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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Responsible New York Banking

Politics / Credit Crisis 2011 Dec 27, 2011 - 03:37 AM GMT

By: Stephen_Lendman


Best Financial Markets Analysis ArticleFounded in 1882, the Bank of Cattaraugus (B of C) exception proves the rule. Located in Western New York, it's miles from Wall Street's cesspool of fraud, market manipulation, grand theft, bailouts, and influence peddling in league with corrupt politicians getting generous campaign contribution bribes in return.

B of C calls itself "one of the oldest and strongest banks in New York state. (It's) a full-service, independent bank that provides financial services with a hometown touch. Personal, friendly service is our signature trademark, and we're dedicated to give back to the communities we service."

B of C "operate(s) with the same belief that the needs of the local community and its residents are its business. Local deposits must remain available for local loans to sustain" Cattaraugus village. It's located about an hour south of Buffalo.

Imagine a bank anywhere operating honestly and responsibly, meaning what it says, and proving it. Grateful customers say so. More on that below.

With about $16 million in assets and $1.1 million in equity capital, B of C is microbank in size, well below the $10 billion small bank ceiling. It's business model stresses serving local community needs. About 80% involve mortgages to local residents.

It's the state's smallest bank with one location and eight employees. It's Cattaraugus' only bank. It doesn't base loans on credit scores. Knowing community needs well, it operates supportively to help.

In its history, annual profits rarely exceeded $50,000. In 2010, it earned $47,000 for a 0.3% return on assets. Despite its size and low profitability, President and CEO Patrick Cullen says twice weekly on average larger banks make buyout offers. No thanks, he responds. "There's nothing they can offer us that we can't do ourselves."

He prefers independence, sticking with his simple business model, operating like a public utility, avoiding high risks, reinvesting in Cattaraugus' economy, and helping local residents.

B of C doesn't operate parasitically. It doesn't speculate in financial derivatives and an alphabet soup of securitized garbage. It won't cheat customers, make liar's loans, bilk investors through fraudulent schemes, or engage in other manipulative, dishonest practices.

It's worked for 130 years as the only bank in a community of about 1,000 residents. Operating privately, it replicates responsible public banking. More on it below.

On December 23, New York Times writer Alan Feuer headlined, "The Bank Around the Corner," saying:

Pensioner Carol Bonner is one of many grateful B of C customers. Needing a loan for car repairs, Cullen helped her like earlier.

"A few years ago, when (she) fell behind on her property taxes and was forced to sell her home, (Cullen as mortgage holder) had his son Thomas (a Chicago resident) buy it." As a result, Bonner and her sister stayed as renters.

"The whole thing was incredible," she said. "I just didn't realize there were people like that in the world who would help you. Especially a banker."

B of C is different. It holds village deposits and "lend(s) to its neediest inhabitants." Recently it granted forbearance to an unemployed bus mechanic mortgagee. Another Amish customer needed $85,000 for debt consolidation. Despite earning only $2,300 a year selling greenhouse starter kits, he got it.

According to Cullen, "If you know Amish culture, you know his sons work and that everything they earn goes to him until they're 21 or married. So he was fine, but none of that shows up on a credit score."

Diner owner Paul Macakanja says, "They do things that big banks won't do. They support you personally because your success is their success."

Through responsible lending to local community residents and businesses, stressing customer service, offering access to management, and understanding borrower needs well, bottom line concerns are served sustainably long-term.

"If it sounds old-fashioned, it is," said Feuer. "It's not the kind of bank you'll find anymore in New York City" or other large communities.

Retired worker Duane Kelley said, "They saved our lives" after he lost his home over a $15,000 tax lien. Cullen bought the house with bank money, returned it to Kelly, and he's repaying B of C through a 15-year loan.

Bank examiners ask Cullen, "When are you going to grow?" He responds saying, "But where is it written I have to grow? We take care of our customers. The truth is we probably couldn't grow too much in a town like this."

Cattaraugus has limited prospects. Except for a lollipop handle producer, its former manufacturing base died. Its largest employer is the school district, "and many village residents survive....on pensions or government subsidies, in homes" with average $30,000 mortgages.

B of C's a family business. Cullen's daughter is chief financial officer and wife Joan corporate secretary. With giant banks bigger than ever during hard times and historically low interest rates, small banks are hard-pressed to compete.

