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Not so wonderful: New federal rules discourage old-fashioned, hands-on style of banking

  • James Stewart, left, Thomas Mitchell, right, and Donna Reed in the 1946 movie "It's A Wonderful Life." (Associated Press)

Bankers have a rough time of it in Hollywood on the whole. Back in 1946, however, ”It's a Wonderful Life” depicted the Platonic ideal of a small-town bank, with managers and customers who knew each other and tried to help each other through tough times. George Bailey (James Stewart) was the banker we all wanted to have, and still is.

Most banks pay lip service to such goals, but fall laughably short of them in practice. Marquette Savings Bank, the last remaining lender headquartered in the once-booming industrial city of Erie, Pa., could make a more plausible claim than most ... until distant regulators and policy-makers undermined its personal approach.

A visit to Erie in the months before Christmas reveals two different economies. Canadian shoppers fill the local malls to take advantage of Pennsylvania's lack of sales tax on clothes. Meanwhile high corporate taxes and demanding trade unions have chased away manufacturers. The region is littered with grand but derelict banks that used to cater to them.

In contrast Marquette, a 110-year-old mutual, is thriving. It has nearly doubled in size since the crisis, to $800 million in assets, and its profits have almost tripled, to $8 million. It has 12 branches, compared to seven in 2007.

Marquette's website features a photo of each branch manager and every foreclosed home put up for sale — there are currently seven. Until the crisis, it followed the ”It's a Wonderful Life” model, holding onto the mortgages it had originated instead of selling them to government-sponsored entities, as most banks did.

Marquette's survival, therefore, depended on the quality of its appraisals of borrowers and homes. Its approach was to have a lending officer — accompanied by one of the bank's trustees, in effect board members — visit every mortgage applicant on the Saturday after each application was filed. Customers received fast decisions, while managers and trustees learned a great deal about their clients and market conditions.

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