The movie “The Big Short” opens with this line: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” Attributed to Mark Twain, it’s a good sentiment to keep in mind as you’re watching the movie, wringing your hands in anger and disgust at the big, bad bankers portrayed in the film. Sure, the big bankers who took advantage of the hopes, dreams and naïveté of Americans are awful, but “The Big Short” makes you start to think that all banks or bankers are despicable — and that just ain’t so.
Let’s start by differentiating between the big banks and bankers such as those portrayed in the film and the community banks that are, unfortunately, being lumped into the same category.
Big banks create an impersonal standard that routinely excludes viable customers who have stories to tell and deserve to be heard. These banks have a one-size-fits-all approach that drives the profit machine. They write cookie-cutter loans for people who really can’t afford them and they charge outrageous interest or penalties when customers inevitably can’t pay them back.
On the other hand, community banks across the country take care of their customers and are generally about more than just the bottom line. They’re the backbone of small businesses. They bank on a case-by-case, individual basis. Community banks find creative ways to assist their customers in homeownership, starting and growing their businesses, etc.
In that regard, small businesses are a major driving force in the economic success of our country. It’s generally the community banks that take care of their financial needs. Community banks were not the reason or a part of the financial meltdown and should not be lumped in with big banks. The crisis was due almost entirely to the risky, unregulated and, dare I say, greedy practices of mortgage lenders and by packaging bad loans through Wall Street firms. In an effort to understand the “why” behind the 2008 financial meltdown, we need to be sure we don’t throw out the baby with the bath water.
Furthermore, community banks are not — or, at least, should not be — included in the category of “too big to fail.” (Philosophically, should any business in a free society be considered as such and be propped up and protected by the government?) They, like most businesses, are responsible for their own success and failures. The loans originated by community banks are typically held and serviced for the life of the loan by the originating bank. If mistakes are made and losses occur, the originator suffers the consequences.
In a perfect world, we would learn from past mistakes and not repeat them. Unfortunately, history proves that’s not always the case. Speaking of history, here’s an excellent example from Cam Fine, president of ICBA (Independent Community Bankers of America): “Blaming community banks for the crisis is like blaming Poland for World War II. It shows either a misunderstanding of our financial system or a disdain for local financial institutions, either of which would be damning to [the Financial Accounting Standards Board’s] credibility.”
Another fine example: Texas. In 2008, Texas fared well in the Great Recession. Texas bankers learned from the savings and loan crisis of the 1980s, and we held to more conservative lending practices. Another reason we did well is due largely in part to more diversity. Think of cities like Houston (the nation’s energy hub), Austin (an education and high-tech leader) and San Antonio (health care, education and military spending). San Antonio, in particular, has placed in the top 10 major metro cities in terms of lowest unemployment, lowest percent of job loss since December 2007 and lowest decline in home prices.
Basically, small banks don’t put all of our eggs in one basket, just like we shouldn’t put big banks and community banks together in the same garbage bag.
So while sitting in silence after watching “The Big Short,” ears ringing with indignant rage at the thought of how so many on Wall Street could play craps with the American and global economy for personal gain, remember: Not all bankers are bad, greedy or unscrupulous. Community bankers know their success lies in the success of the people and small businesses they help and the communities they serve. I truly hope “The Big Short” serves to inform those less educated in the ways of Wall Street and big banking. But in the end, I hope people get all sides of the story — and realize the popular idea that all bankers are evil just ain’t so.
David Littlewood is the president of TFNB Your Bank for Life based in McGregor. The bank was established in 1889 and has served the Central Texas community for more than 125 years. It is the oldest bank in McLennan County and the seventh-oldest national bank in Texas still operating under its original charter.