ALBANY, Ga. -- AB&T President Luke Flatt told the Dougherty County Rotary Club Tuesday that several factors led to the mortgage market meltdown four years ago which brought the nation's economy to its knees and to the brink of collapse.
"Looking back to the '90s to where we are today was the result of several factors," Flatt said. "First there was a general breakdown in values, not just in the financial markets, but all over the country. Investors were demanding greater and quicker returns and some of the borrowers themselves wanted bigger and better more quickly -- all these were factors in the collapse of the mortgage market. But greed was the ultimate factor.
"In the movie 'Wall Street' Gordon Gekko said 'greed is good.' Well as things turned out, greed ain't so good."
As the collapse of the subprime market reverberated through the financial industry and the nation, banks collapsed and foreclosure rates spiked. In 2008, the government launched The Troubled Asset Relief Program (TARP), to purchase assets and equity from financial institutions to strengthen the financial sector.
Three years later with most of the $245 billion repaid, the market has stabilized somewhat.
"My perspective today is that the (financial) industry is healing and things are getting better," Flatt said. "There have been positive changes in recent months. We are no longer in the crisis stage but we still have problems.
"I think more bank closures are set to occur."
Flatt said larger banks had access to TARP funds which helped get them through the crisis.
The larger 'Money Center Banks' are farther along because they had access to capital and TARP money," The AB&T president said. "they also had less concentration of problem assets such as real estate loans."
"The regional banks are also healing because TARP funds were a major contributor into maintaining their health."
But Flatt said the community banks, located farther down the economic food chain, had a different set of problems.
"Community banks like us did not have the kind of support offered to the money centers and regional banks," Flatt said. "We couldn't qualify for TARP. We were deemed 'not healthy' because we were not large enough. We had to raise private capital and the community responded."
Last year, AB&T generated more than $5 million through a stock recapitalization which months later helped the bank escape the gaze of federal regulators.
So as the country and financial industry keep up the slow climb out of the hole, what does Flatt see down the road?
"I think we'll see fewer banks closing and more consolidation in the industry," Flatt said. "I believe we'll also see the community bank environment redefined. We'll go beyond the community boundaries, perhaps more in line with wide-spread geography like metro areas or south Georgia.
"In the future I think that is how we'll define our communities."