When it comes to avoiding the pitfalls that have caused the current economic crisis, the nation at large could learn a lot from the sensible people and businesses of the North Country.
To try to maximize their already bloated profits, hedge funds and high-flying investment banks on Wall Street spent years hatching exotic get-rich-quick schemes that became more and more complex and drifted farther and farther away from sound economic principles.
Most involved reckless borrowing, using money they didn't have to finance complex investment strategies they didn't understand. Lured by the financial windfalls that initially looked so easy, regular banks and investors became enamored with mortgage-back securities, derivatives and credit-default swaps.
When the house of cards came crashing down, the first casualty was trust. Stocks plunged because investors didn't know which companies were on shaky ground, since so many of them had indulged in all these risky schemes. Banks stopped lending to each other because they feared the same thing. They stopped lending to consumers because of all the unsound lending practices that had gotten the public at large so hopelessly overextended.
It's a financial catastrophe not seen since the Great Depression that has practically brought our economy to its knees.
But, around here at least, a lot more sanity has prevailed.
Our community banks and credit unions didn't listen to the siren's song. They continued to lend money to worthy borrowers, carefully checking credit worthiness and employment history. While some mortgages were sold off on the securities market, many others were held on their own books so local service and attentiveness could be provided.
So today, we don't have a severe local credit crunch. Credit unions and community banks still have liquidity and adequate money to lend. Larger banks with branches here also value the North Country as a safe and reliable place to do business. Some have received extra backing from the federal government's TARP (Troubled Asset Relief Program) funds and believe this is a good place to lend it.
This is at least a little good news for local auto dealers and sellers of furniture and other big-ticket items. Their worst problem is overcoming the fear consumers have from being exposed to the barrage of bad news day in and day out due to the turmoil in the nation's financial markets. It's not a lack of local lending availability.
Actually, in the North Country, it's a good time to buy big-ticket items such as cars, furniture or appliances. Interest rates are low, there are plenty of discounts and promotions, and product quality has never been better. Domestic cars are matching their foreign counterparts in quality and reliability, and appliances are getting more and more energy efficient.
If just a small measure of the North Country's sound financial practices had been found on Wall Street, perhaps the whole economic crisis could have been averted.