A Small Town Loses It's Pillar: It's Only Bank

Story from The New York Times By SHAILA DEWAN Published: March 27, 2009 GIBSON, Ga. — With fewer than 3,000 residents, Glascock County is not big enough to have its own hospital, jail or Wal-Mart. But for more than 100 years, it had a bank — until late last Friday afternoon, when regulators arrived to shut it down. Neighbors quickly telephoned one another to break the news. Debit cards no longer worked. At Kitchens Grocery, Don Kitchens was suddenly unable to accept food stamps. Dan Peaster, of the two-year-old Peaster’s Home and Ranch Hardware, began to look for a new small-business loan. Elderly people, used to cruising over in their golf carts to make a deposit, fretted about driving 14 miles to the nearest bank. The town, population about 700, was disappointed, but also slightly dazzled by the “Notice of Taking Possession” signs and the armored car that ferried away the cash. “If you watched about three weeks ago on ‘60 Minutes,’ they showed a team going into a bank and taking control over it,” said Anthony Griswell, the county chairman. “It was identical to that.” Bank closings have become almost familiar in Georgia. Since the beginning of 2008, nine banks have failed in the state, more than in any other state, according to the Federal Deposit Insurance Corporation. But almost all the closings have been in the overbuilt Atlanta area, where the collapse of the real estate market hit particularly hard. To Glascock County residents, it now seems as if the crisis has extended a tentacle from Atlanta to their quiet community of farms and sawmills 120 miles to the east, where “sprawl” is something one does in the den after work. “It wasn’t the loans at this bank,” said J. H. Usry, 74, a retired hairstylist. “But we’re part of it, and that’s brought us down, too.” The Bank of Gibson was founded in 1905 and was owned for decades by the Griffin family. Residents remembered a time when there was no such thing as an account number, or when you could simply call “Mr. E. E.” — Erasmus Eggleston Griffin, or the son who took over for him, Erasmus Eggleston Griffin Jr., and get verbal approval for a loan. “There used to be a lot of banking done after hours over at our house,” said Lee Griffin, 47, a son of Erasmus Jr. “You don’t know how many phone calls we got from people who would say, ‘I just found a car.’ The answer was, ‘Go on and write the check and when the check comes in, we’ll do the paperwork.’ ” But in 2000, the Griffin heirs decided to sell the bank, a decision opposed by Lee Griffin and his brother, Skip (Erasmus Eggleston III), who worked at the bank. At the time, the bank had only about $11 million in assets, but it had a charter, and to lenders in a hurry to cash in on the expanding real estate market, that was its most attractive possession. The bank was bought by a mortgage lender in the Atlanta area, who changed the name to FirstCity and moved the headquarters to Stockbridge, an Atlanta suburb where 20 other banks have offices. FirstCity proceeded to focus on real estate, which ultimately made up more than 90 percent of its loans. Most of the bank’s money came from “brokered deposits,” investments obtained from third parties that shop around for the highest rates, rather than more reliable “core deposits,” which come from local customers. Of the bank’s three branches, where core deposits are typically made, the one in Glascock County had the most money. Glascock County residents did not particularly like the new bank’s style. Frankie Porter, the treasurer of the Gibson United Methodist Church, said she was taken aback when she tried to get a loan for a new roof for the fellowship hall, and was asked to put up collateral. “Before, I would have went in, signed a piece of paper and gotten the money,” Ms. Porter said. “They knew the background of all the people that are borrowing from when they were growing up. My mother had the same telephone number for 40 years. They knew who they were dealing with.” On Tuesday, Sheriff Dean Couch pointed to a white “FirstCity” banner above the door of the bank building in Gibson. “That was our downfall,” he said. The closing was particularly shocking because the F.D.I.C. was unable to find another institution to assume the deposits, which would have allowed debit cards to be honored and checks to be processed. Of the 48 banks that have failed nationwide since 2007, all but two have found buyers, said David Barr, an F.D.I.C. spokesman. But FirstCity’s financial situation was so weak that no one would agree to take it on. Instead, the F.D.I.C. had to issue checks to account holders. In Gibson, many people received theirs on Tuesday morning. Since no other bank had a branch in the county, two other banks had set up tables on East Main Street to entice the newly bankless. “It’s just a monumental headache this has caused,” said Ronald Humphrey, a retired teacher, who was worried that he would lose his satellite Internet service when it came time to pay the bill, which was supposed to be automatically deducted from his account. Mr. Humphrey said he had not had a bank himself until two or three years earlier, when he opened an account at FirstCity in recognition of the fact that, he said, “you have to have a way to shop on TV.” Social Security checks for depositors were sent to SunTrust Bank. But inside City Hall, a bewildered Viola Downs, 82, was listening with skepticism to repeated assurances about where her Social Security check would be deposited and where her money had gone. “They took it all out behind my back,” she said. Most people were sad to see the bank shut down, saying it was a big loss for a little town. But then there was Lee Griffin, who continued working for the new owners until 2006, and now drives a school bus [okay, what did he do with his share of the money from the sale of the bank stock? It had to have been considerable. And now he's driving a school bus????] Mr. Griffin was heartsick that the bank had closed, but he had disagreed with many of FirstCity’s policies. Didn’t he now feel a touch of, well — “Satisfaction?” he asked, finishing the question. “Glee? Joy? That maybe they weren’t as smart as they thought they were? Yes.” *********************************************************************** Yeah, and the "I told you so" mentality won't pay the bills in town now, will it, Mr. Griffin. We can point fingers all we want, but at the end of the day, the Wall Street melt-down courtesy of those dirty-rotten New York snakes affects ALL OF US, whether we like it or not. And we have to deal with it, whether we like it or not. Pretending that none of this is happening and that trillions of dollars in real cash value have not been flushed down the drain courtesy of the "best and the brightest," like some politicians would like us to do, is just not an option.

