We've all felt the reverberations of the economic downturn. Forthe most part, the collapse of the financial markets resulted indisastrous consequences to the broader economy. While the mostvisible affects have been extremely negative, the reality is thatthe ongoing impact of the downturn can be classified across thespectrum. Believe it or not, there are even some positive changesthat continue to influence the way banks and financial institutionsconduct business. Here's my take on a few of the major impacts todate.

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The Ugly: The continued uncertainty in both regulation andpolicy has contributed to the sustained depression of real estatevalues, which further exacerbates market woes. Without a doubt,this uncertainty acts as a deterrent to growth and therefore to anytype of sustainable recovery. Primarily, unknown outcomes ofregulatory reform and fiscal policy have caused lenders additionalrisk aversion resulting in a lack of stimulation to local economiesand scarcity of liquidity in the capital markets. Both businessesand consumers in general are reluctant to spend money until policyis clearly defined and outcomes are more certain. These perpetualmarket fears have turned into a storm of doubt and reactioncontrary to growth or recovery.

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The limbo that exists in economic policy needs clarity, and thesooner the better. Questions regarding taxes, financialregulations, banking fees and even the volatility of the stockmarkets cause a relentless sense of insecurity and lack ofconfidence. Any reduction in uncertainty would potentially resultin hiring and spending.

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The Bad: Accurately valuing assets in the current economicclimate is undoubtedly one of the most critical challenges facingthe banking industry now. Today, banks and other financialinstitutions have the daunting task of raising capital and reducingtheir non performing assets simultaneously.

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Due to the unprecedented decline in real estate, prices forwhole loans have fallen significantly. Many lenders have beenunable to utilize loan sales due to their inability to take largelosses.

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As a result, the need for accurate loan valuations has neverbeen greater.

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And Finally, the Good: One of the most positive changesresulting from the dramatic economic crisis in the past two yearsis the tightening of basic credit standards. The mortgage meltdownresulted in an ongoing residential real estate crisis, dramaticincreases in mortgage delinquencies and foreclosures, as well asmajor capital declines for numerous banks and financialinstitutions. Many believe in hindsight that these loans inviteddefault.

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Conversely, adherence to conservative lending practices may haveserved to prevent much of to day's financial crisis. The recentreturn to stringent credit policies supported

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by streamlined regulation is a hard learned lesson beingembraced by most of our country's banking institutions. Certainly,tightened lending standards will positively impact both banks andtheir customers and contribute greatly to our overall economicrecovery. Clint Eastwood's The Good, the Bad and the Ugly portrayeda world at the cusp of a major transformation. Today, the evolutionof our financial system is sure to alter the way we do business,and while we may have seen plenty of bad and ugly in recent months,the changes that come out of the good will serve to further oureconomic recovery.


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