Published: September 30, 2008 08:39 pm      

Local financial experts say Pulaski economy OK — for now

Somerset — It’s not surprising that Pulaski Countians are alarmed by news of the U.S. House rejecting a $700 billion bailout of the nation’s troubled financial institutions. Local investment specialists have reported phones ringing off the hook with individuals concerned about the status of their money.

Local banks, however, are seeking to reassure customers that they have plenty of money for loans. They aren’t the credit giants that are undergoing such problems right now.

“The effects of not voting on the bill are more on a national level,” said Don Bloomer, president and CEO of Citizens National Bank. “As a community bank located in Pulaski County, we’ve been immune to a lot of the issues throughout the nation.”

Bloomer said Citizen National Bank’s equity capital ratio is at 11 percent, one of the strongest rates in the nation.

“People are looking for safety and soundness, and as a community bank, that’s how we conduct business,” said Bloomer. “We have been answering a lot of questions in regards to FDIC (Federal Deposit Insurance Corporation) and working with customers to reassure them on the soundness of the institution.”

Leroy Bratcher, the market president of Forcht Bank in Somerset, also stated that his bank remains sound.

“There is a difference in the mode of business being done,” Bratcher said.

While the failure of credit giants like Washington Mutual and Bank of America have shaken the confidence of some Americans, Bratcher said small community banks are immune to the turmoil at the moment because the money is kept local.

“We make local deposits and we collect local loans,” Bratcher said.

Cumberland Security Bank CEO Mike Simpson said he was disappointed that the House of Representatives nixed the bailout plan that would have allowed the government to buy bad mortgages and bad assets held by troubled financial institutions.

Simpson stated that the plan, which was defeated by a 228-205 vote, is necessary to ensure that Main Street, U.S.A., and American citizens are not directly impacted by the economic fallout.

“Community bankers across the nation have worked diligently to ensure the legislation contained safeguards and provisions that would bring meaningful and immediate relief to community banks and local communities,” Simpson stated in an e-mail sent to the Commonwealth Journal.

“Community banks did not cause this financial crisis but are determined to do everything possible to help return economic stability to our country and our communities,” Simpson continued.

“This bill was not just about Wall Street, it’s about helping Main Street and the people and towns throughout America.”

While the local banks are letting people know things are safe and sound here on the homefront, Chris Phillips, an economics instructor at Somerset Community College, says people might not want to get too comfy.

“Basically, it’s a credit crisis — loans, credit cards, a whole host of consumption items,” said Phillips. “In a worst case scenario, if the credit crisis gets bad enough, we could see a ripple effect with our local banks. There could be hiring freezes, unemployment could go up. It would be sort of a downward spiral until something could come in and put stop to it.”

Something like the proposed taxpayer bailout? Phillips says that right now, any answer would be foggy at best.

“I think any of the recognized economists would tell you they’re completely uncertain as to the overall impact,” said Phillips. “You spend $700 billion, you may recoup some funds or not, and the market lost $1.2 trillion (after hearing the news about the bailout vote), so it may not be a perfect plan, but what’s the fallout? It’s really unprecedented, so I don’t think anyone knows exactly what to do.”