Pat - I have a tremendous respect for your insight and commentary but I have to say you are WAY off base with regard to the overall tenor of your article. Once again, the entire banking industry is being painted with a twenty foot brush, and in many (most) cases, unjustifiably so. I have been in banking for twenty five years - I've been through the last wicked downturn in the late '80s and early '90's and have seen fortunes disappear and re-appear. I won't get into the issues about excess consumption relative to production etc. that has also been a contributor to the current situation. What I will do is explain the causes of some of the points in your article from a local banker's perspective. First - we WANT to be lending and making loans; it's what we do as bankers. Think about it, we earn income from interest charged on loans that are paid according to terms. If we aren't making loans, we aren't generating income. (And before you or your readers go off on fees - yes we charge for services but we are not a major national bank that controls credit card fees and rates and charges for using the teller line, etc - we're a Colorado bank that depends on our customers' good will for our existence.) Second - we are suffering losses in our portfolio just like everyone else. Not generally because we over-leveraged our customers but because the market devalued their assets and they now have no market for their product or service. We try very hard to work with our customers to avoid foreclosures - it's bad for everyone concerned - but we do have losses that have to be recovered. Third - Our regulators are changing the rules by which we operate. This is the big issue right now. It used to be that a bank was considered well capitalized when risk based capital was 10% of risk based assets (basically bank equity plus loss reserves divided by total loans). The rules have changed to where the MINIMUM adequate capitalization is now 13%. We've all passed basic math - when you have a ratio that you want to be bigger, you either a) increase the top number (in this case capital) or b) decrease the bottom number (in this case loan outstandings). Let's look at these in turn. We'd LOVE to raise capital in the market. We (along with the majority of our brethren) are a privately held bank with roughly 400 shareholders including employees. We chose NOT to access TARP because the conditions were so onerous, it was tantamount to granting ownership to the federal government (the terms were quite different for smaller banks vs the big national companies). So how to raise capital? First - maintain some level of earnings. We have done so despite the downturn because I believe we made good decisions and didn't over-leverage our customers. How about we sell more shares? But how do you attract investors - by paying a return. Here comes the fun part - the regulators say "No dividends without our approval". This pretty much eliminates our ability to raise capital as we can't define dividend levels or even if we can pay them if established. Now what? The only other way to increase that ratio by which we are measured is to reduce loan outstandings. How? By finding ways to move credits - good, bad or otherwise - off the books and by NOT adding new loans to the mix. It's not where we'd like to be but we have not been given a choice. For what it's worth, I'm the senior lender at my institution and have had the unenviable task of declining four loans in the last two weeks. All were requests from profitable companies with long track records, very good deposits (in aggregate, deposits would have covered about half of the loan amounts) and experienced management in markets where we compete very well. Why are they looking for financing? Because their banks are also trying to reduce balances to improve their ratio so the regulators won't further impair our ability to serve our customers and our communities. I guess I'd say in closing - make sure you have all the facts at hand before picking up that big brush. It's pretty indiscriminate in how it splashes paint, and can unfairly cover those that are undeserving of the criticism (most of the banks in this country, by numbers at least). Better to concentrate on the knee-jerk reaction of the regulatory agencies who got caught with their oversight pants around their ankles - just like the S&L mess in the late 80's. Caution - wet paint! By Anonymous Banker on 2009 10 21

After 20 years with Well Fargo and predicessors, it has taken me since Feb. 6th to arrange refinancing for my primary home. I have very good credit, and the amount I am financing is about 1/2 of the original amount. I will be looking for another bank, altho' I wonder if there is a good bank out there. Maybe the mattress is a good idea. By Mike on 2009 10 13

Amen to this article. My colleagues in the building industry have been being turned town time after time by their banks. Shame on these institutions for not helping those who have funded their books for decades. Perhaps we should play the same game - take our money out of our accounts and store it under our mattresses.... By Gayle on 2009 10 13

Pat, you are right on. I am an owner of a construction loan brokerage and servicing company, and our customers have been left for dead by the banks. Three years ago, we had 22 banks in three states that would fund our referred loans, and this week I was told by the last of them that they no longer want any business (loans) referred to them. We are shut down, as are our small builder customers that relied on that funding for so many years (which was profitable business to say the least). There are many good, long time local small businesses that are going down because of the attitude you so accurately describe. It is a sad state at best. By Jerry R. on 2009 10 13