In the red

  • Jon Kelly
  • 2 Oct 08, 04:40 AM GMT

ST LOUIS, MO: In the last few days, the world's media - this blog included - has invited the American public to vent its anger against Wall Street.

But as the US Senate voted on the hugely unpopular $700bn bailout, I wanted to hear the other side. Bankers are real people, too. It can't be nice when everyone's ganging up on you.

I didn't even have to travel to Manhattan to find any. St Louis, Missouri, is one of the major US financial services centres, with the industry employing some 81,700 people locally. And as luck would have it, a business expo was under way.

Joshua LewisSo I thought I'd wander along. Conference centres always make me feel uneasy - it might be their soulless air of functional anonymity, or something to do with the air conditioning - but the mood inside this one was especially subdued. It wasn't, after all, exactly a great time to be closing deals.

Still, it didn't take me long to find a banker keen to make his case. Joshua Lewis, 29, wasn't the flash New York yuppie of popular imagination.

A banker with Frontanec, a locally based finance house, he shared the same concerns with most working Americans I've encountered. With daughters aged two-and-a-half years and two months, he was anxious about the effect of the crisis on his family and his job.

For Joshua, though, the division of America into Main Street and Wall Street was a false one. You couldn't have one without the other, he believed.

"After being confronted with terrorism, natural disasters and the economic situation, Americans are feeling vulnerable for the first time," he told me.

"Wall Street and Main Street have always been intertwined. It just becomes more visible when a local bank can't finance your business because of what's happening on the markets."

Joshua was relieved that the Senate bill had passed: doing nothing, he said, would be "catastrophic". But not every financial professional I spoke to agreed

Larry FousieLarry Fousie, 38, was a financial adviser who specialised in building up investment portfolios. He was worried, too: customers were edgy at the moment, he said.

He understood as well as anyone that the country was entering a bear market. But he was bullish at the suggestion that only bankers were to blame.

"The blame does lie with the government for relaxing regulation, and with the banks for pushing sub-prime mortgages," he admitted.

"But it also lies with consumers who took out these loans because they wanted to keep up with the Joneses and ended up in houses they couldn't afford. People do have to take personal responsibility."

He wasn't happy with the bail-out. It was just be a sticking-plaster, he said, which failed to tackle the problems which caused the credit crunch in the first place.

All Larry knew was that he wouldn't be voting for Barack Obama. "He just doesn't have the experience. That's what we need right now."

An air of pessimism clung to the room like gel to a stockbroker's hair. But I did meet someone who was quietly confident she emerge unscathed.

Amanda KerleyAmanda Kerley, 27, worked for Community South - a modest Tennessee-based bank that specialised in loans to small businesses. It had so far avoided the turmoil faced by its grander rivals, she said.

Ultimately, she believed, Wall Street had been burned because it had been too remote from the reality of life in the heartlands.

"Of course I'm concerned - the same as everyone else," she said.

"But I think banks like this one understand what's going on in our communities better than those Wall Street do. And that's why we haven't been so badly hit."

For her sake, at least, I hoped she was right. If so, perhaps America's banking giants will return to small-town values after all.


  • Comment number 1.

    Here we again, the "smart" pretending to be "stupid" to gain sympathy.
    "But it also lies with consumers who took out these loans because they wanted to keep up with the Joneses and ended up in houses they couldn't afford. People do have to take personal responsibility"

    I am Asian, my grandfather always warned me to be wary of those with lots of money, they got to be pretty smart to have lots of cash.
    The bankers own the money,the bankers are the ones who have to use their brains to assess the credit-worthiness of the borrowers. It is the bankers who gave money away.

    If the bankers are more than happy to lend because of other factors besides the credit worthiness of the borrowers, e.g. meeting his loan prtfolio target or helping the derivatives boys find more sub-prime loans for re-packaging. Just so so!

    Stop whinging about being "conned" by sub-standard borrowers. Just go to Bangladesh and look at ther microfinancing experience.
    The less well-off will always be around for easy cash.

  • Comment number 2.

