Isaac Laquedem

The FDIC takes two weeks off

The FDIC didn't take any banks on Friday, August 27, nor on Friday, September 3.  It's been a while since the feds went two weeks without a takedown.  The reason may be twofold: first, the FDIC took eight banks (a near-record) on August 20, which will take some staff time and energy to digest and hand over; and second, staff that worked through Memorial Day and the Fourth of July may simply want a three-day weekend like the rest of us.  Look for September 10 to be a busy day.

2010 sets a record pace for bank openings: just one (so far)

2010 is setting a pace for bank failures not seen since the 1930s: 118 so far.  Against the series of gloomy press releases from the FDIC announcing bank failures is set one piece of good news: the first bank opening of 2010.   It's of an institution called Lakeside Bank, in Lake Charles, Louisiana.  As the New York Times reports, Lakeside Bank is the first proposed bank to win the FDIC's approval this year.  (It's technically possible to open a bank without FDIC approval, if you can find someone else to issue deposit insurance, but no one's done it since 1933.)  Its organizers, led by a local real estate developer, started the process to form the bank in 2007, and raised $13 million in initial capital.  Progress stalled when the FDIC disapproved the organizers' first choice for president, and they went in search of another, eventually finding Hartie Spence, age 70, the retired president of Hancock Bank of Louisiana, an institution in Baton Rouge.

The Times author wonders why Lakeside's organizers, in the article's words, "won the lottery" to get the only bank charter issued in 2010.  A look at its board of directors might explain this little mystery: buried within the down-home folksiness with which the bank described its directors are little nuggets such as these: two members have business degrees and two have law degrees.  One is a professor of banking and another has a degree from the Banking School of the South.  Two have taught in the banking program at Louisiana State University.  One is a state senator and former mayor of Lake Charles; she also holds an undergraduate business degree.  And one, modestly titled as "Mr. Willie Staats," is Dr. William F. Staats, described as having been named by the FDIC itself to the board of the nation's first bridge bank.  He also used to be the vice president and corporate secretary of the Federal Reserve Bank of Philadelphia.  (I surmise that his presence is what tipped the FDIC into approving this bank.)

As for its office, the bank splurged: it does run out of a mobile home parked in front of the local Baptist church, but it's a double-wide.

Good luck, Lakeside, and keep a sharp eye on your collateral.

Venerable F. Booker

In the late 1960s public-spirited citizens in many United States cities complained that the established banks of their communities were not lending to residents of ghettos and predominantly black areas.  Many banks simply refused to lend in minority areas at all no matter how qualified the borrower or how valuable the collateral. 

This practice, called “redlining,” was later banned, but it was legal then.  So in response, the citizens organized community banks to be based in the redlined areas.  Perhaps 50 or more banks across the nation were formed at this time.

In Portland, the public-spirited citizens organized the Freedom Bank of Finance.  Downtown businesspeople bought some of the shares (typically $500 or $1000 worth each) and North and Northeast Portlanders bought the rest, in smaller amounts.  The organizers engaged as the new bank’s president a real estate broker named Venerable F. Booker, a lively and affable man in his mid-40s who had no previous banking experience.  They set him up in a cavernous abandoned bank branch on Northeast Union Avenue (now Martin Luther King Jr. Boulevard).

 

Mr. Booker, who died on January 30 at age 84, told me that the people who hired him expected him and the bank to fail.  Most of these banks failed.  They made loans on sympathy instead of security, had second-rate or no underwriting for their loans, and hired unneeded staff.  Mr. Booker, who bought stock in the bank himself at the start, didn’t want to fail.  He hired an experienced retired banker to teach him how to make loans.  He kept expenses down.  He insisted on adequate security for the bank’s loans.

He was also a hands-on manager.  He had a private office available at the bank, but most of the time he sat at a desk on the bank floor where he could see the customers and tellers.  On two occasions men attempted to rob the bank.  As they were leaving with the money, Mr. Booker drew his pistol and shot the robbers.  The FBI reportedly used the bank’s security tapes of Mr. Booker shooting the robbers as part of a training film on how not to deal with bank robbers, but, Mr. Booker told me, “After I shot the second robber word got around that it was not safe to rob our bank, and we never had another robbery.”

 

Do you recall the advertisements for home-study music classes that started, “They laughed when I sat down at the piano”?  Mr. Booker could have said, “They laughed when I sat down at the bank.”  He told me that the Portland bank presidents of 1968 treated him with a sort of polite condescension: he was black (bankers weren’t supposed to be black in 1968), he had no banking experience, and he was supposed to last only a year or two in the banking business.  But a funny thing happened on the way to the predicted bankruptcy:  his bank didn’t go there.  Instead, his bank (later renamed the less provocative “American State Bank,” with the slogan “The bank that integration built”) made money – not a lot, but enough to stay in business for the next 32 years with him as president, until, nearing his 80^th birthday, he sold it to Albina Community Bank and retired.  By that time all of his competitors – the banks that had laughed at him in 1968 – had closed or been sold.  He had the last, and best, laugh of all.

Mr. Booker was a major part of the drive to memorialize the late Gladys McCoy with a plaque and open space near the bank office.  Somewhere close by, the city should make room for another plaque to tell Mr. Booker's own remarkable story.