Results tagged “Bank” from Economic Alert

Who would have thought that a bank would actually refuse to take money. But sure enough, that's what Friendly Hills Bank in Whittier did this week.

They turned down a cool $1.6 million in Treasury bailout money that would have been used to buy up preferred stock in the bank.

Many banks have taken the billions available in government bank bailout money, of course. But here's one -- perhaps even the only one, though we're still checking --  to have applied for part of the billions available, and refused it once the government had approved it.

Officials seemed to shy away from saying it was a public relations coup. But I suspect it.

The word "government bailout" isn't exactly a marketing director's dream, even if your bank doesn't need the money.

Anyway, good for Friendly Hills. They can afford to refuse it. And in the end, that's got to make their customers feel good.

East West Bancorp, among the largest of community banks, reported third-quarter losses of $31.2 million on Tuesday.

But from the sound of things, it could have been a lot worse for the bank and its 70 branches.

Luckily for them, it sounds like they saw a crisis coming late last year, and took measures to review their loans.

Those loans weren't based on the "toxic," sub-prime mortgages that banks like the now-bankrupt IndyMac got into trouble with.

And even though East West was indirectly tied to the mortgage crisis through its own loans, which had gone to developers, they weren't completely immersed and ultimately brought down by the crisis, the bank's CEO Dominic Ng said. 

And since the bank did a 100% review of those loans earlier in the year and are taking action to unload them, including by selling off reposessed properties -- at an average of a 9% discount -- Ng can at least be more optimistic about the future.

And in this environment, that's probably saying a lot.

"We can't change the destiny of the world," Ng said. "But we can stay focused on what we can control."

That means pairing down costs, he said.

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Ng also brought up a common theme, which I hear everywhere these days, and which as a reporter has struck a note with me. It's the extent to which fear can affect an entire economy.

I asked him what the biggest lesson he has learned in this whole crisis was.

Here was his answer:

"The biggest lesson? That the market is very much affected by fear. All you need is a rumor going, everybody gets concerned...and it might cause a liquidity crunch in financial insititutions.

"Financial institutions better make sure they have plenty of liquidity to withstand that kind of fear."

Let's hope so.