As we navigate this global crisis in our local communities, we’re seeing the social, financial and emotional impact everywhere. Most notably, of course, is the fear we all have for our own health and the health of our loved ones. I applaud all of our health care workers who are on the front lines battling that fear – doctors, nurses, hospital administrators, first responders and volunteers, I thank them all.
As a bank president, I’m on two distinct front lines: working with our customers and employees daily to tackle safety and mitigate the spread of the virus, and addressing the other major fear facing our community – the financial fear.
Many of us in the banking industry are fielding calls from clients worried about their future(s) and about the safety of their deposits. They’re asking if they should withdraw cash from their accounts, sell investments or close accounts altogether. And while there’s justifiable reason for concern, there is greater reason for confidence.
Let’s look at history for perspective. The country has weathered economic crises in the past when the banks were far less prepared for them. Unlike the Great Depression, banks and depositors today are protected by the Federal Deposit Insurance Corp. That means that deposits of up to $250,000 are insured and safe.
Beyond that, many community banks are also protected by the Depositors Insurance Fund, or DIF. This is a private fund that insures deposits above what the FDIC insures in full. The combination of FDIC and DIF insurance provides member banks with full deposit insurance on all their deposit accounts. Since the fund’s inception in 1934, no depositor has ever lost a penny in a bank insured by both the FDIC and the DIF.
Also keep in mind that banks are extremely well-capitalized right now, much more so than during previous recessions, including the housing crisis of 2008. The safest place for money is not under a mattress or in a wallet, it’s in a bank. When this virus runs its course, all deposits will still be there. Currently, the Federal Reserve Bank is ensuring that banks have as much cash as the system needs and have stated there is no limit to the level of cash that they can infuse into the system. There will not be a cash or liquidity crisis.
Nobody is immune from the impacts of this virus, but the timing is particularly challenging for our local small businesses. Normally, many of our retailers and hospitality partners would be hiring their summer workforce now, ordering inventory and readying their business for opening day. Instead they’re plagued with uncertainty. What can we do and who can we turn to?
First of all, depositors may contact their banker, who can tailor contingency plans to help mitigate their challenges. This could be in the form of a cash advance, line of credit or ease of repayment terms on loans. It is crucial to reach out directly, as these contingencies are tailor-based.
Second, depositors may take advantage of the tax relief measures being offered by the state of Massachusetts. The Baker-Polito administration has announced tax relief measures for small local businesses affected by the outbreak, especially in the restaurant and hospitality sectors. This includes postponing the collection of regular sales tax, meals tax and room occupancy taxes that would be due in March, April and May.
The U.S. Small Business Administration’s Economic Injury Disaster Loan Program is accepting applications from Massachusetts businesses hurt by the coronavirus. Business owners should investigate the program and apply if appropriate.
Cape Codders have always rallied together in the face of uncertainty. This is perhaps the biggest fiscal test we’ve faced, but we will ride out this storm together and rebuild our economy when it passes. We’re in this together.
Lisa J. Oliver
President & CEO