Local banker on FDIC community banking advisory committee.

One thing Matt Williams would like to make clear is that a struggling economy has not treated all bankers badly.

“Many banks are in trouble but a lot of news articles lump all banks together and include investment bankers and mortgage brokers which are clearly not banks,” said Williams, president and chairman of Gothenburg State Bank & Trust.

Williams has a front-row seat to the banking business from a national perspective since his appointment to a 14-member advisory committee on community banking for the Federal Deposit Insurance Corporation.

The FDIC insures deposits at banks and saving associations and identifies, monitors and addresses risks to which they are exposed.

With the closing of 140 U.S. banks—the majority community banks—so far this year, Williams said it’s important to keep failures in perspective.

That’s because 900 banks closed in the late 1980s and early 1990s. He said community banks are viewed as smaller than the nation’s 15 to 20 largest.

Closures hit hardest in places like Georgia, California, Florida and Nevada.

“Banking remains profitable in 2009 but there are still geographic weaknesses primarily based on commercial, residential and real estate difficulties,” he said. “Statistics also show that there are still some non-performing loans nationwide although capital levels remain strong.”

Williams explained that the FDIC was created 75 years ago and operates a deposit insurance fund (DIF) paid for by member banks that are assessed premiums.

“It’s used to protect depositors in case of a bank failure,” he said, noting that no depositor has lost money in insured deposits since the formation of the FDIC.

When banks fail, Williams said FDIC officials take over management and facilitate the transfer of assets to another bank or liquidate assets.

The FDIC administration is paid from the DIF which is backed by the U.S. government.

Because of bank closures so far in 2009, he said the DIF has lost $34 billion although there is still $45 billion in reserve.

Williams said the FDIC projects the failure of about 140 more banks in 2010.

To make up for the losses, Williams said all banks on Dec. 30 will be assessed an amount equal to their estimated premiums for the next three years.

For that reason, he agrees with the increased assessment to keep FDIC-insured banks risk free for depositors during the worst recession in 70 years.

Williams said it’s a difficult time for the FDIC as bank failures cause them stress.

“They want to do what’s right for the industry and at the same time protect bank depositors,” he said.

Despite failed banks, Williams said he thinks the overall health of U.S. banks is good.

He thinks failures will level off and bank business improve through 2010.

Community banks in agricultural areas are performing well, Williams said, which is based on the fact that the majority of ag producers are seeing profits.

What concerns Williams and others on the FDIC advisory committee is that financial reform proposed in Congress to protect consumers from abuses that caused significant harm will affect community banks that have shown integrity.

The American Bankers Association is opposed to adoption of such legislation.

“If we abused our customers, they wouldn’t bank with us,” Williams said.

Some of the proposed reforms could create an environment that will make it difficult for some banks to succeed, he said.

The Obama administration is pushing hard to get those reforms passed before Congressional elections in 2010, Williams said.

Williams pointed out that the U.S. deficit continues to grow—fueled in part by an extension of tax cuts implemented by former president George W. Bush to stimulate the economy.

At the same time, he said the government is raising less money to pay off the deficit.

Historically high levels of unemployment at more than 10% are not helping, Williams said although Nebraska is only at 4.5%.

“It’s going to take six to seven years to get back to a fully employed workforce so I don’t see a quick economic recovery,” he said.

Consumer spending habits have also affected the economy.

Williams said there’s been a nationwide shift from Americans spending to saving money.

That’s good long term but doesn’t help a growing economy in the short term, he explained.

Many people concerned about safety and securityare saving at an unprecedented rate—not to a retirement fund—but for a rainy day, Williams said.

“That doesn’t show consumer confidence,” he said. “It’s a need to save one’s skin versus feeling good.”

The trend also means recovery will take time as confidence builds to the point where Americans again buy goods and services at the levels they did before the recession, he said.

As part of the FDIC advisory committee on community banking, Williams represents agriculture and rural economic development and is from one of the smallest banks on the committee.

The mission of the advisory group is to provide feedback and direction to FDIC director Sheila Baier and her deputies.

Williams became a member of the FDIC advisory board in September after he was encouraged to apply for the position.

More than 300 bankers applied to be on the board. The FDIC then examined applicants and selected 14 members.

Williams said he decided to serve because he felt a sincere obligation to represent community banks, agriculture and related businesses and rural economic development.

“I think these views are important to the FDIC,” he said.

The committee first met Oct. 15 at FDIC headquarters in Washington D.C. and will meet four times a year. Members serve a two-year term.

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