Western Independent Banker - January/February 2009 - (Page 11)

By Richard Sprayregen Managing Liquidity and Funding During a Recession The Speed of Change Everything moves faster these days. The FDIC Web site indicates that no bank failures occurred in 2005 or 2006 and only three small banks failed in 2007. In 2008, there have been 16 bank failures through October 24, many of them most significant. The loss of credit availability, coupled with illiquidity, has caused the stock market to become a roller coaster ride, with continuing downward pressures on stock values. Just about every economist in the country has affi rmed the fact that we are in or on the edge of a worldwide recession. Historians will doubtlessly research the sequence of relevant events that led up to this point in time, and perhaps we will learn how to avoid them in the future. But for now we must learn to better operate and manage our fi nancial institutions in an unstable and recessionary economy. To accomplish this task, bankers must learn to carefully monitor current events, compile relevant information, alter strategic and tactical decisions and implement changes and solutions at lightning speed. Federal Government Intervention Will Help In October 2008 the Emergency Economic Stabilization Act (EESA) was enacted. The fi rst aspect of this new law was to establish the Troubled Asset Relief Program (TARP). Thus putting the wheels in motion for the Treasury Department to purchase and insure mortgage assets and purchase any other fi nancial instrument necessary to stabilize our fi nancial markets including buying equity securities in banks and bank holding companies. It is an historic and far reaching piece of legislation that will quickly evolve into a long list of programs to enable regional and community banks to restore their ability to deal with troubled assets and capital insufficiency. The fi rst implementation step was to inject $125 billion into nine money center banks in the form of preferred stock capital. The second phase is to inject another $125 billion into regional and community banks before the end of 2008. The immediate objective is not to shore up troubled banks but to create the potential for larger, well capitalized and managed banks to immediately increase lending to businesses and consumers. A second objective is to enable these enhanced capital ratio banks to target other banks to be acquired and stabilized. Community banks should reassess their funding information systems and make liquidity management a key priority. Western Independent Banker January/February 2009 11

Table of Contents Feed for the Digital Edition of Western Independent Banker - January/February 2009

Western Independent Banker - January/February 2009 Contents A Message from the President & CEO Managin Liquidity and Funding During a Recession Staying Liquid in a Time of Regulatory Sea Change Managing Liquidity in a Volatile Rate Environment Regulatory Outlook for Brokered Deposits Deposit Growth and Branch Network Effectiveness Turbo Charging Account Acquisitions FDIC-Insured Sweep Accounts Creating a Contingency Funding Plan WIB Service Corporation Report WIB Calendar New Members Index of Advertisers advertiser.com

Western Independent Banker - January/February 2009

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