State's bank bust draws Congressional panel

By Paul Donsky

The Atlanta Journal-Constitution

For years, Georgia was the envy of much of the nation for its robust economy and seemingly endless population boom.

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Bob Andres, bandres@ajc.com Some, including former Atlanta Mayor Andrew Young, said regulators should go easier on the state’s community banks, many of which are reeling from losses tied to the collapsed home building industry.

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But the party stopped a few years ago, and on Monday a Congressional subcommittee decamped to the Georgia State Capitol to focus on the hangover: a wave of bank failures and entire neighborhoods decimated by foreclosures.

During three hours of testimony, the House subcommittee – led by former Presidential candidate Dennis Kucinich, an Ohio Democrat – heard from bankers, builders, home owners and academics in an effort to better understand the Peach State’s problems and determine how the federal government could help turn things around.

Plenty of ideas were batted around.

Dan Immergluck, a professor at Georgia Tech’s city and regional planning program, said Congress should be much more forceful to force mortgage servicers to do a better job of modifying loans of home owners struggling to make payments.

“There must be a hammer put down,” he said.

Others, including former Atlanta Mayor Andrew Young, said regulators should go easier on the state’s community banks, many of which are reeling from losses tied to the collapsed home building industry. Since 2008, 25 small Georgia banks have been closed down by regulators, the most in any state.

Joe Brannen, president of the Georgia Bankers Association, said regulatory orders designed to help improve troubled banks often have the opposite effect. For example, he said, banks under regulatory enforcement actions are being told to shed wholesale, or “brokered,” deposits, a move that only further erodes their financial health.

U.S. Rep. Lynn Westmoreland, a Republican from Coweta County and a member of the House oversight and government reform subcommittee, said the government’s Troubled Asset Relief Program (TARP) that helped rescue some of the nation’s biggest banks should be tapped to help shore up small, community-based banks. Even a few million dollars could help small banks weather the storm, he said, saving the big expense of having to clean up after a failure.

The bureaucratic proceeding took an emotional turn when Atlanta home owner Saqirah Redmond recounted her experience trying to refinance to a fixed-rate mortgage only to find out two years after closing that the interest rate had become variable. Her payments skyrocketed, and as she fought with her mortgage servicer she lost her job and got divorced.

Kucinich, visibly moved, vowed to not forget Redmond’s story.

“My Lord, this is very powerful testimony,” he said.