Depositors keep financial faith in local institutions

LYNN – Cab driver Cliff Gately just opened a bank account in Salem and as long as he keeps making money from taxi fares he plans to make deposits and write checks.His confidence in the banking system, multiplied by millions of other consumers, is the crucial dynamic needed to tug the economy back on course according to finance experts like Anton Schutz. The investment portfolio manager knows his investors are anxiously awaiting the results of a sort of financial stress test being applied to America’s 20 top banks. The goal of the test is to determine which companies would be in need of more capital if the economy erodes further.Faith Case said she and her husband “have done some research into it and talked about it and it is something we feel fairly comfortable with but it is something that is on our minds.”Fears about the stability of the banking sector have heightened in recent weeks, amid dwindling dividends, rising loan losses and a worsening economy. What’s more, investors are worried that the government’s efforts to prop up the financial system will fall short.”At the end of the day, we just need more details,” said Schutz.Investors continued to remain cautious as most bank stocks suffered more losses Wednesday after Federal Reserve Chairman Ben Bernanke had pinned hopes Tuesday for the U.S. economy’s recovery on restoring the health of the financial markets – a feat that has grown increasingly distant in recent weeks.Bernanke’s comments came on the heels of the government’s launch of its much-awaited program aimed at increasing the availability of credit to consumers and small businesses. Under a plan announced late last year, the Fed will lend up to $200 billion to spur consumer lending for autos, education, credit cards and other consumer debt. While the launch was viewed by analysts as a positive, investors still await more details about other government efforts.JPMorgan Chase & Co. shares slipped while Morgan Stanley saw losses but Wells Fargo & Co., Citigroup Inc. and Bank of America Corp. all posted slight gains. Seen as two of the more unstable companies in the sector, Citigroup and Bank of America have been under considerable pressure as of late.”You’ve just had a couple of the bigger, more beaten down guys getting a little bit of a relief bounce,” Schutz said.Earlier Tuesday, Citigroup said it will lower mortgage payments for some homeowners to an average of $500 a month for three months as part of a new program to help the unemployed.On Friday, the government agreed to exchange up to $25 billion in emergency bailout money given to Citigroup for as much as a 36 percent equity stake in the company. The deal between the Treasury Department and the New York bank is the third rescue attempt in the past five months.Associated Press material was used in this report.