Financial faith: Americans' low confidence in stability of the U.S. banking system is taking toll

SALT LAKE CITY — Americans don't understand their financial institutions and right now they apparently don't trust them. A recent survey says the Great Recession has dinged the confidence with which "average Joes" view banks and credit unions.

But tight regulatory controls that include closely guarding data on a bank's well-being — or lack of it — have created a system that relies on consumer faith and trust.

Were that not paradoxical enough, the same Americans who lack confidence in their financial institutions apparently don't trust their government to increase oversight and regulation, which the Obama administration seeks.

A Rasmussen Reports national phone survey released in April found only 42 percent of Americans express confidence in the stability of the U.S. banking system. That's up from the all-time low of 39 percent in February 2009, but it's a marked drop from the 68 percent confidence rate before the financial industry meltdown in fall 2008.

Add that to a just-released quarterly report from the Federal Deposit Insurance Corp. that found that lending by U.S. banks plunged last year in the sharpest decline since 1942, and it's clear that the relationship between banker and borrower is strained.

That's not the only disturbing number, either. The number of American banks considered "at risk of failing" just hit a 16-year record of 702. In the first three months of 2010, just in Utah, regulators slammed the doors on Advanta Bank of Draper, Centennial Bank in Ogden and Barnes Banking Co. of Kaysville. More than 5 percent of all U.S. loans were at least three months past due, which is a 26-year, bad-news record. Nationally, the year's expected to bring even more bank failures than the 140 that flopped in 2009, according to FDIC Chairman Sheila Bair.

And despite credit unions' facetious "kiss your banker goodbye" ad campaign, you shouldn't think the report card on your neighborhood credit union is any better.

On New Year's Day, HeritageWest Credit Union, a trusted fixture in Tooele County, failed and was folded into Chartway Federal Credit Union out of Virginia Beach, Va., although it will retain the HeritageWest name. It was the first Utah credit union failure since 2005. Within weeks, Provo's Mountain High Federal Credit Union followed and was taken over by much larger American First Federal Credit Union.