WATERLOO -- Cedar Valley financial leaders are still issuing loans and conducting business as usual amidst what some financial analysts are calling a national credit freeze.

Local financial leaders shared their views of the recent economic downturn in a forum hosted by The Courier Monday. They said a strong agricultural economy and not getting caught up in the national housing bust will help the area weather the economic storm.

"I don't think we're insulated, but we did not experience the (housing market) ups and downs that some of the other areas did," said Steve Brewer, regional president of US Bank.

"I don't think that any of us are deeply invested in mortgage-backed securities or things like that," said Mike McCrary, vice president of marketing for Lincoln Savings Bank.

Kathy Lee, local president of Wells Fargo Bank, said the agriculture economy and relatively stable housing market can help us prepare for whatever impact the economic downfall may bring to the area.

"We seem to be somewhat protected in that we are alerted to the 'what ifs' of the future and we are able to act now before it hits us."

Perception of the problem

People concerned about dropping stock prices may pull their money from the markets and be reluctant to spend what they do have, panelists said. This could lead to a consumer-driven recession, they said.

"It becomes a self-fulfilling prophesy," said Corey Clark, executive vice president for Lincoln Savings Bank.

Panelists said some customers also expressed worry that their local financial institution is on the verge of collapse.

National press coverage of the economic climate doesn't give people a clear picture of the local situation, he said. National reports lead some people to incorrectly assume local banks aren't lending money.

"I think there's great misperception, particularly in the mass media, that banks don't want to lend," said Joe Vich, CEO, Community National Bank.

"Banks have money. We need to lend and we want to lend."

However, the criteria for loans have tightened, said John Rathjen, Liberty Bank market president

"We're probably not able to do some the things today that we were able to do three or four years ago," Rathjen said.

He also noted that the number of loan applications at his bank have fallen off in the last week.

"I think people are trying to get more comfortable with where they're at before they make a major purchase," Rathjen said.

Wall Street vs. Main Street

Panelists said their customers have brought up concerns about their investments in the wake of news of major national financial institutions folding in recent weeks.

The bank and credit union leaders worked to distinguish themselves from the investment banking firms.

"They're not banks," Vich said. "They're not as regulated the examine process isn't as intense as what banks and credit unions have so there is a significant difference."

"Your local financial institutions are safe and sound and we are making loans," said Jean Trainor, Veridian Community Credit Union president/CEO.

Some of the problems were created by national lending companies working on commission.

"If you look at the foreclosures in this area right now, the majority are not with local financial institutions," said Mark Heth, Iowa Community Credit Union president/CEO.

Bank and credit union deposits up to $250,000 are nationally insured, they pointed out. Congress temporarily raised the deposit protection from $100,000 in a $700 billion bailout bill passed last week.

Bailout and beyond

The group agreed that the bailout plan passed by Congress last week will probably help the economy recover in the long term.

They were uncertain on how long that recovery will take. The housing market needs to bottom out before the recovery begins, said Rathjen

"We have to find a bottom to this housing thing," he said. "I still don't know if we've found a bottom nationally."

Until the market hits bottom markets will remain volatile, Rathjen added.

"I think we will see a trickle-down effect," Rathjen said. "We are a local economy, but we area also a regional economy, a state economy, a global economy. Hopefully what's done on those levels doesn't have a significant effect on our global businesses."

"We do have that optimistic view locally but at the same time we realize nationwide what's going on," Wade Itzen, Black Hawk County market president of BankIowa said. "People just have to be smart with what they're doing out there."

Panelists agreed that Congress should make the $250,000 deposit guarantee permanent and consider not reinstating the capital gains tax.

"To increasing taxes, especially in a time like this, that's going to be dangerous," Clark said.

Teachable moment

The panelists said their customers are concerned about their investments including 401(k) their retirement accounts. Their advice for people looking for retirement a decade or more away is to stay in the market and save money.

Panelists said financial leaders should take advantage of the national attention the economy is receiving right now.

"I think with this experience people would get more serious about saving and we would see an opportunity to help with some financial literacy not only with savings but also with credit," said Trainor.

"I think you have people's attention and with that attention you have an opportunity to teach people to get back to the basics," said Clark.

Contact John Molseed at (319) 291-1418 or john.molseed@wcfcourier.com