Coloradans, like all other Americans, want our banking system to work properly and our banks to lend money and fuel our local economy.
On that note, we have good news to report today. The regulated banking industry in Colorado is solid, growing stronger and actively lending money to support business in our state.
In fact, Colorado banks actually increased lending 11.7 percent in 2008 from the year before.
That boost occurred despite a challenging economic environment, reduced loan demand, high-credit standards, weakening of some borrowers' creditworthiness and regulatory pressure to make only the safest loans.
There's more good news: The majority of Colorado banks anticipate loan growth for 2009.
This confident forecast is based on the strong liquidity and capital and reserves of our banks statewide, along with hope that prudent banking customers will want to borrow.
Recent examinations by federal regulators confirmed that 97 percent of the Colorado banks that control more than 99 percent of banking assets in the state are "well-capitalized."
The difference between real banks and non-banks
Throughout our current economic turmoil, Colorado banks have remained comparatively safe while other financial firms have contracted or collapsed.
The answer lies in the stark differences between genuine, regulated "banks" on the main streets of Colorado and the financial institutions on Wall Street.
Brokerage houses, insurance companies, hedge funds, mutual funds and Freddie Mae/Fannie Mae often are described inaccurately as "banks."
But they are not banks.
Real banks actually have the word "bank" in their name, and they are heavily regulated.
Federal regulators scrutinize the lending practices of real banks and order corrective action whenever necessary to ensure compliance. Unfortunately, non-bank entities aren't regulated or examined to protect their customers' loans and deposits.
Real banks also pay FDIC insurance premiums to protect customers up to $250,000 per account category.
No depositor has ever lost a dime of FDIC-insured deposits because FDIC is backed by large reserves and the full faith and credit of the U.S. government.
The difference between responsible and reckless lending
To appreciate the value of responsible lending practiced by real banks, consider this: in 2006, Colorado banks made 58 percent of mortgage loans, and they were responsible for 18 percent of foreclosures.
Meanwhile, non-bank lenders made 42 percent of mortgages, and they were responsible for an astounding 82 percent of foreclosures. This is the painful result of reckless lending carried on by non-bank financial institutions.
The truth about the 'credit freeze'
Despite the news reports you have heard, there is no universal "credit freeze" in Colorado.
Real banks on Main Street are open for business and supplying as much credit as they always have. But unfortunately, they can't satisfy the overall demand for loans now that non-banks have virtually stopped lending.
In recent years, real banks provided about 30 percent of all loans in the United States while unregulated non-bank entities provided the remaining 70 percent.
That gap is impossible to fill immediately because banks are maintaining the same prudent loan standards they always have - to make sure their borrowers will be capable of repaying their loans without unreasonable risk.
Colorado's banks are working hard to meet the credit needs of our local economy.
They are achieving impressive success, and the outlook for 2009 is bright. Our banks are poised to issue more loans this year - despite the economic downturn.
As always, we will provide these loans in a prudent manner to ensure the financial success of our borrowers and bank - and help safeguard the security of our banking system.
Tom Goding is president/CEO of Bank of Colorado Bankers Association; Terry N. Jost is president/CEO of Mountain Valley Bank; and Pete Waller is president/CEO of First National Bank of the Rockies. Data provided by the Colorado Bankers Association