People are worried. Why throw money to soak up bad debts banks have, when people are facing potential debt or mortgage payments problems of their own, especially if jobs drop and interest rates rise – as seems sure to happen no matter what Congress does. Even if banks are kept solvent, who is to assure that they will still help out the small businessperson?
I have a little experience and a general philosophy here. I started my business with family help in 1988, buying a store. The recession of 89-92 hit right after I moved the store to a new shopping center and quadrupled my rent and overhead. It was tough. But there were good things about it. Businesses had to be smart to survive. You had to take better care of your customers. You had to forge relationships with them. It could not be a semi-anonymous thing just centered around goods and money. People got a little more serious about life in the hard times. It was not all bad.
Here is a little thinking on banking. My experience in business was with a small business and a locally-owned bank. When I went to get my business loan to buy my business I spoke with the banker for a long time. He explained that he was the last locally-owned bank in Knoxville, Tennessee. He explained the difference between a locally-owned bank and a larger chain bank. Local banks take local money and primarily invest it in the local economy, in giving loans to businesses like mine. There is accountability there. There is a relationship. We are business partners. I would often go over to the bank and just talk, get help, advice, and wisdom; not just deal with money. There is a lot more to running a business (and life itself) than just money.
Larger banks tended, he said, to take the local money and invest it in broader, often removed, markets. They would invest Knoxvillians’ money more in the various funds and national or international banking schemes out there. They might make a great profit, but it was not as much by supporting the people where we lived and whom we knew personally and providing them capital to follow their dreams.
I was tremendously struck with the fundamental difference. I had never before realized that every dollar I invested in a bank, even in my own savings or checking account, could either be earmarked to support a vague fund with who-knows-what control over it in who-knows-which place; or it could be put in the hands of my local banker who could be freer to lend it to my neighbor who ran a hair salon in my own shopping center. Or, for that matter, my business. When you boil it down that way, it is very simple.
I became a huge fan of investing locally and investing in a relationship that provided wisdom, commitment to me and my neighbors as well as liquidity.
Perhaps it is time for the entire nation – or even the world – to get the grandiose banking schemes out of their heads and return to investing in -and being accountable to – people they can sit down and talk with. Then we can all learn more – about money – and about life.
A new slogan: It’s about the fact that the economy is us – ’stupid