    Once again bankers are looking to blame everyone but themselves for the problem! Saying that people have to take responsibility for taking out mortgages they couldn't afford is typical - what they don't mention is that most of these loans were given to people at an initial very low interest rate, which suddenly went up after the 'honeymoon' period (usually about 2 years) - which usually wasn't fully explained to those unfortunates who were being told they COULD afford a house after all - just sign on the dotted line!
    A relative who used to work in the Canadian real estate business once told us that the bank which financed their mortgages worked the opposite way round to most - they did a full income/expenditure assessment, and then based the mortgage they offered on the amount you could afford to pay. As a result, they had a very low rate of default!
    Isn't it about time the housing and mortgage market was regulated to adopt this eminently sensible approach?

  • Comment number 3.

    Apportioning blame is so unhelpful My biggest concern is that we will recover from this present crisis, and I am sue we will. Then it will eventually return to the way it was before, lessons will be soon forgotten. We have been here befor have we not?

  • Comment number 4.

    Bankers and Banking companies must accept that this is their responsibility or we will end up in this mess again in the future. They were naive enough or stupid to believe that big paychecks, the bonus culture and short term targets were all they needed to worry about while ignoring the viability and sustainability of a long term banking industry. Unfortunately they are taking the rest of us down with them so no crocodile tears from me!!

  • Comment number 5.

    From the way consumers seem to apportion all blame to the 'evil bankers' one would think that banks had been lending money to robots or infants! The supposed advantage of being human beings is that we are capable of rational thought - that means we are presented with a scenario and we are capable of assessing the pros and cons in order to decide FOR OURSELVES what the best alternative is. To butcher the old adage - if your banker told you that you could survive a 100ft fall would you go jump off a building?!

    Similarly banks did screw up. The credit checking process broke down the day assumptions for future house price growth were factored into the equation. The simple fact is half those people could not afford the repayments and should never, ever, have been offered mortgages.

    Finally why do you media commentators ignore the role of politicians in this mess? 18months ago governments were lauding the boom in home-ownership rates and encouraging banks to offer products that allowed even more credit-unworthy customers to buy-in. Politicians created a regulatory framework in which banks were rewarded for pushing these subprime mortgages and therefore must accept some of the blame. That is like taking a kid into a candy store and telling them sugar is healthy - clearly a lie, but you cant blame them entirely for the resultant cavaties!

    With attitudes like those posted above the simple answer is: 'no - we will not learn lessons, and history will repeat itself'. Individuals must learn that politicians are there for themselves, not their constituents; banks are there (like every other business) to make money not friends; and that consumers have been given a brain - time to start using it!

  • Comment number 6.

    In terms of the "it's the fault of those taking out the loans" this is just the same old passing off of blame from one side to another - the reality to me is that there isn't a simple black and white position on who is to blame, lots of people are and they should start to think about being responsible for the situation and not trying to make themselves out to be the victims.

    Sure some people shouldn't have taken out the loans but as others have said they were being hooked in to take out these loans by some pretty aggressive (and successful) marketing ploys. In my experience you can't go to a bank and force them to give you money - they have to want to give out the money, if they give to people who they now say should never have asked for it then surely they have to accept responsibility for doing so. Likewise some responsibility has to lie with the individuals who asked for money which they could not really afford to have, but I have a bit more sympathy for them as a lot of them were being persuaded by the banks to borrow - just look at all the ads that were about telling us to get consolidation loans, buy now and pay later, cheap credit etc...

    Banks thought they could make money by loaning out money to these markets, they packaged off the loans and swirled them around the system in "sophisticated packages" and thought they had passed off the risk. They were wrong - they hadn't invented some new wonderful risk free world, they didn't understand the risk, as soon as the ability to pay started to reduce and defaults started to happen the whole deck of cards started to fall in.

    In any other business the companies would have to live and die by their actions but because the impact of financial institutions failing and the wider knock-on to the "real" economy the banks need to be bailed out - however unpalatable this is. That has to be the short term focus - the longer term focus must be to curb the excesses that caused this and to ensure that there is no longer a sector of the economy (banking) that milks the good times and keeps the rewards for themselves then in bad times passes the hat around and expects everyone to bail them out.

  • Comment number 7.

    Welcome to St. Louis, Jon. We're glad to have you here :-)

  • Comment number 8.

    I dont think it is soley a problem from the USA .
    The world is out of kilter , with a large majority of the world population surviving on a few dollars a day most of the greedy western consumers need to take a hard look at themselves , they think they are poor if they cant afford a plasma t.v.
    Get real , with food- water and energy becoming more scarce the "credit crunch "is the least of our problems , the west has got greedier and greedier over the last hudered years but this meltdown will be the first of many catasprophies to come .
    A new world order with a severe re-evaluation of what is important needs to undertaken

  • Comment number 9.

