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Small banks may be better equipped to handle crisis

MEMPHIS, TN (WMC-TV) - Some local banks may be better equipped to weather the current economic crisis gripping the nation than larger, national institutions.

According to Fidelity National Bank President Mike Murphy, smaller banks are often more equipped because of the loans they issue.
 
"We did not make any sub prime loans or home equity loans that exceeded the home-to-values at the times they were made," Murphy said.

Murphy said the current crisis was caused when requirements for people to get into homes were loosened, and people had too much home for their income.

"A lot of those loans were made at higher rates with a lot of points and fees," he said. 

Now, lenders have put a stop to that.  Home buyers have tougher loops to jump through to get a loan to ensure they can actually afford it.  Murphy said people were also taking out home equity loans at a rapid rate.

"People were able to borrow against the equity in their homes," he said. "Some banks were relying on homes to appreciate so quickly as they had in the past to cover any loss of value."

But the housing burst lowered home values, so it didn't work.  These days, it's much harder to get a second mortgage on your home.  Murphy said people shouldn't lose faith in the banking system and start stuffing their money in their mattresses, but warned Congress needs to act soon.
    
"Congress needs to act, because perception puts all in the same ball of wax when we're not, so that is a concern."

Looking online:

There are many resources online to help you see how safe your bank is.

One such site is Bankrate.com.  There you can get a rating for your bank and a detailed report about it's operations.

Even if your bank's rating is low, you can take comfort in FDIC insurance.  The FDIC's website has tools to help you determine if your money is safe.  The EDIE Estimator will let you know in a printable report if your deposits are within - or exceed - coverage limits.

Financial experts say with the current state of the economy, the ability to get credit is going away.  CNBC reports that 60% of card issuers are lowering credit limits.  Experts say it's very important to stop living paycheck to paycheck and start saving.  CNN Money's Budget Calculator can help you do just that.

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