A June 10 Wall Street Journal (WSJ) article on Georgia bank failures has kindled a rift between Douglasville Mayor Mickey Thompson and Douglas County Bank CEO Billy Mayhew.
The WSJ article reported that while Georgia is home to just 4 percent of all banks, it accounts for 20 percent of the nation’s bank failures, the highest rate of any state.
The article cites the example of Thompson pulling $9.4 million of the city’s funds from the Douglas County Bank several months ago because of concern over the bank’s solvency. The bank was one of several U.S. banks placed on an FDIC (Federal Deposit Insurance Corporation) watch list, requiring extra reports and observation.
Thompson said the funds transfer was done simply to protect the taxpayers’ money. However, Mayhew said he’s upset with the way the move was handled. Both men said the interviews with WSJ reporters were held about six weeks ago.
“Our intent was not to cause any damage or harm to where we had the money but to protect taxpayers’ money,” Thompson told The Douglas County Sentinel last Friday. “It was a tough decision. We know these folks. It was not about any person or particular bank, it was strictly business.”
Thompson called the concern the same as anyone would have with more than $250,000 in any one bank covered by the FDIC.
“We would’ve been negligent if we hadn’t done anything and lost money,” he said. “We have to do everything possible to protect the money.”
Thompson called the current economic conditions “unchartered waters” and said it wasn’t long ago that people “didn’t even think about banks going out of business.”
He said the city’s money has been spread out to several banks, including a checking account at Douglas County Bank.
“We haven’t stopped doing business with these folks,” Thompson said. “We still have a city checking account there, and I have a personal account there also.”
However, Mayhew told the Douglas County Sentinel Tuesday that the city funds were “100 percent safe” at Douglas County Bank. He said state law requires banks to secure such deposits above the FDIC limits with U.S. Treasury securities.
“The mayor didn’t have the courtesy to pick up the phone and ask about the risks,” Mayhew said. “It’s not good business for local government to not discuss (such transactions) with the bank.”
Mayhew said Douglas County Bank is secure and “our numbers are still great.” He said loss of the city funds has not hurt the bank, but the mayor’s action “stepped over the line” of courtesy.
“We need to keep things positive,” Mayhew said Tuesday. “All banks are not as good as they were two years ago.”
According to the WSJ article, the states with the most new bank startups since 2000 are the ones now suffering the most failures. Georgia has had 112 new bank startups and leads the nation with 11 bank failures since 2008. Most of the failed banks are clustered around Atlanta, the article says. California is second in bank failures with 9 and it had 126 new bank startups since 2000.
According to the Douglas County Bank Web site, the bank was established in 1974 and has two offices in Douglasville, one in Lithia Springs and one in Dallas, Georgia.
