There is little risk of a Wisconsin bank suffering the same fate as IndyMac, the failed California-based mortgage lender.
IndyMac’s downfall was due in large part to its business model of originating risky mortgages in the volatile California housing market. By contrast, Wisconsin banks did not engage in risky mortgage lending and Wisconsin’s housing market, although weakened, has not experienced anywhere near the collapse California’s markets have witnessed.
Wisconsin also didn’t see the kind of housing market speculation that occurred in California and other growth states, which means whatever housing bubble exists here is modest by comparison.
According to the FDIC, bank earnings for the first quarter of 2008 show that Wisconsin banks outperformed their peers nationally. That is due to the Wisconsin banking industry’s historic conservative lending culture, as well as to experienced management teams, solid industry capitalization, low loan losses and almost nonexistent subprime exposure.
Bank deposits spiked in the first quarter of this year because consumers know federally insured institutions are the safest place for their money in uncertain times.
All bank depositors have insurance coverage up to and, in some cases, in excess of $100,000 per institution. The FDIC insurance fund has $52 billion in assets and will grow by at least $5 billion this year alone due to assessments paid by banks and from interest earnings.
All these factors add up to a safe and sound Wisconsin banking industry that consumers can have confidence in.
Kurt Bauer is president and chief executive officer of the Wisconsin Bankers Association, the state’s largest financial industry trade association, representing 300 commercial banks and savings institutions, their nearly 2,300 branch offices and 28,000 employees.
