FDIC Federal Register Citations

From: Mitchell J Bennett [mailto:mjbennett@thefarmersbank-ky.com]
Sent: Monday, October 27, 2008 2:42 PM
To: Comments
Subject: RIN #3064-AD37

To Whom It May Concern:

In the past few months, we have witnessed failures and/or takeovers of large commercial banks, investment banks, and at least one major insurance company. The federal government has felt the need to step in and offer a multi-billion dollar “bailout” plan that will enable large “too big to fail” companies to sell troubled assets in an effort to increase liquidity and restore public confidence. Having been raised by parents who taught me to be responsible for my actions and decisions in life as well as in business, one might guess I am not too much in favor of helping companies who have made poor decisions.

Not much is being said in the media about community banks who continue to provide loans and a safe place to deposit money for members of their local communities. I am the CEO of a two bank holding company operating in the western part of Kentucky. I have answered the few questions received from customers who wonder about the financial condition of our banks after hearing months of “gloom and doom” from the media. It seems much of the media thrives on delivering bad news. After all, who is interested in hearing about the good things, right? My typical response to customer inquiries has been that one of our banks has a leverage capital ratio in excess of 15%, while the other has a leverage capital ratio in excess of 20%. Both of these ratios are well above the minimum regulatory requirements. I also like to inform customers about our continued willingness to make loans to those who qualify. This willingness to lend is driven by adequate liquidity as well as a responsibility to serve our local communities.

My philosophy for managing the banks is simple. I intend for both banks to offer convenient, reliable service, while operating in a manner that offers protection to our shareholders. I don’t think a “pat on the back” is necessary for doing what our banks were originally chartered to do many years ago. Nor, do I expect to be discriminated against as a result of some of the government programs included in the “bailout.” My specific concerns are related to the Temporary Liquidity Guarantee Program being implemented by the FDIC. As mentioned previously, our banks have adequate liquidity at the present time, as well as access to alternative sources of funds should a shortfall occur. I don’t plan on enrolling either bank in the Temporary Liquidity Guarantee Program. Like any other type of insurance, there is a cost associated with participation. Why should I pay for something I don’t need? However, the “catch” is, according to the proposal banks must opt-out of participation. And more importantly, should a bank opt-out a public notice would need to be provided to all customers.

I think a review of the financial condition of both of our banks would reveal they are being operated in a reasonably prudent fashion. With that in mind, I interpret the opt-out and public notice requirements currently in the Temporary Liquidity Guarantee Program proposal to be a strong-arm tactic to encourage banks to participate whether it is necessary or not. Instead of “singling out” those banks that have operated in a sound, successful manner, especially during these difficult economic times, why doesn’t the FDIC ask those banks with liquidity concerns to opt-in in order to participate in the Program? Furthermore, why doesn’t the FDIC require those participating banks to provide public notice to their customers that such participation “is apparently due, in part, to concerns about liquidity in the future.

I am a realist, and thus don’t expect anyone in Washington to care much about what one community banker in Kentucky thinks. Therefore, I will be surprised should my concerns cause changes to be made in the existing proposal. Leaving the current language intact leads me to believe the FDIC is more concerned about collecting revenue, even if it comes from banks that don’t need the additional protection. In the meantime, I will keep managing the banks in the same conservative manner I have for the past fifteen plus years. Don’t bother sending a note of thanks or congratulations. I would, however, appreciate not receiving another “kick in the pants” for doing a satisfactory job.

Sincerely,

Mitchell J. Bennett, Pres./CEO
The Farmers Bank
Hardinsburg, KY