Yet growing anger over banking fraud, predatory lending, high fees, and lack of public service encourages depositors to move funds to smaller, local institutions.

The Move Your Money project encourages it, telling people to vote with their dollars, "Invest in Main Street, Not Wall Street." So does Bank Transfer Inspired by OWS, it encourages credit union banking. According to organizer Kristen Christian:

"I started this because I felt like many of you do. I was tired - tired of the fee increases, tired of not being able to access my money when I need to, tired of them using what little money I have to oppress my brothers and sisters."

"So I stood up. I've been shocked at how many people have stood up alongside me. With each person who RSVPs to this event, my heart swells. (By) each of YOU standing with me....they can't drown out the noise we'll make."

Christian claims she persuaded 400,000 people to shift from large banks to not-for-profit credit unions.

In today's environment, Independent Community Bankers of America (ICBA) president Camden Fine believes small banks are especially important. They hold 20% of banking assets and write over half of small business loans.

According to Fine, "Customers can say, 'I know where my money is - it's down there eight blocks away. They can walk in and talk to the president and know he isn't sucking in their money and betting against them on proprietary securities."

Nonetheless, since 2008, hundreds of community banks have gone under. B of C survived. Cullen believes rural banking is vital. Moreover, "(w)hen customers entrust their life savings to us, we treat them as if it were our own."

He also runs the Historic Cattaraugus Corporation, a non-profit local business. From 1990 - 2003, he invested nearly $1 million of bank money in village properties. Usually it paid off, but not always. "Banks tend not to do that sort of thing," he said.

Among other projects, he bought an old town hotel. He's waiting for a chance to use it. He also plans restoring original town buildings. He hopes to open them as a colonial Williamsburg-style theme park.

"If you look at Williamsburg's web site," he says, "they claim the park employs 3,800 people. Give us 5% of that, I'll claim success." It will be entirely home grown. "Everyone will be involved. The bank, the church, local government, the people - everyone will have a stake." It's what it's all about in his mind.

Public Banking: An Idea Whose Time Has Come

Working cooperatively with responsible community banks like B of C and non-profit credit unions, establishing public banks across America is vital at a time of financialized power, casino capitalism, depression-sized unemployment, socialized losses, privatized profits, and Wall Street crooks operating an unprecedented money making racket.

Like B of C, public banks provide low-interest loans to businesses, farmers, communities, households, students, and other worthy borrowers as a way to revive and sustain inflation-free prosperity.

It's no pipe dream. It's real. It happened before. It's happening in North Dakota, the only state with a publicly owned bank, and can anywhere they're established.

They don't have to earn profits. They're not beholden to Wall Street or shareholders. Only the state, community, or federal government's creditworthiness matters.

So far, in over 230 years, no state ever went out of business, and, except for Arkansas during the Great Depression, none ever defaulted, even when poorly governed.

Moreover, they can lend to themselves and municipalities interest-free, as well as to businesses, farmers, and individuals at low affordable rates to create sustainable, inflation-free growth.

Notably, the more often loans roll over, the more debt-free money is created - inflation-free if used productively for growth, not speculation, big bonuses and other excesses.

In fact, as long as new money produces goods and services, inflation can't occur. Only imbalances cause problems when demand exceeds supply. In contrast, price stability is assured when both increase proportionally.

It's not pie-in-the-sky. It works and can again by returning money power to public hands where it belongs. Doing so will end Wall Street's responsibility for massive fraud, asset bubbles, record budget and national debt levels, and depression-sized unemployment, human need and anger.

Today's contagion is global. Billions suffer. Economies are wrecked to save banks. Washington is Wall Street occupied territory. So are European financial capitals because governments provide trillions of dollars to socialize losses, privatize profits, and hang their own citizens out to dry.

Replacing a predatory system with public banks working responsibly with small community one like B of C and non-profit credit unions can change things.

Now's the time under a just and equitable system. Besides peace, good will, democratic values, and government, of, by, and for everyone, what better idea is there than that when it's needed more than ever!

By Stephen Lendman

Stephen Lendman is a Research Associate of the Centre for Research on Globalization. He lives in Chicago and can be reached in Chicago at

Also visit his blog site at and listen to The Global Research News Hour on Monday through Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national topics. All programs are archived for easy listening.

© 2011 Copyright Stephen Lendman - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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