Banks react to flailing economy

Heather Vitale

As the week of Sept. 19 came to an end, investors began to grab their stocks in hope that the world finance crisis of bad mortgages would come to an end. Many homes are being repossessed; people are filing for bankruptcy and leaving banks with the end results.

The crash has left the financial market unstable and in need of government attention.

“I wouldn’t call it a crash. I’d call it a crisis,” said James Bear, senior vice president of Butler Wick & Company on Main Street.

Bear said the bottom line is that the financial markets will lock up and some will lose money in the process. In the past, Congress wanted to get as many people into homes as possible, Bear said.

“Everybody bought into the idea that everyone should be in a house,” said Scott Stiegemeier, senior vice president and corporate secretary at Home Savings Bank on North Water Street. “Everyone bought a house that they couldn’t afford and didn’t read what they signed and ended up with a higher fixed interest rate than they


This all started 30 years ago, Bear said. When someone wants to take out a mortgage on his or her home they need to fill out financial information so the bank can determine whether the money will be paid back. Banks started giving loans out to people who initially did not have the financial stability to take out the mortgage. They made the lending requirements from banks so lax that now those banks aren’t seeing any of the money that was lent out, Bear said.

“People always say that real estate always goes up,” he said. “Now we’re seeing the opposite. A lot of people are sitting in their homes with no equity and watching the value of their house decrease.”

Everything freezes up when a situation such as this occurs, Bear said. It “clogs up the gears of the financial system.” This will make it harder for people to borrow loans or take out a mortgage when the banks own so many repossessed homes.

Bear said the Wall Street crash will affect everybody.

“People don’t realize how we’re intertwined with everyone,” he said. “Anybody with debt might face higher percentage rates because of this.”

Stiegemeier has a different perspective on how this crisis will affect the local economy.

“Kent as a whole will be fine,” he said. “We’re pretty steady because of the university.”

The people who will be the most affected are those approaching retirement because they have lost money that would have gone into their retirement funds, Stiegemeier said. Now they are going to have to work longer.

Customers have brought their portfolios into Home Savings because they’re shrinking, Stiegemeier said. Some people are “mortgaged up,” which means they have a first mortgage, home equity lines, maxed out credit cards and no room left for anything else.

The advantage of living in Kent is that the city doesn’t have high real estate costs. Surrounding areas, such as Aurora, might get hit harder with their financial stability, but Kent doesn’t have that problem, Stiegemeier said.

“We survived the ’80s,” Stiegemeier said. “We’ll get through this somehow.”

“The biggest concern is when we get thrown into a recession,” Bear said. “People who say ‘this won’t affect me’ – it will.”

A corporate representative from Huntington Bank commented, “It’s too soon to tell. We’re just sorting everything out like everybody else.” That was the only statement being issued to the media.

Contact public affairs reporter Heather Vitale at [email protected].