• May 2010 - Financial Education Web Site
• April 2010 - Avoid Getting Scammed
• March 2010 - Have You Hugged Your (Local) Bank Today?
• February 2010 - More Americans Considering Community Banks
• January 2010 - CDA Business Fair

The Financial Literacy and Education Commission recently announced the launching of its redesigned financial literacy education Web site -- www.MyMoney.gov -- that includes enhanced interactive features.

The Web site contains financial information from the 21 federal agencies, departments and bureaus that comprise the FLEC. It also provides money management tools, including a financial savings calculator, worksheets for establishing a household budget and a college preparation checklist. Go to www.MyMoney.gov to check it out.

Idaho Department of Finance
NEWS RELEASE

Boise, Idaho . . . In the wake of the current economic crisis in Idaho and throughout the nation, Gavin Gee, Director of the Idaho Department of Finance, is warning investors to be on the lookout for opportunistic scams. In times of tragedy, confusion, fear and uncertainty, there are always those who will attempt to prey on the investing public.

"Cold-calling telephone salespeople, advertisements, or Internet postings that tout commodities, exotic financial products, or technologies related to recent events should be a red flag for investors," Gee said. "Investors should be especially wary of enticements to send their money offshore to so-called 'safe havens'," he added. Recalling that many con artists exploited fears associated with the Year 2000 computer bug (Y2K), the 9/11 terrorist attacks, Gee noted that the recent economic downturn has brought new pitches for precious metals investments, emergency preparedness scams, non-existent technology companies and real estate deals, the Department of Finance urges investors to:

• Hang up on aggressive cold callers promoting "safe" investments with "guaranteed returns" and ignore unsolicited e-mail or Internet chat room talk about small companies with new technologies or products related to the recent events.
• Call the Idaho Department of Finance toll free number 1-888-346-3378 (Idaho only) to ask if the seller is licensed to sell securities in Idaho and if the security is properly registered.
• Request written information that fully explains the investment, such as a prospectus or offering circular. The documentation should contain enough clear and accurate information to allow you or your financial adviser to evaluate and verify the particulars of the investment.
• Get a professional, third-party opinion when presented with investment opportunities that seem to offer unusually high returns in comparison to other investment options. Pie-in-the-sky promises often signal investment fraud.

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April is Financial Literacy Month. Department of Finance Press Releases and other information can be found on the Internet via the worldwide web at http://finance.idaho.gov and may be obtained by contacting the department at (208) 332-8000 or Idaho toll-free at 1-888-346-3378.

by Michael Boss, Idaho Business Review

As appealing as the prospect of full-time employment is right about now, I’d have to think twice if someone offered me a public relations gig at a major bank. I don’t imagine I could describe the challenge any more prosaically than a bank lobbyist who was quoted in a recent Time Magazine article as saying: "We get it; we’re al-Qaeda, and nobody wants to be seen with us." ("Can Bank-Bashing Help Obama", February 8, 2010) That characterization seems a bit extreme – I’d have been more inclined toward a Gordon Gecko comparison, myself.

Despite the culpability of America’s largest banks in our current economic mess, I’m sympathetic toward any group caught in the hurly-burly of our political discourse. On the other hand, the banking industry itself has been the source of its worst PR. In response to the industry’s opposition to Obama’s proposed new taxes on big banks (intended to recoup the cost of bailouts), the same Time article quoted the President as telling the banking industry, "Instead of sending a phalanx of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities." Sounds like good advice to me.

It was the issue of the banking industry’s responsibilities – and the opportunities that the industry’s difficulties have created for smaller, community banks – that prompted an interview with Daniel Prohaska, the CEO of Boise-based Idaho Trust Bank. Just as national concerns over America’s food supply have led some consumers to embrace the "locavore" concept, Prohaska describes what could be an analogous opportunity for banks like his within the local business community: bank locally.

The first thing Prohaska made clear during my interview was that community banks should not be tarred with the same brush as their Big Bank competitors. Notes Prohaska, "The financial crisis was the result of big bank problems. The business community understands it has to distinguish between large, Wall Street banks and small, Main Street banks. There are over 8,000 banks in the United States. The twenty largest banks and federal government policy are largely responsible for the financial crisis. Community banks in Idaho had nothing to do with it."

Prohaska pulls no punches in his critique of Big Bank practices, or of Federal policy in aiding and abetting their excesses. "Federal policy has created a huge moral hazard with the ‘too big to fail’ standard. The federal government is providing an express guarantee to the twenty largest banks that they will not fail no matter what they do, and the government has created special programs just so these large banks can increase their profits. All of the cost has been shifted directly to the taxpayer…at the same time these banks cut lending to small businesses in 2009 by $12.5 billion in order to increase their profits and reduce their credit risk. The large, out-of-state banks that took us to the brink of financial collapse and damaged our economy are being rewarded. That’s not good for the Idaho economy…and that’s not fair to Idaho taxpayers."

To Prohaska, the sin of the big banks was not simply the greed and arrogance of seeing themselves as "too big to fail", but instead becoming too big to regulate…or manage. He argues that this would not have been the case had America’s largest banks stayed true to their fundamental role in a healthy capitalistic market: "taking deposits and loaning to the benefit of the community", rather than engaging in loosely regulated financial transactions for the benefit of their shareholders and top executives.

