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ABA President Keating Wants the Economy and Kids Out of the Basement

Posted By:  |  June 23, 2014  |  0 Comment(s)

Frank Keating, current president of the American Bankers Association (ABA ), has weighed in on two sectors of banking – the economy that continues to grate on home owners, and a new debt crisis concerning student loans – both grabbing their share of sexy headlines. The former two-term Oklahoma governor says they are now affecting everyone.

Interviewed for Businessweek-Bloomberg media on Business Week’s website, Mr. Keating jumped on the interviewer’s premise that today’s U.S. bankers are choking. “Yes,” he says, pointing out that 90% of ABA’s members have no more than a billion or less in assets. He was clearly referring to the majority of financial institutions who serve local communities. While a billion is, of course, a big number, it may not go very far for a small bank trying to meet mortgage and consumer loan needs when they must also meet regulatory standards for reserves.

Mr. Keating went on to point out that the big banks are busy competing overseas. The regional banks are meeting regional needs. With the U.S. economic recovery stuck in low gear, the temptation to look to Europe and Asia for capital is no mystery. In the U.S., there has been no movement on Dodd-Frank, which we may infer from Mr. Keating’s comments, is still a drag on the economy.

America’s community banks are described as the “fiber of America.” They are “saddled with regulation”, Mr. Keating says, forced to sort through 7,000 pages of complexity. “So borrowers are fleeing overseas. It’s not good for American banking.”

When asked about upcoming vacancies at the Federal Reserve Board, Mr. Keating reminded us these are presidential appointments. “It’s important for Obama to choose a community banker,” emphasizing that the U.S. needs to focus on lending at the community level.  This is critical, he says, pointing out that since fall 2008, when the economy collapsed, “We have lost one community bank a day five days a week.” This is a hard number to corroborate, since a quick check on the FDIC’s website shows just nine banks going into receivership so far in 2014.

Nevertheless, community banks are in trouble, according to Mr. Keating. They are spending 15% of their income on compliance. “How does that help?”  Community bankers are described as “character lenders and first mortgage lenders”, key to healthy small cities or less populated areas. A lot of banks are getting out of mortgages because they no longer have the capital. “How is that good for America?” opines Mr. Keating rhetorically. He’d like to see a focus on banks as mainstays of the economy once again; go back to a time when America had confidence in financial services.

Finally asked about the looming burden of one trillion dollars in student loan debt, Mr. Keating was concerned that young graduates are not getting degrees that will get them employed.  A high number of young Americans are still living with parents.  Eleven percent of 20-somethings are unemployed. Between servicing debt and a soft economy, young folks pull back and don’t buy a house. The average age of first-time home buyers in today’s climate has risen to 37. Back in the day, Mr. Keating bought his first home when he was 27. One of the moderators piped up with, “In Manhattan it’s 42.”

When asked about bankruptcy, Mr. Keating nodded that we could “maybe change bankruptcy laws”, but he did not elaborate. He agrees that graduates saddled with debt are not good for America. He wants to make sure that students who get loans are getting a marketable degree. This led to a sly dig from one host to another as he looked over at her and said “I think he was talking about that degree in radio and TV journalism.”  Boom. Thus ended the interview.

Economy, Student Debt, Hurt Home Buyers; Keating

http://www.businessweek.com/videos/2014-06-20/economy-student-debt-hurt-home-buyers-keating#r=rss

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  • How important is it to you for a debt consolidation company to offer financial education resources?
  • Takes your existing debt and try to settle with your creditors for a lower amount. If you pay off the settled amount, your debt will be considered paid in full.
  • Negotiates with your creditors on your behalf.
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  • Most settlement companies have you create a separate "escrow" account where you will make monthly contributions over a certain amount of time to contribute to your settlement. Once there is a substantial amount of funds to show your creditors, the settlement company will try to negotiate a lower amount of debt.
  • Combines all your debts and creditors into one monthly payment.
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  • You no longer owe your original creditors; instead you pay one monthly payment to your consolidation company.
  • Consolidation companies can help negotiate lower interest rates on your debts and help lower your total debt payment in the long run. A lower interest rate will lower the amount you owe in the end.
  • Allows you to consolidate all your different debts into one personal loan that can be paid off over time.
  • Can offer borrowers a lower interest rate with a longer payback term (compared to high-interest credit cards or medical bills). This will lower the amount of money required to pay off the loan over time.
  • Personal loan debt consolidation can be an effective way to raise your credit score quickly (within 3-6 months).
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