Getting bank loans continues to be problematic for small businesses in the tri-state area, said an economist with the Federal Reserve Bank of New York, even as loan demand in the sector picks up.
Commercial real estate loans remain particularly nettlesome to secure, said Rae Rosen, an economist with the Federal Reserve Bank of New York, while addressing the Business Council of Fairfield County this month in Stamford, even as she highlighted several signs that the economy is on the road to recovery.
“We are returning toward normal (in lending),” Rosen said. “I don”™t think we want to return to where we were in the middle of the decade ”¦ Overall we have moved back toward normal, but there are still pockets of difficulty.”
According to the New York Fed”™s beige book assessment of the tri-state economy released this month, the region”™s banks report that demand continues to fall for every category of loan save residential mortgages and loan refinancing. Credit standards continue to be tightened across the district.
Offering another perspective was the CEO of JPMorgan Chase, which trails only Bridgeport-based People”™s United Financial Inc. in Fairfield County as ranked by local deposits.
“We think loans in middle market are actually starting to level off and we”™ve seen small business demand actually go up,” said Jamie Dixon, CEO of JPMorgan Chase, in a conference call this month with investment analysts. “(There) are ”¦ some good signs out there.”
After influential blogger Ariana Huffington opened the New Year by calling for a boycott of large banks, holding them to blame for the credit crisis and recession, the Independent Community Bankers of America called for the Obama administration to avoid penalizing its members in any overhaul of the banking industry.
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“Even though community banks did not cause the economic crisis, we have been affected by it through a shrinking asset base, heavier FDIC assessments, and a suffocating examination environment,” said Rusty Cloutier, former chairman of the Independent Community Bankers of America, testifying this month before the Financial Crisis Inquiry Commission formed by the Obama administration. “Congress has been engaged in the monumental task of crafting legislation that will reduce the chances that risky and irresponsible behavior by large or unregulated institutions will again lead us into economic chaos.”
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Cloutier said many of its members are reporting that federal regulators have stiffened the “safety and soundness” exams they administer on banks, demanding overly aggressive write-downs and reclassifications of viable real estate loans.
“Several bankers commented that they were being treated like they had a portfolio full of subprime mortgages, even though they had no subprime loans on their books,” Cloutier testified. “Community bankers are saying that the field examiners are overzealous and unduly overreaching and are, in some cases, second guessing bankers and professional independent appraisers.”
ICBA is recommending the federal government take several steps to enhance lending to small businesses, including maintaining a diverse array of Small Business Administration program lending options.
“Are there things in the bills we don”™t like? Sure. No legislation is perfect,” Cloutier said. “We strongly oppose the single regulator approach in the Senate proposal. And we have no use for a new national bureaucracy (Consumer Finance Protection Agency) dedicated to protecting consumers from financial abuses when there are already adequate safeguards in place.”
