Macro Economics
Eulogy for a Small Town Bank

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By RayKinsella
May 12, 2009

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My great grandfather was under-sheriff of Miami County, Kansas, for many years. His family was well known in town, and well respected. Back then you traded in your town, there wasn't much traveling anyway, and you knew the business owners and law enforcement. There was a trust.
The family banked in Miami County Bank, which had been established in 1875. The Post Civil War United States left a lot of people with experiences of large boom and bust cycle, and Miami County Kansas was still reeling from the front lines of the Civil War. John Brown rose from Osawatomie and much of the bloodiest battles were fought in the area, which led to the term "bleeding Kansas." But I digress.

In 1875 a sound bank was important to the town. When you travel through the Great Plains it is very common to see the largest building in town by far is the bank, and it is usually an old, sturdy brick building. There's a lesson there. The literal brick and mortar of the building was built to last.

This bank withstood the depression. My grandfather earned his associates degree in Accounting and worked there throughout the depression. The experiences were hard earned, and he was a miser his entire life until he died in 1994, a millionaire.

My parents came of age in the 1970s. They traded at Miami County bank because they trusted it. Trust didn't come easy to them. They both grew up poor, and lived by cash, refusing to even use a checking account through my formative years. But they trusted that bank.

When I married I moved away, to get an education and make my way in the world. After I'd been away long enough, I returned to live near home due to work and family issues. We banked at several places, including Miami County bank, which at this point had expanded and opened a small handful of branches. I had friends who worked there and after four generations I trusted the bank.

March 20, 2009: TeamBank, N.A., Paola, KS was closed by the Office of the Comptroller of the Currency. The Federal Deposit Insurance Corporation (FDIC) was named Receiver. They had failed the stress test. There was no bailout for a small town bank. Those trillions of dollars were reserved for large institutions like BOA.
We were issued checks with the new name, Great Southern Bank. We were told not to worry - we would be kept whole.

Last week Great Southern Bank announced layoffs in the Paola, Kansas office. It seems a medium size regional bank has no need for two operational headquarters.
After nearly 134 years in business, this present darkness was too much for the small-town bank.

I have two points:
(1) The actions of the Federal Government, while working to protect depositors, is adding to the unemployment problem through consolidation. I know the bank should have worked to stay more liquid, but this bank was NOT more at risk than the large international banks that are receiving trillions in bailout money. Our government gets to pick and choose who survives.
(2) This time its different. The great depression and a dozen recessions did not kill this bank. A dangerous economic climate coupled with an activist government led to the seizing of a bank that was in no more eminent danger of folding than large banks that are being saved by borrowed bailout money.