Upside To The Economic Downturn

With all the bad news about Banks in this last year, it seems that local Berkshire Banks are doing pretty well.

That's the news Berkshire Eagle Business reporter, Tony Dobrowolski, wrote about in the Saturday May 23 and Tuesday May 26 issues of the Berkshire Eagle. In his Saturday article, Berkshire Bank To Return $40 Million To Treasury, Dobrowolski reports:

Berkshire Bank has received approval to return $40 million that it received last fall as part of the federal Troubled Asset Relief Program. Following approval from the U.S. Treasury Department, the bank said it expects to return the money by the end of the month, drawing funds from its cash assets. It does not expect to sell additional stock to repay the government. Berkshire received the funds as part of the Capital Purchase Program, which was a core component of the Troubled Asset Relief Program — or TARP — that set aside $787 billion to help keep the country's credit flowing. The Capital Purchase Program was only available to banks that already had strong reserves."

Legacy Bank had earlier requested $20 million from TARP and then its Board turned it down. Apparently they didn't like the requirements that went along with accepting the money. Turnabout from Berkshire Bank appears to be for similar reasons. The reason for the loan originally was to release credit to other needy banks. The May 23 report indicates they can expand credit without the TARP. National controversy surrounding TARP appeared to have its impact on Berkshire Bank's decision as well.

Dobrolowski's Tuesday article, Local Banks Make The List, reports,

"Berkshire County's two largest banks are the only county companies included in the Boston Globe's recent rankings of the top 100 publicly traded corporations in Massachusetts. Berkshire Hills Bancorp of Pittsfield, the holding company for Berkshire Bank, is ranked 41st. Legacy Bancorp of Pittsfield, the holding company for Legacy Banks, is 84th. Berkshire Bancorp was 78th in The Globe's top 100 rankings last year. This is Legacy's first time on the list, said the bank's President and CEO J. Williar Dunlaevy."I'm proud for the bank," Dunlaevy said on Friday, adding that companies that make the list usually benefit from their size. "I have to give credit to the bank and the community. I think it's great that Berkshire County would have two banks among the top 100 firms in the state."

Last November we wrote a blog post about Berkshire Bank, Berkshire Bank Applies For Bailout Money. Conditions in November involving banks indicated that "bailout" meant unsound. Berkshire Bank and Legacy did not believe themselves unsound. In the case of Berkshire Bank they wanted to expand credit lending to area banks and businesses. Their recent statement indicates they can do this without either government help or stockholder help, that sufficient cash reserves exist. Their turnabout is also to restore whatever lack of confidence local consumers may have had in the bank with their initial acceptance of government funds.

This represents a glimmer of good news in an otherwise large ocean of bad news about banks. Thought you would like to hear a little good news for a change!!

Memorial Week 2009 - A Time For Reflection And Review

Today is Memorial Day. Yes, yes, I know. The"official" holiday of Memorial Day is celebrated the last Monday of May; this year May 25. But May 30 is the original day set aside by the United States Congress in 1868 to remember the dead of both sides of the Civil War. It was then called "Decoration Day". It was since much later changed to Memorial Day -- a day of remembrance for of those no longer with us -- friends, family, and others. It is also a time for reflection and review. (For an informed overview, history of Memorial Day, see Wikipedia's entry here.)

So, this is really Memorial Week, the official start of Summer tourism in the Berkshires and throughout New England resort area. The annual migration to Pittsfield and surroundings has begun. Tourism is a major part of the economy of the Berkshires. How summer develops will reflect the economy. Will people still vacation here or stay at home? Labor Day signifies the end of Summer tourism, although for some, the true end of Summer tourism is October 12, Columbus Day.

Already gas prices have started to climb again. They really began creeping up Mother's Day. Now gas prices in the area are averaging near $2.50 per gallon rates. A year ago we were entering the $4 range with no end in sight. The prices broke in November, going down below $2 for the first time. They stayed down until May 2009. (See Motor Trend's Gas Price Locator for Pittsfield area prices and AAA's fuel gauge report on daily state and region prices.)

Reflecting on oil and gas increases to sustained $4 + prices, we see immediate and far reaching effects that have thrown the US economy into one continuing crisis after another, making it especially difficult for small businesses to stay afloat, but also major Fortune 500 companies. Witness the bankruptcy of Chrysler Corporation and the coming bankruptcy of General Motors Monday June 1st. Of course, it was more than gas prices that led to the collapse of the automotive industry in the United States, but for the consumer it was the key. Companies with large inventories on dealer's lots, inventory that did not move, together with crisis in credit financing, the bank bailouts and bailouts of the auto industry. Great losses have occurred. Even Toyota experienced billion dollar losses and Toyota has very diversified offerings, something that could not be said for either Chrysler or General Motors. Auto dealers not moving inventory are offering "going out of business" sales now. Long term relations between dealers and the auto industry are being severed through the bankruptcy restructuring process. The automobile industry will survive but not as the mega-giants they once were.

Another impact of the automotive industry collapse has been on parts suppliers and credit financing agencies such GMAC (General Motors Assistance Corporation). Part suppliers Delta and Visteon are in bankruptcy. (See Business Week article on this). For consumers availability of parts is always a problem Meanwhile the taxpayers are guaranteeing Chrysler's warranties.

Collapse of the automotive industry has been impacted by its inability to confront major trends in the manufacturing economy -- the larger context of the problem. Forbes Magazine has just published a major special report, Made in America, focusing on major manufacturing trends since 1979. These articles represent an informed analysis of what has happened and what needs to happen for the "second American century." The manufacturing sector has changed dramatically. Currently there are 12 million Americans in manufacturing where it was once 19.5 million in 1979. The 12 million that still have jobs have advanced in productiviy and efficiency. Much more is produced with 12 million than the 19.5 milion. The reason for increase in productivity in two words: the Techological Revolution. The effective mating of computer and machinery together with robots and increased sophistication. This has led to manufacturing productivity at the highest level ever $1.6 trillion, according to John Engler, President of the National Association of Manufacturers, in his Forbes article, "Forging a Second American Century", Economist Robert Reich, author of Supercapitalism, foresees in his article, "Manufacturing Jobs Are Never Coming Back" a different scenario. According to Reich unskilled jobs are not coming back and this is a worldwide phenomenon. Instead manufacturing is calling for highly skilled jobs with machines and robots doing the repititive and and even skilled work. Whatever you think this report represents a significant attempt at understanding our current predicament. It is education and continuous training that is needed.

While we're reflecting on these trends and the reemergence of increased gas prices, hopefully you'll take a moment or two to enjoy your summer vacation, wherever you take it. Even in the great recession we're going through, there are positive developments and opportunites to be had.

During this Memorial Week I hope you've taken time to Remember. Remember those no longer with you and those who are still living. And have a happy Summer! Enjoy the beautiful Berkshires!