Bank chiefs offer insights into recession

Michael Quinn bought his first house in 1988, “the year the stock market took a nose dive.” But Rhinebeck Savings Bank’s president and CEO didn’t buy the home as an investment: “I bought it to live in, which is what most Americans do.”

It’s an old-fashioned way of looking at housing and mortgages that has held sway regionally and that, in the wake of the national subprime mess, is proving both prescient and prosperous.

The easy money that flowed into hands of risky borrowers on a national level is now dust in the wind. Which begs the question, How are local banks faring?

Hudson Valley’s small commercial and residential banks have conducted business the way they always did, despite the lure of easy money.

“You just don’t take money that belongs to your customers and lend it to someone on a hunch they’ll pay you back,” said a chorus of bank chiefs across the region. And that philosophy, said Quinn, is what helped keep the region more stable than other parts of the country. “We stuck to our tried-and-true methods. We may have lost some customers, but we are still here doing business and are solid.

“If anything good’s come from this terrible recession,” he said, “it’s that Americans have learned that having everything immediately is not necessarily a good thing. We’d become an ‘I have to have that now’ society, and look where it’s gotten us. Hopefully, we are going to get back to basics as a result.”

Quinn’s bank, and most others in the Hudson Valley, did not take TARP (Troubled Asset Relief Program) funding, so returning the money to the federal government isn’t a problem. Right now, said Quinn and fellow CEOs, helping customers get through the financial crisis – whether they are commercial or residential customers – is the No. 1 focus.

“I can’t stress enough how important it is for customers to go to their lenders the minute they start to see financial difficulty,” Quinn said. “Some wait until they are over their heads. Some problems are solvable; others are not. But I know most of my peers agree: Contact your bank immediately. The longer you wait, the more it will hurt and the possibility of helping turn it around becomes more and more remote.”

For people who have watched 401(k)s dwindle, “there are delinquencies in all portfolios, which goes hand in hand in a recession,” said Quinn. “For our part, we have not had a foreclosure for 15 years; this year, we’ve had three. While that in itself is not monumental, we are paying close attention to what’s happening. It is especially disturbing to see those who have had good credit histories and good jobs become unemployed and are now at risk. We are doing our best to help them.”

The upshot of the downturn, according to Quinn: “We are seeing a return to the old ways – people saving for things they want. People buying homes to live in, not as investments. So, if your home is not worth what they said it was a year ago, the market will come back. The key is to remember you bought it to live in, not as an investment.”
Quinn is not as optimistic as the economists, many of whom have said things will begin to turn for the better in the third quarter of this year. “I think it will be later than that – next year, or even 2011. Again, I don’t want to sound pessimistic, but I think it will be some time before there is a balance between supply and demand again.”
Quinn’s fellow bank executives also weighed in:

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