Thursday, October 2, 2008

Credit Crisis? What Credit Crisis?

I keep hearing the media going on and on about how credit has dried up and loans aren't available for anyone, anywhere. That may be true in New York, Washington DC, and maybe host of other large cities throughout the nation. But it doesn't seem to be the case outside the big cities.

Most of the banks in smaller cities and outlying towns haven't seen the problems the bigger banks have been suffering. That's certainly true here in New Hampshire where local banks have reported they're not having any problems in regard to liquidity or providing credit.

As the national media continues to focus on what it is calling a credit crisis in the United States, local banks — which continue to lend money and grow their loan portfolios — are asking "what credit crisis?"

Neither Mark Primeau, president of Laconia Savings Bank, nor Sam Laverack, executive vice president of Meredith Village Savings Bank, denies that there is a problem on Wall Street — which Congress is currently attempting to fix through a $700 billion bailout.

But as they've been saying for weeks, Primeau and Laverack on Tuesday again stressed that "Main Street" banks are doing just fine, both in New Hampshire and especially here in the Lakes Region.

Those opinions are shared by New Hampshire Banking Commissioner Peter Hildreth, who pronounced that Granite State financial institutions are "safe and sound."

"When I talk to bankers and credit union folks, I hear a lot of them have been writing a record number of loans," said Hildreth, who is a Laconia native. "They're filling the voids left by some folks, the ones who caused the problems."

The local banks learned the lesson of overreaching themselves back in the early 1990's.

Back then the economy went into recession and the hot housing market collapsed, leading to the failure of five major New Hampshire banks when mortgages went unpaid and foreclosures were far more common than sales. During the housing boom, mortgages were seemingly handed out much like toilet paper by a bathroom attendant, and people were buying grossly overpriced houses and condos. When the recession hit, a lot of people with big mortgages, or even worse, were upside down on their mortgages, handed the keys to the bank and said “Good luck!” At its worse, some real estate values fell 60%, and the foreclosure rate climbed. During that time it wasn't uncommon to see twenty pages of foreclosure auctions in the Thrusday edition of the statewide newspaper. At one one point the Resolution Trust Company had over $1.3 billion (in 1992 dollars) of New Hampshire real estate to dispose of. They had to auction them off a few at a time, otherwise the already bad real estate market would have ceased to exist.

This time the local banks weren't so foolish. They didn't offer mortgages for 120% of the value of the home, didn't give sub-prime or interest-only mortgages, made sure the people applying for loans actually had the ability to pay them back, and very few, if any, borrowed money from Fannie Mae or Freddie Mac in order to finance risky mortgages. In other words, they didn't gamble with their depositors' money.

It's not just here that's seeing plenty of credit available to borrowers. In this report from NPR, the local bank in Floyd County, Virginia is in the same condition as the banks around here, having been very conservative with their depositors' money. They didn't fall into the trap that pushed so many larger banks to the brink and beyond.

To prove the credit crisis and the status of the economy is being overblown by the MSM, and Nancy Pelosi's claim the economy is the worst shape than during the Clinton Administration, Bob Krumm put their claims to the test and found they must be talking about some other country. (H/T Instapundit)

To test Nancy Pelosi’s hypothesis that after eight years of President Bush the economy is in far worse shape than it was under President Clinton at a time of “budget surpluses,” I went to Lending Tree to see what kind of mortgage terms I could get to buy my first home today.

So what kind of offer did I get today in the midst of this horrible financial crisis? I got four offers, the lowest of which was a 15-year fixed-rate VA mortgage of 6.0%, zero points and zero down, yielding a monthly payment of $948.20. Yes, that’s right, as bad as everyone says the economy is today, I can get the same mortgage as I had twelve years ago for about $250 a month less than I was paying 12 years ago in the midst of a “great” economy.

First, he was able to find a mortgage with little problem. Second, it was with better terms than his original mortgage 12 years ago. Hmm. That doesn't sound like a credit crisis or bad economy to me. But then, I'm not an economist or a member of the MSM, so what do I know?

Obviously, a lot more than they do.

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