We've all felt the reverberations of the economic downturn. For the most part, the collapse of the financial markets resulted in disastrous consequences to the broader economy. While the most visible affects have been extremely negative, the reality is that the ongoing impact of the downturn can be classified across the spectrum. Believe it or not, there are even some positive changes that continue to influence the way banks and financial institutions conduct business. Here's my take on a few of the major impacts to date.

The Ugly: The continued uncertainty in both regulation and policy has contributed to the sustained depression of real estate values, which further exacerbates market woes. Without a doubt, this uncertainty acts as a deterrent to growth and therefore to any type of sustainable recovery. Primarily, unknown outcomes of regulatory reform and fiscal policy have caused lenders additional risk aversion resulting in a lack of stimulation to local economies and scarcity of liquidity in the capital markets. Both businesses and consumers in general are reluctant to spend money until policy is clearly defined and outcomes are more certain. These perpetual market fears have turned into a storm of doubt and reaction contrary to growth or recovery.

The limbo that exists in economic policy needs clarity, and the sooner the better. Questions regarding taxes, financial regulations, banking fees and even the volatility of the stock markets cause a relentless sense of insecurity and lack of confidence. Any reduction in uncertainty would potentially result in hiring and spending.

The Bad: Accurately valuing assets in the current economic climate is undoubtedly one of the most critical challenges facing the banking industry now. Today, banks and other financial institutions have the daunting task of raising capital and reducing their non performing assets simultaneously.

Due to the unprecedented decline in real estate, prices for whole loans have fallen significantly. Many lenders have been unable to utilize loan sales due to their inability to take large losses.

As a result, the need for accurate loan valuations has never been greater.

And Finally, the Good: One of the most positive changes resulting from the dramatic economic crisis in the past two years is the tightening of basic credit standards. The mortgage meltdown resulted in an ongoing residential real estate crisis, dramatic increases in mortgage delinquencies and foreclosures, as well as major capital declines for numerous banks and financial institutions. Many believe in hindsight that these loans invited default.

Conversely, adherence to conservative lending practices may have served to prevent much of to day's financial crisis. The recent return to stringent credit policies supported

by streamlined regulation is a hard learned lesson being embraced by most of our country's banking institutions. Certainly, tightened lending standards will positively impact both banks and their customers and contribute greatly to our overall economic recovery. Clint Eastwood's The Good, the Bad and the Ugly portrayed a world at the cusp of a major transformation. Today, the evolution of 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 our economic recovery.

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The Ugly, the Bad and - Believe It or not - the Good

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