By Lauren Otis, Staff Writer
Members of the greater-Princeton financial and business community have been as riveted as the rest of the nation by the struggle in Congress to pass a $700 billion economic package.
The measure, which has been described as both a “bailout” and a “recovery” bill, failed in the House on Monday, sending stocks into a near free-fall that day. An amended version, approved by the Senate Wednesday, still faced a second try in the House.Members of the Princeton banking and business community said the area’s economy had so far been reasonably insulated from the financial crisis but could deteriorate if Congress fails to act.
And the effect locally of Wachovia Bank being felled in the financial crisis still remains to be seen, some said. It’s debt and loan losses crippling it, Wachovia — the bank with the biggest presence in Mercer County — needed to be rescued through a purchase agreement with Citigroup that was arranged by federal regulators and announced Monday.
”I’ve never seen anything like it,” First Choice Bank President and CEO Randy Hanks said of the events of the week. “I just hope they get something done,” Mr. Hanks said of efforts to enact a bailout plan.
”We are seeing a good bit of business in terms of lending both on the consumer side and small business and commercial real estate side,” Mr. Hanks said. These opportunities are in many cases an outgrowth of other lending institutions tightening their financial parameters in the current credit crunch, he said.
Because Lawrence-based First Choice is a recent startup — it has been in operation for 18 months — and as a community bank adopts a hands-on approach to its loan portfolio, it has not had the loan and balance sheet problems of large national banks and is actively pursuing new loan business, Mr. Hanks said.
”Monday we did no business, because everyone was watching their TV, and watching their jaws hit the floor,” said Robert Burt, owner of Honda of Princeton in Montgomery and Sports & Specialist Cars, a Lotus dealership in Hopewell.
Despite the grim events nationally, at Honda of Princeton it is “very much business as usual,” Mr. Burt said. September sales numbers are similar to those from September of last year, off only 3.5 to 4 percent, he said. And financing of car loans through Honda’s finance subsidiary and JP Morgan Chase has remained available, with good terms, he said.
At Sports & Specialist Cars, “are the young Wall Street tycoons coming in to spend their bonus money? They’re not,” Mr. Burt said. This was never a large percentage of the business, however, and sales of Lotuses and other classic cars at the dealership are still good, he said. “We’ve got eight orders for the new car that’s coming out next year (from Lotus). That tells you there are still people out there who want the latest and the greatest,” Mr. Burt said.
”I fully anticipate surviving this correction,” Mr. Burt said, adding “we’ll get through this, one has to be optimistic, and hard working.”
”These are interesting times,” said Steve Jusick, senior vice president, investments, and branch manager of the West Windsor office of brokerage firm Stifel, Nicolaus & Co.
”People have questions and they are concerned, and with all the bank failures people are apprehensive,” Mr. Jusick said. Their apprehension comes on the heels of past increases in fuel and food prices, the slowdown in the real estate market and other negative economic developments, he said. “This is not something that has just developed in the past week or two weeks,” Mr. Jusick said.
The impact of all these developments is tempered in the Princeton area because the economy has remained stronger than in other parts of the country, Mr. Jusick said.
”Everyone is a little more nervous this week than they were last week,” said Michele Siekerka, president of the Hamilton-based Mercer Regional Chamber of Commerce. “I think people are feeling it, the business community is guarded,” Ms. Siekerka said.
The biggest outgrowth of the economic turmoil is businesses are delaying making decisions if they don’t have to, Ms. Siekerka said. “All around, people are holding back,” she said.
Auto dealers locally have been challenged, Ms. Siekerka said, but some retail sectors, such as sellers of home improvement supplies, appear to be doing well. The retail banking sector in the area has remained strong, which has been critical to helping other business sectors maintain their own strength, she said.
”PNC (Bank) is strong, and the community banks are strong, the community banks are looking to lend,” Ms. Siekerka said.
In the area, established businesses are still able to obtain financing but startups and company expansions are meeting with far more hesitancy on the part of lenders, said Mr. Hanks. For the most part, however, commercial lending in the area is still solid, he said. “I haven’t seen the desperation in that market yet,” he said.
Large national lenders are pulling back on consumer home equity lines of credit, so-called second mortgages, often canceling them completely and making consumers reapply, Mr. Hanks said. “There we are seeing some actual pain,” he said.
Small-business loans that in the past were routinely approved by larger institutions are now being rejected unless every lending threshold is met, Mr. Hanks said. A three-person business where two of the three are strong, healthy borrowers but the third has a lower credit score, may no longer pass muster with lending institutions, he said.
Both Ms. Siekerka and Mr. Hanks said the effect locally of the takeover of Wachovia by Citigroup remains to be seen.
”I don’t have any good numbers right now but what I understand, there is some shifting going on right now,” Ms. Siekerka said.
The acquisition is a large one, and given the current state of upheaval in the financial markets, Citigroup must be careful, Mr. Hanks said. “If they don’t really keep their eye on the ball there is a good chance there could be some disruption,” he said.
Mr. Hanks said he hoped a federal rescue plan would be adopted soon in order to stabilize the credit markets because area businesses will see increasing problems without some order in the markets overall. The freezing and canceling of lines of credit could jump from the consumer to the commercial sector otherwise, with dire consequences locally, he said.
”We are all staying glued to the news,” Ms. Siekerka said.
