "We're well capitalized and, for us, it's business as usual."


Squire said his bankers have been busy answering questions about FDIC coverage and other areas of risk.


"People are certainly asking a lot of questions," he said. "Since we first started to get a sense of nervousness among our customers, we've been proactive in reaching out with information and resources.


"For a lot of our seniors, certificates of deposit and dollars in bank accounts are an important part of their overall savings plans."


Squire said he's unsure when or if liquidity concerns and a general tightening of credit will reach Main Street banks. Passage of the bailout bill might have eased that, he said.


"There is still credit available," Squire said.


In the meantime, neither Wilmer Sheedy nor Squire have noticed customers departing their banks with life savings in tow.


"I would certainly hope that doesn't happen," Wilmer Sheedy said. "First and foremost, people need to talk to their bankers."



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