'Sky-is-falling' reports snowball troubled times

Oct 10, 2008

The news of the economy?s demise has been, according to some Houston experts, greatly exaggerated. ?The news was talking about a ?depression,? ? says Garrison Wynn, trainer, speaker and author with Wynn Solutions, who takes exception to the media coverage that uses such phrases to describe the U.S. economy. ?I can?t believe they said that in an article,? Wynn says. ?In the 1920s, you could have $2 million, the stock market plummets and you could wake up in the morning owing $2 million. One day you own a train and the next day you are a hobo riding on it. That?s the kind of thing that was possible. It?s not now.? Local experts agree that Houston has always been buffered somewhat from national economic troubles. (?Houston is the reverse of New York,? Wynn says. ?If you can?t make it here, you can?t make it anywhere.?) But as the forecast becomes cloudier, Houstonians, too, become nervous and more cautious with spending. A vicious cycle of frightened consumers who tighten spending tends to snowball the problem. ?The media paints the worst possible picture, and consumer confidence goes down,? he says. ?Your belief system creates your experience. The media shapes how you feel, and if you feel we are headed for the worst of times, you hang on to your money. You stop spending ?? and the economy slows. ?If everyone went out and spent money, it would help,? he says. ?But right now that sounds insane.? ?Confidence is the key to a turnaround,? says Ron Brounes, CPA, technical financial writer and president of consulting firm Brounes & Associates. ?Without it, the global economy will continue its downward spiral. Banks must have confidence to lend. Businesses and consumers must have confidence ? and ability ? to borrow and spend. Investors must have confidence to put those hard-earned dollars to work in functioning markets.? The American dream? Despite being shielded from the national elements somewhat, Houston home sales have steadily dropped and a Halloween e-cartoon featuring a group of trick-or-treaters surrounded by empty houses with foreclosure signs is making the rounds. ?Banks aren?t going to help you like they did,? Wynn says, ?especially if you are credit challenged.? In the case of lending institutions that were not proactive in strategizing a ?business development culture,? as he calls it, waiting around for loan applications to be dropped off would prove a useful activity only part of the time. ?Banks needed to hire people who could sell, train them and develop a culture that says, ?We are bankers and we?re going to help you,? ? says Wynn, who provides training for sales forces of several banks. ?The banks that didn?t do that found themselves in a different situation, and what happens is basically, they start offering loans to the easiest people to attract, which happens to be the people who can least afford them.? The mortgage crisis of the past year resulted from a ?new kind of loan? ? one that would result in a dangerous blow to the economy. ?Mr. and Mrs. $43,000 a year were told they could buy a $400,000 house,? he says. ?It was the American dream, but it was just a dream ? and it doesn?t work. The reality was they couldn?t afford to buy that house.? The good news Banks in Texas, particularly those in the Houston metropolitan area and rural areas of the state, continue to perform better than banks across the rest of the nation, according to a recent report by Sheshunoff & Co. Investment Banking, a merger and acquisitions valuation advisory firm for the banking industry. The exception, the company said, are banks in the Dallas/Fort Worth area. While 14 banks failed across the nation in 2008, including the FDIC-assisted sale of $307 billion Washington Mutual and the $812 billion Wachovia in the last week, Texas institutions are fundamentally strong, the report says. Woodforest National Bank reported on Sept. 30 that its third quarter earnings were at a record level. CEO Robert E. Marling Jr. also announced that 2008 will reflect the best earnings period in the history of the bank. ?This is a testament to the fact that we stayed away from subprime loans, purchasing investments that proved to be toxic or lending money outside of our community, all of which has led to significant problems in the financial sector,? Marling says. ?The best lessons come from the worst situations,? Wynn says. ?The good news is it is possible to learn big lessons from this. Texas probably suffers the least. We have a good economy in Texas and in Houston more than anywhere.? For their customers now struggling to plan through tough times, Wynn recommends banks take a short-term, flexible approach that will help customers in the short term and build loyalty in the long term. ?You may need to step away from the brilliant long-term solutions you?ve developed,? he says. ?If someone is drowning, you want to throw him a life preserver and not teach him how to build a boat. Where you may be worried about long term, they may be worried about Friday, the end of the month and the end of the quarter.? Can banks recover? ?Yes,? Wynn says, ?but they have to get back to telling people the truth, such as you can?t afford a house. If we are honest with people about the American dream then it won?t be just a dream.?
Read More: Houston Business Journal

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