Saturday, July 12, 2008


The financial sector is hurting nationally, with the second largest bank failure ever being announced this weekend. But while IndyMac, which has nothing to do with Indiana as far as I can tell, will be shutting up offices, a new bank office is under construction in Rensselaer.

We have five banks, and this will not add to the five. Rather one of the five is relocating. The Kentland Bank presently has offices in a building shared with a bowling alley.

Why put a bank in a bowling alley? Not that many years ago, there were strict rules on entry into banking. One of the conclusions drawn from the many bank failures of the Great Depression was that banks could be too competitive. So the government decided that they should not compete so much. And banks probably were quite happy to support the legislation. But then when the opportunities arose, they found ways to evade the rules. And that is what happened here. Legally the bank, which I think was the State Bank of Remington, could not locate in Rensselaer. But the bowling alley was just south of the city limits, in an area that had had a post-office identity of Collegeville. So they claimed that they were moving in to serve not Rensselaer but Collegeville. The case when to court and the State Bank of Remington won.

But the victory was short-lived. The bank loaned extensively to farmers buying land that was rising in value. When the bubble burst, the land was often worth less than the loan, and the farmers defaulted. (Sound familiar?) One day I rode by and saw a sign saying that the FDIC had closed the bank. The next business day it was re-opened as a branch of Lafayette National. And when Lafayette bought the old Farmers and Merchants Bank, it left the space, which was then occupied by the present resident, the Kentland Bank.

When I moved to Rensselaer there were two banks and one savings and loan. One of the banks, State Bank of Rensselaer, is now a branch of National City.

The Farmers and Merchants Bank was bought out by Lafayette National. It is the only bank that does not have its drive up attached to the main office. It is a block away.
Indiana Federal Savings and Loan has gone through so many different owners that I cannot remember them all. It was a case of a big fish swallowing a little fish, and then the big fish got swallowed by a still bigger fish. The current big fish is 5/3rd Bank, which started in Cincinnati. Among previous owners were Pinnacle and Civitas.

After the barriers to entry came down, two additional banks moved to Rensselaer. The first, the Peoples State Bank of Francesville, after a few years merged with another small bank, I think in Kentland, and now is Alliance Bank.

The other seems to be unmerged, the Demotte State Bank, which has only been here about a year. I suspect its nice new office may have been an incentive for the Kentland Bank to build its own new structure.

So we have five banks in a little town of about 5000 people. You might think there would be no need for any other financial institutions. But we also have an office of the Farm Credit Services. I really do not know what it does.

And we have two payday loan places that make loans to people who do not have credit cards

If you think we have a lot of banks, you should see how many churches we have. Maybe another time.

(I may have gotten a few names wrong--there have been so many different mergers and acquisitions.)

1 comment:

Lonely Paul said...
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