After the terrorist attacks: What bankers can do to help restore confidence in the U.S. economy

Northwestern Financial Review, Nov 1, 2001 by Barlow, John

The events of Sept. 11 have scarred us for life but they also have revealed a side of America that we may have forgotten. If we don't use this as' an opportunity to build a stronger America, then the terrorists have won. Our responsibility as bankers is to maintain a strong economy. What can we do?

A recession is defined as two consecutive quarters of decline in gross domestic product. Two-thirds of the GDP comes from consumer spending, and spending is heavily influenced by attitudes. Many economists are worried because consumer confidence plunged by 16 points in September, the largest drop since October 1990. If consumers won't spend, then the economy will be stuck in a rut.

To understand the challenges ahead for the banking industry, we need to examine the gravity of the situation. First, consumer confidence was falling before the Sept. 11 terrorist attack. After 10 years of uninterrupted economic growth we were already experiencing a decline. The index fell by 26 points in the 12 months prior to the August 2001 measurement. Second, the index is an aggregate of measures for both the present situation and future expectations; and it can change quickly. Attitudes often return to pre-crisis levels within a few months, more quickly than the actual economy. Finally, the Federal government has been running a budget surplus and we are not fighting inflation. Both of these factors were against us as we entered a similar economic challenge in August 1990 when Iraq invaded Kuwait.

There are certainly industries and individual businesses that will be negatively affected by both the events on Sept. 11 and the economic deceleration that occurred before then. It would be prudent to assess your customer base and prepare a list of those clients who could be affected. Remember that seasoned businesses that have lived through the recession in 1990 are more likely to know their options and the need for changing business plans. We hope that the risk in your loan portfolio may not be as great as it seems.

Here is a list of other ideas: a Communicate to employees. Each front-line officer and teller should know that your bank takes its responsibilities for stimulating the economy seriously. We are a united America, and this is our job. Use your Y2K plan as a model for employee communication.

* Visit affected customers. If your loan policy is changing, or if your bank's willingness to stand by a specific company during tough times is about to wane, let them know. A quick "no" to a loan request with other suggestions is better than a prolonged "yes."

* Stick with your planned commitments. If you were going to open a branch, do it. If you are planning an acquisition, go forward with conviction. Any hesitation will cast a shadow of doubt on your own confidence.

* Review your own disaster recovery plan. For a large bank, think about the consequences of losing all your technology and half your employees. For a small community bank, think about losing it all.

Like most times of crisis, the events of Sept. 11 have created an opportunity to reflect on our own values and those in our business lives. The terrorists that committed these crimes represent the worst in human values. They envy what we have achieved and wish to tear it down. In our own businesses, do we celebrate the success of others or do we enjoy seeing a competitor fail? These terrorists demand one religion and do not tolerate differences. Do we accept diversity in our employees and customers or do we surround ourselves with more of the same? These terrorists profess a doctrine of peace while creating terror. Do we make promises in business or our personal lives that we know we will not keep? These terrorists exist because their host country is afraid of them. Do we allow dominant business or personal relationships to compromise our values, or do we do the right thing even if we might suffer financially or personally for a short time?

The men and women who entered the World Trade Center on Sept. 11 did more than try to save lives. They provided a great example of courage and duty. This is a great time to be an American and an important time for every banking professional. We will honor the heroes of Sept. 11 through our actions in the coming months. Remember, it is our economy that the terrorists want to destroy.

John Barlow is president of Barlow Research, Inc., Minneapolis.