From the pages of
Sublette Examiner
Volume 8, Number 28 - October 2, 2008
brought to you online by Pinedale Online

Local Economy Should Remain Stable

by Derek Farr

Superlatives are in order as the nation’s financial system faces a crisis that some experts compare in severity to the Great Depression.

The crisis redlined Monday when Congress rejected U.S. Treasury Secretary Henry Paulson’s $700-billion bailout plan for troubled financial and mortgage institutions. The bill’s failure sentmarkets across the globe into steep decline.

All the while, Sublette County is remaining relatively stable and the energy industry is likely responsible for shielding us from some of the fallout, according to First State Bank of Pinedale President Bill Kuhl.

“We’re in pretty good shape,” he said.

Kuhl gauges the county’s worry level as “medium to low,” saying there is less to worry about here than in other parts of the country. “I would say one thing (in Sublette County) that is fairly unique, is the lack of dramatic increases and decreases in the housing market in the last 18 months,” he said. “I don’t feel here we’ve had a huge drop in housing prices where all across the country there have been.” A massive drop in housing prices significantly contributed to the current economic troubles.

Low interest rates paired with a frenzy of sub-prime mortgages created high-risk, lower-income borrowers whose houses were only affordable in perfect market conditions. As mortgage rates rose and the housing market cooled down, sub-prime borrowers began to default en masse. Those foreclosures crept into the larger financial picture as components of “assets” brokered by giant investment firms.

While those assets contained a low percentage of bad loans, their presence made the assets unsalable.

Eventually the “toxic” loans poisoned enough assets to lock up enormous sums of money, grinding the financial system to a halt. Without liquidity – the ability to borrow and loan money – experts predicted a collapse of the global financial system, and until liquidity is restored those experts may be right.

But Sublette County has not only avoided the housing-market crash, it has remained protected from global economic instability.

The same factors that make the county boom are the same ones shielding us from economic volatility.

“I think (a lot is) attributable to the oil and gas industry,” Kuhl said. “Because of the need for housing they bring when they come to town.”

Kuhl is not alone in his assessment.

Jeff Patterson, 1st Bank president, agrees, saying the county’s relatively stable housing market is a product of our local economy.

“It just doesn’t make sense to look at real estatemarkets on a national level,” he said. “Because what goes on in Florida has absolutely nothing to do with what’s going on in southwestWyoming.”

In southwest Wyoming, the energy boom has built a small island of relative economic stability.

But Patterson warns the county’s apparent immunity to the larger economic picture doesn’t shield Sublette residents from the crisis’ financial burden.

“I think it should worry everyone primarily because the taxpayer is on the hook,” he said. “What that means is our national debt is going to go up and it’s already astronomical.”

It is the confidence of the American worker that produces the most concern. In a weekend poll conducted before Monday’s market losses, half of the respondents reported being worried about a drop in pay or benefits.

And while there is very little an average person can do to bring liquidity into the financial system, there is plenty an average person can do to put his/her finances in order.

Kuhl said people need to monitor their credit scores now more than ever.

He said the difficulty of getting credit in today’s environment might tighten credit standards. “And if they tighten their standards... people may not qualify whereas a couple of years ago they would have.”

He suggested establishing two to three months’ worth of savings for a rainy day and then “go ahead and start paying debt down.”

In all, both Kuhl and Patterson have a cautious yet optimistic outlook for the county’s financial future.

Patterson pointed out there are no troubled banks inWyoming, “particularly in our area,” and any savings that fall under the FDIC are guaranteed should a bank fail.

On the bigger economic picture, Patterson sees the nation’s economic stability in terms of the government’s commitment to the system.

“You know that the government is standing behind (the economy),” he said. “And your faith in the financial system should be as strong as your faith in the government.”

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