Dittman describes what got the economy in trouble
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BY RICHARD PIERSOL / Lincoln Journal Star
Between mildly optimistic presentations by Federal Reserve economists, who were in Lincoln on Wednesday on their annual tour of Tenth Fed District cities, the dean of Lincoln bankers, Alice Dittman, gave a quick summary of what she believes has put the U.S. economy at risk.
“Do you suppose there was a corruption of lending standards that was not only encouraged but promoted to boost the economy through new home production, which leads to new shopping centers and other ancillary businesses?” the chairwoman emeritus of Cornhusker Bank asked, not so rhetorically.
The implications of poor U.S. financial management at many levels hung heavily in the air at The Cornhusker hotel, even as the Fed economists predicted less severe economic fallout in Nebraska than elsewhere.
That same evening, the U.S. Senate voted to rescue financial institutions from bad decisions and, presumably, the U.S. economy from the worst possible consequences.
Life is full of temptations, political, financial and otherwise, according to Dittman, who was among scores of local business leaders invited to the presentations.
“Remember ‘a chicken in every pot’?” she asked, recalling the campaign slogan of the luckless Herbert Hoover, not to mention his “car in every garage.”
“A homeowner in every house,” she said, “without regard for the discipline it takes to buy a home and consistently make the payments.”
Dittman was just warming up.
The constriction of credit allegedly afflicting big financial institutions that are afraid to lend to each other — among the reasons given for the Senate’s need to act — isn’t a problem at Cornhusker Bank.
Its branches have signs that say, “Loans on Sale.”
“It can’t be more clear,” Dittman said.
The aforementioned mortgage-related credit ailments are infecting “the high fliers,” she said.
Nebraska has had the good fortune to be insulated so far from the worst of the economic troubles brought down by others, according to Dittman and Omaha Fed Branch executive Jason Henderson, who described the state’s economy as very resilient, slower than it was earlier this year but holding up much better than most of the rest of the nation.
That’s thanks to the agricultural boom and, encouraged by the low value of the dollar, brisk exports.
And no thanks to the profligacy of the age, according to Dittman.
“Congress, in its wisdom, discontinued the deduction of interest payments on cars, so people finance cars through the equity on their homes, to extremes,” she said. “Where does it end up? First mortgage, second mortgage, a charge card that ends up being a third mortgage. This has been going on for a long time.
“Credit is like fire: It can warm you or burn you. A lot of people got too close,” she said.
Particularly angered by the collapse of Fannie Mae and Freddie Mac, the mortgage finance agencies created by Congress, Dittman says of them: “I don’t understand who was watching or not watching.”
“We’ve got to turn this around and teach thrift,” she said, describing the joys of its practice.
“I feel very strongly (about it),” Dittman said.
Reach Richard Piersol at 473-7241 or dpiersol@journalstar.com.
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