With respect, I don't agree that all small town banks fall under the elaborate scheme that you have detailed.
It's not an "elaborate scheme". Small community banks are under capitalized, and don't have the same shock absorbers that the bigger banks do. They
are run by locals that favor their own.
The risks associated with small community banks are manifold: under capitalized, revenue tied to a single community, run by substandard management,
and concentrated income streams - i.e., not well-diversified. Any business analyst worth their salt will tell you the same.
Your community bank has $500 Million to 1 billion in assets? The 4 mega-banks have trillions of dollars in assets. Trillions.
Every board member grew up in the same area.
That's exactly the problem. It's called the "good old boys network". If you are African-American, a woman, or any other minority, good luck trying
to get a loan. Locals protect and favor their own.
The bank I use, offers a wide variety of services
If it's a community bank, they don't have the capital or wherewithal of the bigger banks, and they certainly don't have the same number and breadth of
banking services as bigger banks do.
Can your community bank manage the sophisticated banking needs of a Fortune 500 company like Coca-Cola? Didn't think so.
Community banks are small, with generally weak capital, highly concentrated loan assets in a small geography, and run by locals with sub-standard
management skills. If the management team had any talent or education, they would be on Wall Street as a senior executive, not in some small town
Big banks employ hundreds of thousands of employees, are international in scope, and have whole divisions dedicated to practically every area of
business and finance. They have specialized teams in everything from medical finance to cash management to overseas trading, among others. Community
banks have nowhere near the breadth and scope of the big banks in terms of the services they offer.
The big banks have MIT graduates running their computer systems, which make them more capable of warding off cyber attacks. A local bank might be
lucky to have a single person managing their IT department. There's simply no comparison.
that are underwritten by their own Trust & Financial Company just a few miles away.
The capital under management with a local community bank's trust company pales in comparison to the capital under management with the investment firms
on Wall Street.
They are not even in the same ballpark in terms of dollar ranges.
edit on 4-5-2013 by CookieMonster09 because: (no reason given)