Larry Myers, president and CEO of First Savings Bank, FSB, Clarksville, Ind., just across the Ohio river from Louisville, Ken., writes a monthly letter to customers that appears on the home page of the bank's website, www.fsbbank.net. It's usually monthly, says Myers. "They keep after me if I miss the deadline." He writes on a variety of topics. The April letter, for example, talked about Biztown, a Junior Achievement program that the $493 million-asset bank's charitable foundation contributes to.
In March, however, Myers wrote a candid and (some might think) unusual letter for a bank CEO. We have reproduced it, below, with Myers' permission, because it no longer resides on the bank's site. He begins with a discussion of out-of-control government spending, backing up his points with hard numbers. The unusual part comes after that. Read the letter and you'll see what we mean.
Myers says he did get one negative comment from a potential investor, but overall his message was well received. Weigh in with your thoughts using the links below.
Here's the letter, titled simply, "A Letter to our Southern Indiana Customers": By Larry W. Myers, President & Chief Executive Officer, First Savings Bank, F.S.B.
With increasing frequency you are hearing concerns across the country about the rising government debt levels. Senator Bunning from Kentucky made national news last week by stalling the renewal of unemployment benefits until someone explained where the funding for this program would come from. What was noteworthy about this was 1) this may have been the first time since Mr. Bunning played baseball that he made national news, and 2) someone in Washington is asking how we pay for something. If you agree with Senator Bunning’s approach or not, the fact of the matter is our government is facing tough questions that will not have easy or popular answers.
Here are the facts: In 1970 the total federal spending was $970 billion while the median household income was $38,851. Nearly 40 years later federal spending reached nearly $2.8 trillion while the median household income has increased to $51,355. In percentage terms, federal spending is up 221% compared to median household income up 32%. How does the government make up this deficit? Borrowing. The national debt in 1970 was $370 billion ($2.0 trillion inflation adjusted). In 2009 the national debt was nearly $12 trillion. That is a whopping 500% increase. Our population has grown only 50% over this same period. This means that the amount of debt per citizen has increased about 10 times over the last 40 years. In addition, the population has gotten older. There will be more weight on our social programs and less tax dollars rolling in, Folks, the walls are not painted gray, there is an elephant in our room. We need to deal with it.
Most important, we need to get our own house in order. If you have debts and can pay them down, do so. Get rid of your credit card balances and consolidate debt where reasonable. Make sure you have maximum flexibility in making your debt payments. Eventually we will all have to pay more in taxes. More paid in taxes, less going in our pockets. If you own investments, being conservative is good. Along with taxes going up, so will interest rates. Be positioned to take advantage of that reality. Finally, live within your means. Borrowing for a home or other major capital expenditure is not bad, but don’t borrow to buy a new flat screen television or the latest fashions. Pay cash for those things you want or need that depreciate in value and borrow on those things that hold or increase in value.
If you don’t know where to start, make an appointment to see one of our financial advisors or lending officers. They can help you plan your financial future, make recommendations about your debt structure, and advise you on your investments.
I would also advise you to contact your congressional leaders. They are easy to reach through the internet, by mail, and are even listed in the phone book in the government blue pages. Ask them to be financially responsible and hold them accountable. In doing so you have to expect that government will not be there to take care of every slip-up in life. Benefits will be less and services will be cut. We will have to learn to live with it. Like the sub-prime mess of last year, you cannot keep borrowing if you can’t make the payments. Sooner or later this party has to end. Better to end it on our terms.