    How long as Americans are we going to wallow in the "who's to blame?" mentality?
    Honestly, this is the question people in my small Missouri community are asking. On a daily basis, in stores, on sidewalks, at the post office, people in my area are making it a priority to get information about what we can all do to help our families (and learn from this whole mess) in order to get going forward again.

    Main Street is being affected by Wall Street's problem, and our job now is to get about the task of doing what we can to help our families on individual levels. And there ARE things that as rationally thinking individuals we CAN do. These are a few topics being spoken the loudest where I live.

    #1: Your credit score is absolutely everything right now. If you don't know what your number is, find out ASAP. The top priority in any family should be to get that number as high as possible.

    #2: Pay off your debt (credit cards, car loans, all of those high-tech toys and shiny-faced appliances that offered no financing for a year that we couldn't resist). No matter how small you can afford as a payment toward debt, pay what you can and don't stop chipping away.

    #3: Realize that insurance companies are currently---RIGHT NOW---polling credit scores of customers. My car insurance company is currently doing a sweep, checking credit of all its customers and if your credit score is low your rates WILL increase.

    #4: Put away the credit card---remember when our parents taught us "only for emergencies"? Well, they were right and it's time to employ that concept ASAP.
    Pay off credit card balances, no matter how long this takes we have to do it. In this economic climate, monthly balance roll-over customers are ripe to be picked for interest rate increases.
    You think you can't afford to live without a credit card? You can't afford to touch it if you carry high balances and your car insurance rates increase because of negative credit scores.

    #5: Pay cash and save cash.
    For how long have we been told that it's stupid to keep money in the bank (in low interest saving accounts) and that our money should be invested properly.
    Well, many of us took that to extreme, meaning that living on easy, fast credit gave us no reason at all to have any cash on hand. I'll take that further and say that being comfortable with investments has given us the excuse to buy even more newer and shinier things on credit, not realizing that the debt load one day began to exceed the investment load. Investments are good, but when the market falls, so does the value of your investments, making your debt value affect your credit score...etc.

    How many have "rainy day" money available in PHYSICAL dollar bills?
    How many of us have that 3-6 months worth of income tucked away in case of emergency, as money experts have been advising for well over a decade? It's time to start, and for many of us it's time to learn how.

    For those who already make economically smart moves for their families, kudos to you.
    For the rest of us, we need to get busy, get over the blame, realize it's too late to stop what is trickling through "Main Street" and begin pro-actively to protect our families through financial intelligence.

    I'm not attempting to patronize. These are topics that people in my city and neighborhood are talking about DAILY. You can't go from one place to the next without getting caught up in the conversation.
    The positive thing, however, is that people around here are beginning to form good, solid plans for their families' futures.

    The blame game could potentially go on forever. Being aware of the problems and seeking solutions to fix them/avoid a repeat is essential. But standing in the middle of the street, twirling in crazy circles screaming "the sky is falling and it's all YOUR fault" isn't going to put food on the family table.

  • Comment number 10.

    It's generally the people who are responsible who want to avoid the "blame game." Fousie recognizes that deregulation is at the root of the problem, yet rationalizes continued support for the Republicans, whose philosophy of deregulation got us into this mess.

  • Comment number 11.

    Yes, many people did take out sub-prime mortgages, but it was because they trusted the housing professionals they were dealing with and for the most part were unaware they were considered sub-prime borrowers.

    The entire housing market, from the Realtors to the mortgage lenders, are paid on commission and therefore want to put people into the most expensive homes they can con...err...persuade the buyer to purchase. When I bought my home the first Realtor I used refused to let me talk with a mortgage broker to determine how much I could actually afford, instead telling me that with creative financing they could get me into anything I wanted. Adjustable rate mortgages, home equity loans when the value of the house increased "in just six months", (assumed) pay raises at work, second mortgages and getting new credit cards were all part of the creative financing I was told about. However, when I finally did find a Realtor who let me discuss with a broker the what size standard 30 year mortgage I could truly afford it was for a house half the price of what had been constantly shown me by all the other Realtors - and told I could afford.

