The timing couldn’t have been better. Months ago the Hauppauge Industrial Association scheduled an executive breakfast for March 19 to look at the financial industry’s impact on Long Island.
Well, just two day before the meeting, the Federal Reserve engineered the highly unusual rescue of a securities firm, Bear Stearns. And the Fed carried out other efforts to shore up the financial markets on a scale not seen since the Great Depression, some experts have said.
That gave the panel a lot more to talk about and talk they did.
The rescue, “really brought the credit market problem into sharp focus,” said moderator Pearl Kamer, chief economist for the Long Island Association.
And the credit market crisis has shown that “much of the nation’s recent prosperity is based on a sea of debt.”
But the bubble of easy money in the credit market has clearly burst. And Kamer said the nation’s economy could be in for “a prolonged period of unusual retreat.”
Some signs of changed lending habits are already being played out on a local level.
Michael Campites, a branch manager for New Jersey-based American Mortgage, which has a branch in Bohemia, said the creditworthiness of prospective borrowers is a prime concern among all lenders now.
He said that popular loans based on what borrowers said their income and assets were are no longer available. Banks will do more checking now. “Today if your credit is low, there is chance there is no funding out there.”
While the meltdown of Bear Stearns caught a lot of executives off guard, it shouldn’t have said, Ann H. Tucker, the director of Ivy Asset Management Corp., a hedge fund of the Bank of New York Mellon in Jericho.
She said that first clues the securities firm was in serious trouble came when two hedge funds connected to it failed last year.
Douglas C. Manditch, the chief executive of brand-new Empire National Bank and the contrarian of the panel, advises his staff to follow a simple rule on lending. He asks them, “Would you make this loan with your own money? If you wouldn’t, then you shouldn’t be doing it.”
One of the panelist saw a silver lining of more affordable housing on Long Island amid all the negative economic developments.
Said Nicholas M. Lacetera, the chief executive of People’s Alliance Federal Credit Union in Hauppauge, “The housing drop will provide opportunities for young people.”
--Carrie Mason-Draffen
But there slowdown could be a silver lining for affordable housing.