You didn’t have to be a small community bank to steer clear of the helter-skelter investments favored by the likes of Bank of America and AIG. But apparently it helped.
New York Times reporter David Segal writes that spending time with solvent bankers in places like Indiana was like stepping into an “alternate universe,” a place “where everything sounds a little strange because it makes perfect sense.”
Weird that it’s strange, eh? Sensible should be normal.
Turns out, the secret is to be boring. Clay Ewing, a banker in Jasper, says, “If banking gets exciting, there is something wrong with it.” So, no maniacal juggling of hyper-complicated subprime debt instruments just for the thrill of it.
Boring bankers also tell Segal: “If you don’t understand the risk you’re taking, don’t take it.” Also: “We want to be around for decades, so we’re not focused on the next quarter.”
Today, banks that abided by such common sense are solvent. And declining government bailout money.
Profligate bankers propelled by visions of infinite if inexplicable returns were not the only culprits in the housing bust. The Federal Reserve stoked the buildup of demented debt. As did many politicians.
But bankers who made bad decisions also deserve blame for surging blindly ahead. They could have done otherwise. They could have been, well, boring.
This is Common Sense. I’m Paul Jacob.