SAN FRANCISCO — Independent bankers should worry about the effects of the continuing economic recovery and of the unremitting strength of the U.S. dollar, a banking consultant warned Monday at the opening session of the Western Independent Bankers conference here.
William Baughn, economist and president of the University of Colorado at Boulder, said the dollar's rise has eroded U.S. businesses' foreign and domestic selling power by making U.S. goods cost more abroad and by cutting the price of imports.
And even as their markets are shrinking, small and mid-size business borrowers--a primary income resource for independent banks--are celebrating the recovery by "going into debt like there is no tomorrow . . . and this means a reduction of the ability of corporate America to handle adversity."
This business borrowing poses pitfalls for unwary bankers, Baughn cautioned the more than 300 community bank presidents and directors attending the banking group's annual seminar. He also said that consumer borrowing could be equally a problem in the near future, with the ratio of consumer debt to disposable income fast approaching the record levels of 1978.