October 21, 2008

Bank on it

Earlier this month, USA Today founder Al Neuharth visited the Great Plains Bank in his old hometown of Eureka, South Dakota. He apparently came away with a renewed understanding of the simple logic that seems to escape big city bankers: lending institutions should loan money only to the people who can afford what they’re buying and who will be able to repay the loan.

Neuharth wrote about this experience in Why our little banks don’t need bailouts.

With tons of taxpayer money now going to help bail out big banks that didn’t have the good sense to remain true to the above axiom, we’re confronted with another sad fact. Big banks are getting bigger, and their wallets will likely get fatter with our hard-earned tax monies that are simple subsidies.

We’ve railed about media consolidation, and there’s little reason to believe that huge bank consolidations are any less smelly. The last-minute takeover of ailing Wachovia Bank allows Wells Fargo to join Bank of America and JPMorgan Chase Bank as financial behemoths that will eventually stifle good local service. The corporate mentality of maximizing the bottom line at all costs will work to blur the judgment of these banks, and “local service banks” will become harder and harder to find.
Bank on it.

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