Why the Panic?

Admittedly my degree in economics was earned in 1980 - but I don't think the underlying principles of macro and micro-economics have changed much in the past 20+ years! So why is everyone panicking because the unemployment rate "surged" to 5.5% this month? Say what? When I was in undergrad an unemployment rate of 5% represented FULL employment - with only the "dregs" left over -- those who didn't want to work and those who didn't have the requisite skills to hold even a minimum wage job. People didn't start panicking until the unemployment rate started hitting 9%. It's been awhile, but I seem to recall unemployment rates approaching 10% in the United States during some past recessions. What a bunch of wimps we've turned into. Oh, the unemployment rate is 5.5% - quick, jump from the windows! Oh, gasoline is $4 a gallon - quick, jump from the windows! Oh, the Dow Industrial Average dropped almost 400 points today - quick jump from the windows! I think the real problem is two-fold; one is the mainstream media. They don't want to report real news (too much effort), so they focus on routine economic data and the sensationalist story of the day, and blow things all out of proportion. The other problem is that Americans have gotten used to the sound-bite and, for whatever reasons, they don't read anymore or take the time to analyze just what IS being reported as "news." I don't think kids study history in school anymore, and so they don't know that we've been there and done all of this before - over and over again! Hell, this country survived the Revolutionary War, the Civil War, two World Wars, the Great Depression, the Dust Bowl, immigration of millions from Ireland, Germany, the Baltics, Eastern Europe, Italy, Puerto Rico, Japan, etc. etc. as well as the stagflation of the '70's, the Oil Crisis (the first one), the Crash of '87, and the election of Bill Clinton (no fooling, some people thought that would trigger the end of the world as we know it). We've also managed to survive eight years of George Bush and his chums. Yeah, we're battered and tattered; "pundits" (just who annointed them as demigods, anyway?) moan about how unprepared America is to compete in the new world economy. Other people worry about the hungry encroaching "Brown Hordes" in Mexico, Central America and South America. But we've been there and done that before, too. We'll survive. So suck it up, people, and quit whining. Geez! You don't like $4 a gallon gas - try living in France or Germany and paying twice as much! You want to save a little money - try taking public transportation and walking your fat butts a couple of miles to and from the store lugging 25 pounds of groceries every few days. That's guaranteed to take off pounds and get your aerobic system back in shape. People in the US are the most obese in the world. That really says something about us, doesn't it - and it's not good. You don't like what's happening in the country, our fearful leaders who care more about feeding their pensions and their fully-funded health care plan than taking care of their constituents, then get out and vote, and quit thinking that a turn-out of 50% in a presidential election is a remarkable achievement. Oh gag, darlings!