No bailout money for you, community banks!

Too Small to Fail – Phillip Longman & T. A. Frank

One reason community banks are doing so well right now is simply that they never became too clever for their own good. When other lenders, including underregulated giants like Ameriquest and Countrywide, started peddling ugly subprime mortgages, community banks stayed away. Banking regulations prevented them from taking on the kind of debt ratios assumed by their competitors, and ties to their customers and community ensured that predatory loans were out of the question. Broadway Federal, for its part, got out of single-family mortgages when they stopped making sense. “A borrower comes and asks, ‘Do you do interest-only, no-down-payment, option ARMs?’

This is a really nicely done article, because it makes it clear that a lot of people weren’t lemmings. It’s just that the lemmings swamped the sane folks’ market share. And of course the perfectly solvent people are now going to pay along with the crooks, both as taxpayers responsible for the bailout and as collateral damage when enterprises that used to be perfectly healthy get caught in the recession.

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