Paul Gores
The Milwaukee Journal Sentinel
August 1, 2009
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Contrary to the dour and exacting way they sometimes are portrayed, most bankers aren't pessimists, says Russell C. Weyers.
In reality, he said, bankers thrive on taking calculated risks in which both the bank and the borrower are likely to be successful.
"To be a banker you need to be optimistic," said Weyers, president and chief operating officer of Racine's Johnson Bank. "You have to be optimistic to lend money, and the borrowers have to be optimistic that they can pay it back."
The trouble is, right now such optimism is scarce, said Weyers, whose bank is the third-biggest based in the state.
"There's an underlying feeling of pessimism by banks," he said.
In a recent interview, Weyers reflected on his recently completed year as chairman of the Wisconsin Bankers Association, the state's biggest trade organization for banks.
With a deep recession, the continued real estate slump and the freezing of credit markets, it was the worst period many bankers ever have seen. While there are some signs of life and stabilization and no Wisconsin bank so far has failed, Weyers said, there are big challenges ahead.
Here are Weyers' edited comments on today's banking landscape:
Q. What are the biggest changes that have occurred in banking over the last year?
A. Probably the two biggest things I've seen change are consumers being concerned about the safety and soundness of banks at a much higher level than they were a year ago. And then the credit markets, where banks are buying and selling funds with each other, continue to be dislocated at this point. The financial markets went through a very turbulent time and haven't settled back out yet.
Q. How have banks reacted to the rough environment?
A. The fallout is, you've really got to pay attention to the small details more than you ever have in the past. The days of handshake deals are probably gone for a while. Everybody is under more scrutiny - from regulators, from the press, from consumers, from customers - than we've been in a long time. Customers are nervous. Customers are feeling the impact of the economy and they want to know if their bank is going to be there to support them.
Q. What is your outlook on the economy?
A. We're seeing some minor positive signs. The residential housing business market has improved a little bit. We think the first-time homebuyer tax credit has been a very good program. We're actually seeing some people buying homes again.
Our customers' ability to pay is driven by things like unemployment. We would expect unemployment rates to rise even as the economy starts to pick up. That has tough implications on banks.
Q. Is there any demand for business loans?
A. We're not seeing many businesses trying to expand right now. What we're seeing is a lot of people trying to cut back their inventory, slow down their business a little bit.
So the loan demand we're seeing right now is people trying to work through some challenges. There's a fair amount of projects out there, but they're difficult projects to finance if they are having a hard time finding a tenant or other things.
Q. Will Wisconsin have some bank failures?
A. I would say, based on what we're seeing, that the Wisconsin banks are still holding up pretty well. I don't like to predict bank failures. I don't like to predict there won't be any. But the management of the banks in Wisconsin, people I got to meet in my travels, are all very committed people who are working hard to keep their banks as safe as they possibly can.
Q. How are Wisconsin companies that have bank loans faring?
A. It's a pretty conservative area where people run their businesses for the long term, and our clients are not having much fun right now, either. But they are doing whatever they can to keep their business going and their people working.
Q. Could someone get a loan for something like a restaurant these days - a business that relies on consumers' discretionary income?
A. It really depends more on your business plan - what kind of capital you bring to the table and how many customers you're going to have to have to do it. There are still businesses being started every day. I would say a lot more of them have to have more capital than they have in the past, and finding capital is tough. But banks aren't going to lend you 100% for start-up capital any more. You are going to have to put some of your own money in.
You have to go back to the history of Wisconsin, and the vast majority of businesses got started by family and friends investing in it. We'll see more of that in the future.
Good business plans always get financed. Bad business plans never should.
Q. Can a recovery take place before hiring resumes?
A. When banks have trouble collecting loans, it's usually because people lost their jobs.
As businesses start to hire, you're going to see the economy pick up. But it's going to be awhile before we see that because you have to be optimistic that your business is going to grow to bring people back to work.
I'll make a political statement: The more taxes we create on businesses and the more burden we put on them, it makes it more difficult to hire people. And some of the corporate taxes getting passed in Madison right now aren't helpful in creating jobs.
Q. Will we see more banks acquiring smaller banks?
A. We will see continued consolidation in the industry, driven by a couple of reasons. We are expecting more regulation on banks. Regulation on banks is very costly. Particularly for some small banks, it's very hard to keep up with the cost of that regulation. Also, finding capital right now is more and more difficult. As banks are looking for capital, sometimes their only option is to consolidate.
Q. What was the highlight of your year as chairman of the Wisconsin Bankers Association?
A. Getting around the state of Wisconsin and meeting an awful lot of really good people: bankers, politicians and - careful how I say this - newspaper reporters.
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