Sunday, February 8, 2009

Small Free Market Banks In Texas Making Profits Without TARP Funds

Originally broken by Texas newspaper

In what should be the primary argument against Barack Obama's second allocation of TARP funds and all future bailouts to come, we find that smaller operating banks are not hit by the financial crisis and are instead turning some very good profits.

Some smaller, bailout-free banks boosted lending, sometimes dramatically, during the fourth quarter of 2008, in part of a marketing plan that works by drawing business away from larger institutions and it has paid off well for them.

“People are coming to us because they’re not able to finance what they want to do at their bank,” said Jim Sturgeon, chief executive of Founders Bank in Sugar Land Texas, which reported loan growth of 31 percent from the third quarter to the fourth.

Twelve Texas banks have accepted money under the Troubled Asset Relief Program so far, but none showed the double-digit loan growth of many smaller institutions like Founders, which has one location.

“The small community banks may be the ones that save the day,” said Dan Bass, managing director of Carson Medlin, a Houston investment bank. “Right now they’re seeing the best loans they’ve seen in years.”

While government officials have called on banks to lend more, many larger institutions are reporting declines in their loan business. Dallas-based Comerica, for example, received $2.3 billion in TARP money in late October, yet its outstanding loans fell by more than 2 percent in the fourth quarter. Other large bailout recipients, such as Bank of America, Citigroup and JP Morgan Chase, also reported declines in their latest financial statements.

So while the government may cram their scare tactics down our throats on how the world is going to end if we do not give them all of our paychecks to "stimulate" lending, we can clearly see that under free market principles, the fall of the bigger banks leaves the playing field wide open for smaller banks to become more competitive. This growth for the smaller banks will lead stimulate the economy itself if given the time it needs. Instead the government would rather bail out the big guys and leave the little guys all alone out in right field, all the while screwing the consumer out of doing business with a competent and sound smaller company.

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