Small banks weigh in on big bank bailout

CHICAGO The nation's smaller, community-based banks -- holding $1 to 5 billion in capital, which is small in the banking world -- say that while some of them are not doing well, they're not to blame for the subprime mortgage mess that created the need for a bailout. They blame Wall Street. But because they live on Main Street and rely on Wall Street to lend them money, they say any help Washington is doling out will have to accepted. However, some banks say it's more of a curse than a blessing.

Deposit insurance is a topic that customers at Diamond Bank, a 123-year-old institution formerly known as North Fed Savings, are talking about.

"I feel like especially with the way the economy is going now, where's my money going? Is my money going to get lost in the crisis?" said Ernest Clark, record producer.

Bank President Matt Gambs has been spending a lot of time on the retail floor with folks like Clark, assuring clients their money is safe.

"They want to talk to their banker, they want to know were you involved in this at all, the subprime, they want to know did you do those mortgages. So it is really information gathering. But, you know, we have actually seen more people come in and open deposit accounts trying to spread their money around, so that is a good thing for us," said Gambs.

But many institutions like Diamond Bank, which are part of the Community Banking Association of Illinois, say that the subprime mortgage mess and the ensuing global financial crisis were the product of high-risk Wall Street and big bank greed. However, now community bankers are likely to have to take Uncle Sam's money --with strings attached --to shore up capital resources because their competitors might. And that money could allow competitors to, for example, make cheaper loans.

"We're the people who calm people down. We are the people who have to make loans to small business that's not what they do and so it is hard not to kind of feel some anger about that," said Gambs.

Diamond hopes considering Uncle Sam's money will lead to calmer thinking about all things financial -- at least in Lincoln Park.

"I live on Main Street, I look people in the eye on Main Street," said Gambs. "You can't tell people how to feel, you can't step back form it and say, 'Hey I didn't create this problem. It doesn't exist here.' You can't say thing in absolute terms, that's what is different. Nothing's for sure. You can't talk that way."

Not every community bank will take money, and Washington says it won't be available to those that are especially weak -- which means that some banks are going to be buying other banks. According to the Community Banking Association of Illinois, that's a good thing because Chicago is the most fragmented major market for banking in the country.

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