NEWS - Banking & Finance

By Lou Phelps

Sept 12, 2011 – Four weeks ago, on Aug. 16, the U.S. House Subcommittee on Financial Institutions and Consumer Credit held what they termed a “field hearing’ in Newnan, GA to look at the banking crisis in Georgia where 67 banks have failed since 2008.  Georgia leads the U.S. in bank failures despite the heralded real estate crises in larger states including Florida, Arizona and Nevada.

Two Georgia Congressmen have questioned whether all of the banks should have been shut down, and asked that federal regulators looked at whether strained relationships with some bank examiners have contributed to some of the closings.

U.S. Rep. Lynn Westmoreland, a member of the Subcommittee, told the Associated Press that she, “wondered whether strict regulations created more failures.”

The hearing was entitled, "Potential Mixed Messages: Is Guidance from Washington Being Implemented by Federal Bank Examiners?" and featured a long list of witnesses. 

Several key leaders of the FDIC testified as did Gil Barker, Southeast District Deputy Comptroller, Office of the Comptroller of the Currency and Kevin M. Bertsch, Associate Director, The Board of Governors of the Federal Reserve System. 

And then, local Georgia bankers were heard from including Chuck Copeland, CEO, First National Bank of Griffin; Michael Rossetti, President, Ravin Homes; Jim Edwards, CEO, United Bank, and Gary Fox, Former CEO, Bartow County Bank

In their testimony, the Georgia bank executives complained of difficult relations with regulators, according to Subcommittee documents.

The FDIC regulators defended their policies, and said that the FDIC had brought stability to the banking system by quickly resolving problems with failed banks while saving the financial system billions of dollars, according to Christopher Spoth, an FDIC official.

The Georgia bank officials complained that bank examiners are now "nitpicking," but acknowledged that abuses and poor practices have definitely occured.  Because they've improved their practices, they are looking for a better understanding of their efforts to survive and reform by State and Federal examiners...was a recurring theme.

However, U.S. Rep. Spencer Bachus of Alabama, a member of the Subcommittee, called Georgia "ground zero" for the banking crisis, and said that he believed that Georgia's banks were too eager to make construction loans in the mid-2000s when the state's economy was booming and real estate prices were on the rise. "Not many expected the housing collapse," he said.

Georgia state banking regulators were also blamed. They “relaxed strick standards” as far back as the 1990’s, acknowledged Gary Fox, the former chief executive of Bartow County Bank which failed in April 2011. He said that it became too easy to get a bank charter in Georgia going back to the 1990's.  The dramatic increase in the number of community banks led to competition and the need to build market share.    

Both Westmoreland and U.S. Rep. David Scott, D-Georgia, from Macon are supporting legislation that calls for a review of the FDIC aimed at investigating whether regulators are hampering rather than helping the economic recovery of the financial industry. The measure passed the House and is now pending in the Senate, according to the Associated Press.

Scott  is also a member of the Subcommittee.