The Importance Of Locally Owned Banks

What is the toll that communities, especially poorer ones pay when locally owned banks with local ties are taken over by larger ones? This article describes how the loss of just such a bank has affected Maywood, a working class suburb of Chicago.

The experience of Maywood, IL may be indicative of other casualties that often go unnoticed when banks change hands. It also sheds light on the importance of locally owned banks - in this case the bank owner was well-known for his philanthropy in poorer neighborhoods.

"Across the country, many have bemoaned the loss of locally owned banks, worrying that a faceless national bank will have little interest in a community - aside from making profits. Perhaps nowhere has that issue played out more publicly than in the Chicago area, where Mr. Kelly's Park National Bank was as well known for its philanthropy as for its financial products.

For more than a decade, a silver-haired banker from River Forest named Michael E. Kelly - owner of Park National Bank in the Chicago area and eight others around the country - took an unusual interest in Maywood, decidedly more blue-collar than its neighbors, and its residents are predominantly African-American. He did things most bankers don't do, e.g. buying homes out of foreclosure, renovating them and selling them at cost.

Last fall, Mr. Kelly's private banking empire collapsed, and his profitable, time-tested playbook as a banker and philanthropist failed amid his own misjudgments and the brutal headwinds of the financial crisis. At the direction of federal regulators, his nine banks were acquired by U.S. Bank, the nation's fifth-largest bank, based in Minneapolis."

Full Story: The Town That Loved Its Bank



Credit Unions

In Canada, or at the very least in the province of Manitoba where I live, we have a very strong system of credit unions. These are essentially the same as banks in terms of the services they provide, but they are member owned and are much more likely to be real supporters of the community. In our case, the big banks wouldn't lend us anything to buy rental properties in the low-income inner-city neighbourhood where we live, despite our business plan being solid. Our local credit union (which actually three small branches within walking distance of us) was more than happy to help, and has been wonderful to work with. The rental properties have been a success so far, and we are able to provide good quality safe housing in an area that desperately needs more of it. We have established a great working relationship with our personal banker and can call him up or email him whenever we need help. Needless to say, we're moving all our banking to this credit union.

This credit union also supports many small scale community development programs, has systems in place to help low-income families become homeowners, provides other services geared to the needs of inner-city residents, and is an excellent corporate citizens.

If you can, skip the big banks altogether!

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