Big money worries even affect small, formerly remote Island
While financial upheaval roils Wall Street, New York, and political wrangling occupies Capitol Hill, Washington, D.C., Main Street, Martha's Vineyard is already feeling the affects of the downward spiraling economy in concern about bank stability, the construction industry, home prices, and charitable donations, say local business leaders.
While the Vineyard may be somewhat insulated in some economic sectors, it is not immune from uncertainty, and as on Wall Street, doubt about the economic future underlies concern for even the healthiest of Vineyard businesses. Yet several Island business are looking for, and finding, silver linings in the darkest of financial clouds.
The impact of failing banks, frozen credit markets, and unchecked fear among those who make decisions about huge chunks of investor capital hit the Bank of Martha's Vineyard last week in a way that senior vice-president Paul Watts described as very scary.
Photo by Ralph Stewart
The bank is a branch of Sovereign Bank, which saw its stock price plunge 72 percent when two large European investors sold all of their stakes in the Philadelphia-based bank. Both of those investors were already burned by the failure of Washington Mutual Bank, and the sale of Wachovia Bank.
Moody's Investor Service, a widely watched rating agency, downgraded its ratings on Sovereign Bank on September 2, citing the bank's sizable exposure to mortgage lenders Freddie Mac and Fannie Mae.
Sovereign Bank also replaced its chief executive officer in a move designed to restore confidence among investors.
All this, though Sovereign Bank, including its Vineyard branch, remains a healthy institution, according to Mr. Watts. "We're a strong branch, we're doing well. The bank has $12 billion in cash reserves. We're still making loans, we're still interested in making loans. Our deposit base is staying loyal to us," said Mr. Watts last week.
The bank's stock price rebounded from a low $2.20 per share last week, to $4.54 after the close of trading Wednesday.
The other two Island banks, Martha's Vineyard Savings Bank and Edgartown National Bank, have also spent much of the last few weeks reassuring customers of their financial health.
"Earnings were very good this year, our loan portfolio is very strong," said Fielding Moore, chief executive officer of the Edgartown National Bank. "That's helped us. People are moving money out of investments and putting money where they feel it's safe. We actually have money coming in."
"We're in great shape," said Bob Wheeler, executive vice-president of the Martha's Vineyard Savings Bank. "We're very highly rated by the various bank rating companies."
While executives at all three Island banks say they steered clear of the risky loans and complex investments which have toppled large commercial and investment banks, they are concerned about the effect a Wall Street crisis will have on the Main Street economy.
"We're concerned about what the impact is to the economy if there aren't some measures taken to alleviate the credit crisis," said Mr. Moore. "That really drives the economy. We're not part of that but ultimately it will affect us if the economy suffers and we go into a very deep recession."
Mr. Wheeler said the real estate and construction sectors are already seeing the impact of a softening economy, but he has not seen signs of a slow-down in the retail or tourism sectors. "It's tough to know this time of year," said Mr. Wheeler. "Things are slowing down from the summer, but is it just the normal slowdown? They [retailers and restaurants] were mobbed this summer. Some of the higher priced restaurants were down a little bit, but the Linda Jean's of the world did pretty well. The people that were here weren't buying like they have in the past."