Letters to the Editor

Weathering the financial storm in Massachusetts

There is no better time than now to get to know your banker. During these turbulent financial times, there has been a lot of confusion regarding the regional, national and global economic environment. The average person has been bombarded with unfamiliar talk of “bailouts,” “credit markets,” “foreclosures” and “delinquencies” throughout the media. These concepts can seem confusing and overwhelming.

To put it simply, financial institutions made loans to borrowers who ultimately weren’t in a position to pay them back. A $700 billion economic bailout package is in place to inject capital into financial institutions and strengthen the banking industry, resulting in more credit being available to consumers and businesses. This bailout has been put into motion, and it is starting to work.

This economic downturn led to significant increases in “foreclosure” activity, which is what happens when a lender legally repossesses a property after the owner falls behind in making mortgage payments. Foreclosure has been happening at an alarming rate because people were granted mortgages that in hindsight they could not afford. Today, there are fewer mortgage programs available, and loans are more difficult to obtain in our current market. Many houses and condominiums that are new to the market are being listed at foreclosure prices, which is driving down home prices overall.

This has obviously been a difficult time for banks. Many financial institutions have been impacted by this economic downturn. What is very important to remember is that the Massachusetts banking industry is very healthy.

An important factor for consumers who may be worried about the safety of banks is to understand is that just because a loan is delinquent, it doesn’t necessarily translate into a loss for the company. In many cases, delinquent loans will get paid and the bank will not incur any financial losses.

It cannot be stressed enough — your money continues to be very safe in a bank. Your deposits are currently federally insured by the Federal Deposit Insurance Corporation up to $250,000 per depositor, per bank. In many cases, it is possible for a depositor to have federal deposit insurance in excess of the $250,000 limit. In addition, banks like Mt. Washington Bank carry excess deposit insurance, meaning any deposit not insured by the FDIC is insured, in our case, by the Share Insurance Fund. You should check with your bank and inquire if they carry excess deposit insurance coverage.

I am proud to be part of a solid stable industry that operates in the Commonwealth of Massachusetts, and I must emphasize that no consumer has ever lost a penny in a Massachusetts bank.