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Who Needs a Bailout? Definitely Not These Banks

They may be small but they can challenge the big guys in Wall Street.

If banks and auto companies are fighting over the $700 billion bailout fund, some banks are likely to change the trend in the industry. Two banks are resisting the bailout offers of the Treasury Department. They are less popular in the financial world and yes, they are small – so small that the media would have to mention their location right after their names. While this may be startling to some readers, these banks have been trying to gain public support with their decision not to participate in the Troubled Asset Relief Program (TARP).

The Evergreen Federal Bank in Grants Pass, Oregon has guaranteed that depositors are account-holders and they are considered the investors in the bank. Such arrangement won’t allow the Federal Reserve to offer them the TARP fund. In the words of the bank’s head, Brady Adams :

All the other banks in our area are owned by investors; and the purpose of those banks must be to maximize the value of the stock held by their investors. The management, and staff, of those banks work for the investors who own the bank. I don’t work for stock investors; I, and the staff, work for you. The thousands of you who have trusted Evergreen with your hard earned money are my boss.

Another bank in Maclean, Virginia shares the same view. The Chain Bridge Bank N.A. has published its balance sheet for September 2008 that indicates the institution’s strong financials and clean record. Interestingly, the bank has highlighted three assets namely Investments in Fannie Mae and Freddie Mac, Subprime and Alt A Loans, and Real Estate Owned Through Foreclosure. All three entries were valued with zero. At the bottom of the sheet, it takes pride in refusing any bailout package.

Both banks have tuned their efforts to communities where they can transact to small businesses and homeowners through personal banking. On the positive side, they can assure clients that they have adhered to ethical standards amidst loose regulation by the government during the subprime mortgage craze. Such behavior allowed them to ride out the recession storm and would secure them more customers who are now too careful to entrust their money just to anybody else. Second, these banks would likely fall on the “strong” list of banks that are weeded out from the bailout list. Therefore from the start, they are not eligible to receive support after all.

However, their decision can also be a detriment since the recession would likely continue next year. That would put them at risk since they are situated in small towns where middle-income dwellers are easily hit by the effects of unemployment and worsening home values. With fewer deposits and loans, they may still find themselves caught by the crisis eventually.

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