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To the editor,
I applaud Gary Bigler of Bremer Bank for trying to reassure the people of International Falls that the U.S. banking system is safe and the people of International Falls hadn’t need to worry.
I ask myself after having read Gary’s letter to the editor, “What has prompted this action?” If it is the state of the U.S. national economy and the failing U.S. investment banks, then Gary could let us know if Bremer has any CDO (Collateralized Debt Obligations) exposure.
We’d all like to believe, and economic development depends upon local banks being strong and safe institutions. It is good to be an advocate of this if the institution you represent is such the case. But at the same time if your institution has tied itself into the CDO fiasco, then your local banking institution has the same exposure as the rest of the banks that let their financial engineers, hungry for fast profits, risk their once reputable names.
If Bremer hasn’t exposed themselves to these risks, Gary and the rest of his affiliates at Bremer deserve a pat on the back and should be rewarded with people’s trust and their money. On the other hand, if Bremer and its partners have exposed themselves to these risks, then the local branch of Bremer is being less than upfront. No matter how strong the local branch’s lending practices are, if you are part of a regional/national banking conglomerate, the local branch is only as strong as their national lending philosophy.
Gary’s assessment of what role the FDIC (Federal Deposit Insurance Corporation) is to play is correct, but one certainly needs to wonder, does the FDIC’s funding have the same exposure that the Canadian banks were exposed to? Remember, they were also insured. One needs to remember what insurance is meant to do. Insurance funding capital is out there working in the economy and there is no one who can tell you the risk these dollars have been encumbered to. Hence, the tight capital markets the past six months.
Merrill Lynch, Wachovia, City Group, and UBS are bleeding billions due to the CDO exposure. The Canadian economy almost failed last summer as four of the five major Canadian banks followed their U.S. counterparts into the CDO market.
Every financial report in print in the last six months warns there is still plenty of bleeding to be done by those banks that thought just because they were insured they could invest their client’s funds into basically “illiquid securities” that have now been given junk bond classifications by all the major rating agencies.
International Falls is unique having two private banks plus two regional/national banks. The community needs all of them providing safety to their depositors and dollar injections into the local economy. With the advent of global banking, which is what we have today, I believe one local bank’s views of safety and liquidity tends to get a little too simplistic.
Bruce LaVigne
International Falls