December 2, 2008 - 8:13 AM
So, a lot of local banks are in line for hundreds of millions of dollars from Uncle Sam to help prime the economy and fight the recession. Good news for Western New York, right?
No, not really.
WNY banks, like many around the nation, are eligible for federal aid in the form of stock purchases that represent cheap capital for lenders. M&T Bank, the big kid on our block, has applied for $600 million, and it's not alone among local lenders.
To put that $600 million in perspective, that's $200 million to $300 million more than the economic development subsidies provided annually to businesses in WNY by the federal, state and local government. My first blush reaction to reading about the M&T money was, "Gee, is that the best way to help our local economy?"
But don't go blaming M&T. The feds are leaning on banks to take the money, in the belief/hope an infusion of cash will lead to more lending and thus economic growth. If M&T doesn't take the money - and it's only one-third of what it could get - it would probably be the only one of the 25 largest banks in the nation to say "Thanks, but no thanks."
This is Plan B for the feds. Plan A was to help capitalize struggling banks, but Wall Street wasn't buying.
So now the feds have set aside $250 billion for relatively healthy banks to, among other things, lend to businesses and home buyers and spend to acquire weaker sisters.
That strategy may or may not fly in growth states like Florida and California, which have been hammered by the implosion of the real estate market, or Death Valley states like Michigan, whose economy makes ours look good.
Imagine how bad off they are.
As we have learned the hard way over the years, WNY is, well, different. Our banks here are in better shape. They've kept lending. Thus, most of them don't really need the federal money. That's the good news.
The not-so-good news: The upstate economy, including WNY, isn't screaming for more borrowing. Small business loans are down, big business loans are down and housing sales are slumping, so that takes care of mortgage lending.
In other words, the federal bank bailout for WNY means a growing supply of money in the face of a declining demand.
Just our luck, isn't it?
It sure would be nice if our economic development thinkers came up with a strategy for taking advantage of this prospective surge in capital, especially in light of President-elect Obama's push for renewable energy and eco-friendly growth.
I'm not sure it's realistic to craft such a strategy on short notice and with the pressure for short-term results. But it sure wouldn't hurt if folks at least contemplated coming up with a game plan.
I wonder what the Jim Allens, Sue McCartneys and Paul Dysters of the world think? To say nothing of M&T boss Bob Wilmers, who also happens to be the state's economic development chief.
People, talk to us.