    And yes, my home did increase in value quickly, but IMO much of the increase in my homes value came not from normal appreciation, but from the politicians "no new taxes" pledge. They didn't raise my property taxes, they raised the tax appraisal instead and in just a few years my home had nearly doubled in "value" - and my property taxes were as high, if not higher, than a raise in in taxes would have been. If I had taken out a creative financing package I would have had to sell my home when the expenses became too much to maintain giving the Realtors and mortgage brokers another, and bigger, commission. Unfortunately this worked only as long as the home values could be forced higher. Now many people can no longer pay off their mortgages with what they can sell the house for. And the people who a year ago were saying "Trust me, I'm a housing expert and you CAN afford this" are now saying "It's all the borrowers fault for accepting mortgages they could not afford"

    For those of you wondering why I didn't buy into the creative financing that so many others did I must confess to several unfair advantages; the family black sheep. The used car salesman who taught me to never trust a salesperson on commission, even a relative. The spendthrift who if they repayed one relative it was by borrowing from two others taught me to dislike debt and live within my means. But most importantly is the one who gave me an insight into what it looks like when grifters are setting up a mark for a con.

    Proud Pagan

    P.S. "You can not cheat an honest man." is the biggest con of all. Bogus charities that never intend to disburse any of the monies they raise is just one example of honest people being conned.

  • Comment number 12.

    It's not a blame game. The money and credit are there if you have the deposit, have the credit history and are able to pay the money back.

    It, the bailout is for the wealthy, not the rich being those who earn money, the earners will be taxed into middle class qand the middle class will be poor.

    This is 'A George Bush' tax on your wallet. He has over extended the country, needs that money now to save his legacey, not us. You must realize our money is based against the GNP, lower GNP with increased cash printed lowers the value of our dollar by up to 25%,.. quickly.

    My retirement and Social Security won't be worth a loaf of bread with hyperinflationary spending by our Government.... and I'm a republican that calls GW the best Democrat in this century. :)

  • Comment number 13.

    Hey Larry--your man McCain showed absolutely NO leadership in the past 2 weeks, while Obama showed plenty.

    And as for bankers, I hold a WaMu credit card, yet the news is full of the executive who got millions for 3 weeks' work. I will stick with my local banker (who did not fall for the subprime mess) and anyone in the "financial services" who loses their job--if you lie with dogs your gonna get fleas

  • Comment number 14.

    Yes, bankers made some bad loans, there is lots of greed out there, but the blame game is always a day late and a dollar short.

    Let's work to take the best route to fix this mess.

  • Comment number 15.

    As a customer of a small-town, conservative community bank, a few observations:

    1. In our county, if the bank screws someone over, it becomes common knowledge within a month or so. If they keep on screwing customers, they find themselves out of business. A large regional bank moved in here, trying to run our lives from Birmingham, Alabama--and four years later, they sold all their local operations for any cash they scrape from the ashes. No one would bank with them, or even work for them!

    If they melt down, fine by me, they earned their extinction!

    2. And, conversely, if a customer screws the local banker over, it's common knowledge soon enough. Everyone here shops in the local groceries, goes to church together, puts their kids through the same schools, sits in the stands at the high school get the picture.

    3. New Yorkers and their minions in places like Washington think we are just stupid hicks, and there some among us, to be sure.
    They marketed cheap money endlessly and aggressively, and seemed shocked, yea verily stunned and indignant that people actually bought their products! Hmm...isn't the First Rule of Sales not to sell something to the customer that he can't afford, or would be injurious to his well-being? That's what I was taught, out here amongst the hillbillies and hayseeds.

    4. And as for the politicians, especially characters like Barney Frank--well, the words I want to use could never be posted here!

    No bailout, no way. I pray the the Thin Red Line of House Republicans stands fast against this horrible, immoral attempt to hijack our lives.

  • Comment number 16.

    The bankers......the little local guy at the office giving you a loan, has nothing to do with this and generally has no idea what a mortgage backed security is. No, this debacle arises from the Wall Street geniuses and SEC patsies who will throw anything, old shoes, tires, that bit of lint from under the couch, into an "investment pool", slap some sort of "promise" of a "rate of return" on it, and then sell it to silly "investors" who never grew tired of trading Pokemon cards but now live in the "grown up" world. There is something a-moral about treating home loans and student loans this way, but hey, who cares as long as the big guy makes a buck.

  • Comment number 17.

    Hello there, Can any one suggest some good websites that can assist in finding a good rate for auto insurance? I have found a great website that has helped me find an incredible rate,
    they give you the best rates from lots of local providers


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