‘Ring of Death’ Throttles Georgia as Small Banks Close: Economy
By Steve Matthews Mar 19, 2014 9:04 AM ET
Georgia homebuilder Blankenship Homes lost its source of loans for new construction after four local community banks failed since 2009.
“The economy just shut down,” said owner Johnny Blankenship, 54, a builder for more than 30 years in Douglasville, 20 miles west of Atlanta. “We are just starting back to do a few homes. The economy is still very, very slow.”
While the Federal Reserve and U.S. Treasury rescued major banks amid the 2008 financial crisis to avert a meltdown of the nation’s financial system, the bailouts didn’t prevent the collapse of about 500 small lenders. Their disappearance, part of a syndrome of economic weakness, still weighs on growth and employment in dozens of counties across the U.S.
“It will be difficult to fill the void left by failing small banks,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Small bank failures matter a lot to the communities in which they operate, especially in non-urban areas. Small banks are key to small businesses.”
Counties that experienced bank failures from 2008 to 2010 saw income growth reduced as much as 1.43 percent, job growth cut as much as 0.5 percentage point and poverty rise as much as 1.4 percent in the following year, Fed economist John Kandrac reported in research presented last October at a community banking conference at the Federal Reserve Bank of St. Louis.
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http://www.bloomberg.com/news/2014-03-19/-ring-of-death-throttles-georgia-as-banks-too-small-to-save.html
