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Despite national economy local businesses ready to lend
By ALEX WUKMAN
For the last month the national news has been almost exclusively about alliterative economic problems, from the Bailout Bill to the Credit Crunch cable and network news shows have hammered home the point that the U.S. is in recession. A baker’s dozen of giants in the finance industry have gone under, GMAC has said that it may halt financing to some dealers and the national news shows consistently state that people may find it harder to get loans for new cars, trucks, boats and homes.
However, here in East Texas things are a little different. “Wall Street Banks and Main Street Banks have little in common when it comes to these matters,” said Jay Estes, a Vice President at People’s State Bank in San Jacinto County. Estes explained that since his bank has a conservative outlook they aren’t going to go under and their customers’ money is still safe.
Estes also stated that People’s State, like the majority of the banks in the area, is still making loans. “We’re still lending money to qualified customers. There has been no change in our policies from [those of] six months to one year ago,” said Estes.
He also stated that his bank feels that since they are small bank without much debt on their books they feel they are perfectly positioned for the current economic climate. “We look at this as an opportunity since the mega-banks may be restricted,” said Estes.
The Conference Board, a private research group, issued the latest consumer confidence index on October 28. The report, which surveyed 5,000 households nation wide, found that consumer confidence had dropped almost 30 points in a month.
Despite the collapse of Lehman Bros. and the government bailout of AIG in September consumer confidence was at 61.4; a month later it was down to 38, a record low. Part of the drop is due to spreading beliefs that the job market will tighten and business conditions will worsen in the next six months.
Another factor in the drop is the belief held by many people that even if they wanted to, they couldn’t get credit; which is a perception that isn’t true anymore. “Loan applications are down over 50 percent but the approval rate is up that much or more,” said Buck Anderson owner of the Anderson Ford-Mercury dealership in Cleveland.
Oscar Mena, Anderson Ford’s Finance Director, feels that the downturn in loan applications is directly tied to public perception. “Because people think they can’t get loans they don’t come to dealerships,” said Mena.
Anderson went on to say that despite the economic troubles playing out across the evening news, many banks and finance companies have expanded their lending criteria. “We have the representative from Ford Motor Credit in here every week and he’s asking for the loans he would have passed on a year ago,” said Anderson.
Mena stated that it’s not just Ford Motor Credit that’s opening up their lending criteria; it’s almost all of the banks and companies he deals with. “As soon as I finish sending an application I’m getting responses. Why, because they [the banks] want to lend,” said Mena.
Anderson and Mena went on to say that recently they have seen loans that wouldn’t have been approved a year ago get approved in fifteen minutes or less with low interest rates. “We’ve got some people approved that never thought they would get approved,” said Mena.
Part of the expansion is simply just the nature of business. “People forget that the supply and demand laws apply to banks as well,” said Anderson.
And since fewer and fewer people are looking to finance a car the financial institutions have to hold on to their money longer and longer. “If the banks don’t lend the money they have to pay interest on it, it’s like unsold inventory,” said Anderson.
However, here in East Texas things are a little different. “Wall Street Banks and Main Street Banks have little in common when it comes to these matters,” said Jay Estes, a Vice President at People’s State Bank in San Jacinto County. Estes explained that since his bank has a conservative outlook they aren’t going to go under and their customers’ money is still safe.
Estes also stated that People’s State, like the majority of the banks in the area, is still making loans. “We’re still lending money to qualified customers. There has been no change in our policies from [those of] six months to one year ago,” said Estes.
He also stated that his bank feels that since they are small bank without much debt on their books they feel they are perfectly positioned for the current economic climate. “We look at this as an opportunity since the mega-banks may be restricted,” said Estes.
The Conference Board, a private research group, issued the latest consumer confidence index on October 28. The report, which surveyed 5,000 households nation wide, found that consumer confidence had dropped almost 30 points in a month.
Despite the collapse of Lehman Bros. and the government bailout of AIG in September consumer confidence was at 61.4; a month later it was down to 38, a record low. Part of the drop is due to spreading beliefs that the job market will tighten and business conditions will worsen in the next six months.
Another factor in the drop is the belief held by many people that even if they wanted to, they couldn’t get credit; which is a perception that isn’t true anymore. “Loan applications are down over 50 percent but the approval rate is up that much or more,” said Buck Anderson owner of the Anderson Ford-Mercury dealership in Cleveland.
Oscar Mena, Anderson Ford’s Finance Director, feels that the downturn in loan applications is directly tied to public perception. “Because people think they can’t get loans they don’t come to dealerships,” said Mena.
Anderson went on to say that despite the economic troubles playing out across the evening news, many banks and finance companies have expanded their lending criteria. “We have the representative from Ford Motor Credit in here every week and he’s asking for the loans he would have passed on a year ago,” said Anderson.
Mena stated that it’s not just Ford Motor Credit that’s opening up their lending criteria; it’s almost all of the banks and companies he deals with. “As soon as I finish sending an application I’m getting responses. Why, because they [the banks] want to lend,” said Mena.
Anderson and Mena went on to say that recently they have seen loans that wouldn’t have been approved a year ago get approved in fifteen minutes or less with low interest rates. “We’ve got some people approved that never thought they would get approved,” said Mena.
Part of the expansion is simply just the nature of business. “People forget that the supply and demand laws apply to banks as well,” said Anderson.
And since fewer and fewer people are looking to finance a car the financial institutions have to hold on to their money longer and longer. “If the banks don’t lend the money they have to pay interest on it, it’s like unsold inventory,” said Anderson.
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