WITH ALL the hullabaloo in the nation about a crisis in America’s banking system, the business wonks who fill the airwaves of cable and network news channels do not tell you the harsh, clear truth: the problem is not in our local banks. It is in those huge, multinational banks the government is constantly pouring billions of dollars into. Your local banks are doing their job, while the big bankers of Wall Street are picking your pocket.

Twenty years ago, the federal government could not wait to take over smaller banks and savings & loans across American. They quickly turned over the failed local institutions’ good assets to some big bank out of New York City. Small community banks were given the back of the government’s hand, while big banks in trouble got rescued. We heard the term “too big to fail” far too often.

IN THE late 1980s and early 1990s, the government bailed out big banks and let smaller banks go under. For the local banks, the standard was “let the free market take its toll.” But, as usual, for big banks it was socialism — welfare for the well-fed. Hometown investors nationwide saw their equity in their local bank disappear, as federal banking authorities sold off the good assets in those banks on sweetheart deals to big banks.

If there is one lesson history teaches us repeatedly, it is this: whichever big companies most need regulation are the companies that will end up running the federal government’s regulatory bodies assigned with the task of regulating them. Once they have effectively taken control of the government entities designed to regulate their industry, they use the power of government to gain advantage over smaller players in their markets.

LOCAL BANKS in America know this lesson all too well. They have to be lean and tough, and cannot expect Uncle Sam to bail them out. If they step out of line in the least, they have federal bank examiners breathing down their necks.

This time around, it is the smaller banks that are most sound, and the big banks that are in big trouble. Banks such as Gilmer National Bank and First National Bank of Gilmer have good ratings by groups which rate banks for their economic soundness. The local banks learned lessons from the failures of the late 1980s and early 1990s. They are tied to their communities, and that makes them less likely to become involved in truly speculative banking practices.

THE BIG banks went nuts during the past 10 or more years. They got involved in very speculative commercial paper transactions, and that means they are either holding paper that is less than its face value, or they have legal responsibility for large packages of debt that have gone bad. It’s Wall Street, not Main Street, where banks did not do their job. They got involved in making bets that should be found only in casinos, not in the banking system. Now they have to pay the price, but instead of their stockholders, directors and officers paying the price, they call on every American to fix their trillion dollar messes.

It ain’t right.

© 2009, Pappy Moore, All Rights Reserved.

Pappy Moore is a humorist, a native son of East Texas who still makes the piney woods his home.

oaktreefm58@hotmail.com

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