Lest you interpret Prohaska’s observations as a tad altruistic, he has some strong support from no less a pragmatist than the Chairman of the Economic Recovery Advisory Board, Paul Volcker – not to mention the granddaddy of all capitalists: Adam Smith. Prohaska points out that, "Adam Smith, the father of capitalism, advocated for small banks to reduce the risk to the capitalist financial system and increase economic vitality. He theorized that allowing banks to grow too large posed systemic risk. That certainly proved to be the case in this financial crisis – a handful of large, Wall Street banks that put the entire financial system on the verge of collapse in August and September 2008."

While the excesses of large banks have resulted in a credit crunch that adversely affects Main Streets throughout the country, the fall-out has also created new opportunities for banks like Idaho Trust, which currently has $100 million in assets and manages another $225 million through its asset management services in Boise and Coeur d’Alene.

Says Prohaska, "Bank regulation will increase dramatically over the next several years. More regulation will make it more difficult and less profitable for non-bank lenders to provide credit to small businesses. Small businesses will become even more dependent on Main Street banks for their credit needs. Sixty-five percent of the Idaho economy is based on small business activity, and unless we can provide capital for them, future growth will be limited. We believe in capitalism and the role of banks, but the credit to allow local businesses to grow will come from local banks."

Outrage over the practices of America’s largest banks makes for good political posturing, whether from the Oval Office or a Tea Party rally, but Prohaska points out that there are more concrete actions that local businesses can take to channel their ire: they can move their deposits to community banks. Doing so, however, is more than just "voting with your wallet" – for Prohaska it’s an important step in building a stronger local economy. And at a time when local banks are becoming more competitive with lending rates and credit availability, new technologies are also leveling the playing field in terms of the services they can offer vis-à-vis their larger competitors.

Prohaska does, however, have a strong populist argument to make: "Roughly 75 percent of all Idaho deposits are controlled by large, out-of-state banks. Moving deposits to Idaho-based community banks that will lend to local small businesses in good times and in bad times, and changing the numbers so 75 percent of all Idaho deposits are in Idaho-based banks, would be a huge economic stimulus for Idaho. Community banks like Idaho Trust Bank will have tremendous opportunities in the next decade. We are highly capitalized and we are lending to creditworthy borrowers. We just need more local deposits so we have more to lend to help the Idaho economy grow."

Bailouts and bonuses have many Americans frustrated with big banks. Some consumers think these giant institutions have lost touch with customers and basic good business practices. They're so fed up that they're holding these behemoths accountable by moving their money to community banks.

Terry Brauer is moving his personal and business bank accounts from Wells Fargo to the much, much tinier Bank of Highwood-Fort Sheridan in the suburbs of Chicago.

"It's a community bank," says Brauer. "As you can see, the architecture doesn't look like a spaceship."

The bank tellers are quick to greet customers.
There's a coffee machine in the lobby, along with chocolate chip cookies.

"And then we have dog biscuits. My dog has been here several times, and he enjoys it very much," Brauer says.

But for Brauer, the switch from his big bank was about more than niceties; it was about trusting the company he banks with to do right.

"If I were to have, for example, an issue with this bank, I would go to the bank manager," says Brauer. "She's only about 15 steps. She's not in some office hiding under her desk on the 44th floor of a large building. They're accessible; that's the difference. The difference is that decision makers are accessible."

Thousands of other people around the country are making — or at least want their online friends to know they're thinking of making — a similar switch and saying bye-bye to the big four: Wells Fargo, Bank of America, JPMorgan Chase and Citigroup.

Arianna Huffington of the Huffington Post is spearheading a campaign called Move Your Money, which encourages people to move from the banking giants to smaller community banks.

"There's a lot of anger about the way banks have acted," says Huffington. "It's a total lack of empathy and concern."

The group's Facebook page has more than 27,000 fans.

Huffington says half the country's zip codes have been plugged into the Web site's community bank search engine.

"I think it's already an enormous success," says Huffington. "The fact that people are considering it; the fact that people are doing it; the fact that people are feeling empowered."

But Mitchell Petersen, a finance professor at Northwestern University's Kellogg School of Management, is skeptical whether the campaign will cause droves of consumers to abandon their big banks.

If I was a betting person, I'd sort of bet against it," Petersen says.

He says it would take a whole lot of money-movers to have a noticeable economic effect.

"People are busy, and they get really mad at things, and they say, 'I'm going to go home and do something,'" Petersen says. "And then they figure out how long it's going to take to change the checking account and change all the [electronic] payments. And I can either spend an hour with my kids or an hour doing that, and I don't know about them, but when I do that trade-off, I'll just stay with the bank I have."

But, says Petersen, even without a massive number of banking customers switching to community banks, the campaign sends a political message.

Elise Brooks is a spokeswoman for the Financial Services Roundtable, a group that represents the largest banks.

"Difficult to say — I'm sure they've heard of it," Brooks says when asked whether banks were paying attention to this movement. "But I think their priority is just turning out the best possible product for their customer."

The Coeur d’Alene Idaho Trust Team will participate in the 2010 Coeur d’Alene Chamber of Commerce Business Fair on Tuesday February 16th. Idaho Trust bank has been a long time member of the Chamber and supporter of the Business Fair. At this highly energized and attended business event, Idaho Trust Bank will market its products and services to potential clients. Visitors to our booth will have fun practicing golf and by putting a “hole in one”, enter our drawing for the chance to WIN an 18 hole round of golf for two at one of our beautiful local golf courses!