Ralph Barber, Jr. is a friend of mine. Until recently, he was also my banker. But his bank, First Security National Bank, is the latest bank failure in what’s been called the “Great Recession of 2008-2009.”
So far, 29 banks have failed in Georgia since 2008, more than in any other state. According to some reports, another 30 Georgia banks might fail next year, and as many as 200 of the 300 Georgia banks might be under some form of edict from the FDIC. Many of these “edicts” keep banks from providing loans, in which case they become, in essence, “zombie” banks. They look like banks and take deposits, but they aren’t generating loans for the community.
It’s easy to lose sight of what these bank failures mean. If you read most of the news headlines, you might think of these bankers as greedy fat cats who deserve their fate. But this usually isn’t the case, especially at the small community banks that comprise the bulk of the bank failures in Georgia. The truth is, these banks are part of the communities-our communities-that they serve. These bankers are our friends and our business partners.
Like many of my business friends, I work with several local bankers, and Ralph was one of them. He is a husband, father, Sunday School teacher, and chaplain of a football team. He contributes to local charities. Ralph is a great friend and his bank served an important function: providing capital to help drive the biggest generator of jobs in the U.S…. small businesses.
The statistics make it clear that small businesses create more jobs than any other sector. According to M.I.T. researcher David L. Birch, small businesses have generated two-thirds of all private sector jobs in the last 25 years. Also, in a recent issue of Business Week, it was reported that presently 83 percent of U.S. employment is in small businesses.
Local community banks like First Security National and the hundreds of others in Georgia have been the fabric of small business in America for decades. ABC News recently reported that community banks make 20 percent of all small-business loans, even though they only hold about 12 percent of all bank assets, and that about 50 percent of all small-business loans under $100,000 are made by community banks.
With fewer local community banks, I and my fellow small business owners will find it harder to get the loans we need to grow our businesses, and harder to hire new employees when we need them. This vicious cycle-where businesses can’t grow and hire because they can’t borrow money, and banks can’t grow because they can’t lend money, and the economy can’t grow because too many people are unemployed-is a continual drag on the economic health of America.
Much of the media has tried to portray rich bank presidents and CEOs as the poster boys for everything that has gone wrong with the American financial system the past couple of years. After all, banks got all that TARP bailout money and used it to lavish big bonuses on CEOs, didn’t they? Actually, most of the TARP money went to the huge mega-banks, not small community banks.
The fact is, it’s not an “us” vs. “them” system. We are all tied together in this complex, interrelated economy, and bad news for one sector (like community banks) usually spills over to others, like small businesses; and eventually, their employees and families.
The local banker is an important part of this system that our communities simply can’t do without. I, for one, am hoping that far fewer community banks fail in the next year than the experts are predicting, and that community banks actually start growing and expanding again. If so, this will be good news for my business-and even better news for Ralph and hundreds of other community bankers like him.