From the Editor

David Staats: Idaho’s zombie banks

December 3, 2013 

Staats, David

David Staats

SHAWN RAECKE — Shawn Raecke/ Idaho Statesman Buy Photo

I first encountered the term “zombie banks” during the financial crisis. It refers to banks whose conditions are so poor that they need government support to survive. They’re walking, but are they really alive?

So I noticed BI columnist Peter Crabb’s use of the term in Statesman reporter Zach Kyle’s Dec. 2 story about Idaho’s financially troubled small banks. Much of the story focused on two Boise banks that still hold money from the government’s Troubled Asset Relief Program. Congress created TARP in 2008 to help stop recessionary bleeding. Crabb, an economist, said Syringa Bank and Idaho Banking Co. would have died without TARP money.

While other Idaho banks that took TARP money have paid it back, these two have not. Crabb says they’re only semi-viable, blocked by regulators from adding branches or services.

Neither bank returned Kyle’s phone calls for the story. We expected as much. Bank executives don’t want to talk to the press about this. They don’t like it when we report about TARP money and the consent orders regulators make them sign.

Banking is one of the most heavily regulated businesses in America. The government will do whatever it takes to stop bank runs, to preserve confidence in lending and lenders. Joseph Schumpeter’s “creative destruction” is unwelcome.

That’s why Syringa and Idaho Banking Co. are still in business. That’s why they’re zombies.

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