Nation’s economic gloom slow to reach valley
ASPEN Nationally, the most recent economic expansion appears to be over, that much is clear. But is it time for families in the Roaring Fork Valley to start hiding their money under mattresses and growing their own potatoes?Not just yet, say local financial experts. We’ve got a ways to go to ride out the storm, but it’s not all doom and gloom, argued Juan Grobler, mortgage broker with Affiliated Financial Group, Inc. When the national economy stays in a funk for a long enough time, we all suffer a little, but it isn’t a disaster, nor, in my opinion, is it going to have any lasting effect on local banks, said Bob Young, chairman of Glenwood Springs-based Alpine Bank.
The subprime mortgage crisis, and its negative economic impact, has long been news. But in the last few weeks, several recent financial crises have headlined national newspapers, drawing sudden attention from major investors and the average consumer alike. In mid-July, shares of Fannie May and Freddie Mac which hold or guarantee nearly half the nation’s mortgages slid, among concerns that the financial institutions were facing trouble. The federal government hurriedly put together a rescue package (which has still gone unused). On July 11, in what was widely considered the second-largest bank failure in U.S. history, Pasadena-based bank IndyMac Bank, was shut down and then taken over by the Federal Deposit Insurance Corp. (FDIC). On July 15 and 16, Ben Bernanke, the Federal Reserve chairman, testified before Congress, calling housing sales sluggish, noting that consumer spending had slowed, predicting moderate growth for the second half of 2008 and expressing concern that rising food and energy costs could lead to inflation.
Local financial experts acknowledged that an economic slowdown is likely already here. But they also argued that the local economy should weather an economic downturn better than most. Chief among the differences between the local and national economy is the lack of what Young called overbuilding locally. He noted that strict approval processes and the lack of available land in the Roaring Fork Valley, and particularly in Aspen, has ensured that the valley isn’t full of unsold homes.Moreover, the relative affluence of most valley residents means that homeowners can afford to wait until the economy improves to sell their homes, he added.The result, he said, is that real estate sales slow but it isn’t a disaster like you have in larger communities.He also pointed out that economies in Rifle and Grand Junction have been buoyed by the energy expansion–and that impact has spread at least as far as Glenwood Springs. In those economies, there are more jobs than people to fill them, he said.
Local bankers remind their investors that all cash deposits are insured up to $100,000 by the FDIC, and in some cases more. Since the FDIC was created in 1933, no one has ever lost a dime in an insured deposit, said Young. Tom Griffiths, senior vice president for Vectra Bank, which has branches in Aspen, Basalt and Glenwood Springs, points consumers and businesses to FDIC resources that provide banking counsel. The website http://www.fdic.gov, he said, provides guidance for those who want to increase their deposit insurance coverage and an insurance calculator to determine how much of ones holdings are insured. (The 877-ASK-FDIC hotline provides a similar service.)As far as determining a bank’s stability, Bauer Financial (www.bauerfinancial.com) and Bankrate (www.bankrate.com) provide free independent ratings of banks, say bankers. Highline Financial (bankratingreport.highlineinet.com) provides a fee-based service that consolidates FDIC information into a complete report for every bank. Young, who was chairman of the Colorado State Banking Board in the late 80s and early 90s, argued that in the last 10 or 20 years, most banks have generally trended toward stronger regulation, stronger capital positions and more enlightened management. Griffiths agreed, pointing out that, while 1,500 banks were on the FDIC troubled bank list in 1990, only 90 banks appeared on the list at the end of the first quarter in 2008. And while loan defaults may be big national news, Young points out that in the first quarter of 2008, only 1.46 of loans made by Colorado banks were noncurrent, or 90 days past due. [That is] hardly a precursor of horrible things to come, he said. And he noted that because the Roaring Fork Valley economy tends to do well overall, its banks do, too. In the 35 years that hes been in the banking industry, the only local bank failure he can remember is that of Aspen Savings and Loan. Though managed well in the beginning, it was later sold to a group of Texans who filled the portfolio with bad loans from all over the country, he said.In short, said Young, the best indicator that the banking industry in the Roaring Fork Valley is healthy is the fact that the economy in the Roaring Fork Valley is generally stable. We are blessed to be here instead of other places that arent doing as well, he said.
But despite their arguments that they are well-capitalized and well-positioned to ride out the current economic slowdown, most bank officials say they’ve spent the last week assuring customers. Spencer May, branch manger at the Wells Fargo bank in Aspen said Wells Fargo employees have been explaining FDIC insurance to local customers, as well as pointing out that they are the only U.S. bank to receive a AAA rating from Standard & Poors Rating Services. Young says he’s created radio and print advertising specifically geared at assuring customers. He is trying to be as proactive as he can, he said, without oversensationalizing a problem that isn’t there.It’s in the customer’s mind, he explained. When we’re dealing with their money and their life savings and their futures, we’d better reach out and tell our message and reassure them that their money is safe and it will continue to be firstname.lastname@example.org
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