Steve Adubato: Banking on the Garden State

Amid the current financial crisis, we wanted to know the condition of our New Jersey-based banks. To find out, we turned to Montville resident Gerald Lipkin, chief executive of Wayne-based Valley National Bank, New Jersey’s largest commercial bank (with $14 billion in assets) and the state’s first to voluntarily accept an infusion of cash under the federal government’s $700 billion financial rescue program.

How are area banks doing?

At Valley National Bank, 99.5 percent of our residential mortgages are current; 98.5 percent of our automobile loans are current. Fortunately, in New Jersey, very few banks made subprime mortgage loans and very few communities are exposed to those loans. Therefore, New Jersey is in a pretty strong position.

Is the state experiencing an economic crisis?

It could have one. A lot has been said about the direct impact of the economic crisis on the consumers and corporations within the state. However, also of concern are the municipalities, which are currently having difficulty borrowing. The lack of liquidity within this arena not only raises the cost [of borrowing] to each town, but may directly reduce the services provided. One of the strategies the governor presented to stir economic growth throughout the state was to encourage municipalities to deposit their cash flows into local banks. Historically, this was customary. However, a few years ago, the state initiated a program which allowed local New Jersey municipalities to deposit funds in institutions throughout the country…. The governor is now attempting to drive some life back into the state by once again encouraging municipalities to direct their excess cash flows to local financial institutions, which have a vested interest in the long-term sustainability of New Jersey’s economy. I believe this is wonderful; however, the amount of money they are thinking of moving from the non-local funds into New Jersey banks is relatively small and will not solely have enough of an impact.

What is on the horizon in 2009 in terms of the credit crunch for New Jersey consumers?

The federal government has taken some steps to inject capital into the banking system, which is going to translate into the ability of banks to make more loans. What we are facing right now, however, is a crisis of confidence. The average person on the street turns on the TV or radio and hears nothing but bad news from the media and begins to believe everything is going to get worse. As a result, they individually start to cut back and that only exacerbates the situation.

For example, the individual on the street hears that the economy is contracting and the first thing they decide is that instead of going out to dinner twice a week, they only go out one night. As a result, the restaurant sees fewer customers and then lays off staff or sees lower profits. Then the person owning the restaurant holds off buying a new car. Then the car dealer who didn’t sell the car turns around and says, things are bad, I am not going to buy the new house. It feeds on itself.

Valley National has undertaken an aggressive ad campaign that addresses the current fiscal situation. What is your thinking?

We took on the campaign to reassure our depositors and customers that our bank is sound, our bank is safe, and they can sleep at night. The federal government came in and increased the FDIC levels up to $250,000 per individual account. The average person on the street doesn’t have near that amount on deposit, but there is concern on the street that people are worried. The American public needs to know that if their money is in a bank, they don’t need to worry.

Steve Adubato, PhD., is an Emmy Award-winning anchor for Thirteen/WNET and a media analyst and columnist for MSNBC.com, who also appears regularly on CBS 2. He is the author of the book Make the Connection, as well as his newest book What Were They Thinking?, which examines highly publicized and often controversial public relations and media mishaps. For more information, log on to www.stand-deliver.com.

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