Officials Say Oklahoma Banks Are Solid

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Oklahoma’s economy will not be substantially affected from the credit crisis that led to the bankruptcy of Lehman Brothers, officials said.

Bank failures are expected in several states, but Oklahoma Banking Commissioner Mick Thompson said state banks, for the most part, stayed away from the subprime mortgage market, blamed for much of the country’s economic upheaval.

State Treasurer Scott Meacham said Lehman’s bankruptcy would have little direct effect on state pension systems, except for losses in their portfolios tied to declines in the stock market.

The Dow Jones Industrial Average sank by 504 points Sept. 15 after news of Lehman’s bankruptcy and the sale of Merrill Lynch to Bank of America.

On the national level, Meacham said the crisis among financial institutions will test government controls enacted in response to the Great Depression, which followed the stock market crash of 1929.

Meacham said a booming energy industry is allowing Oklahoma to avoid economic woes of other states. “Commodity-based economies do well in times like this,” he said.

Officials point to higher tax collections, low unemployment and strength in agriculture and manufacturing, as well as the energy sector, as evidence that Oklahoma’s economy is stable.

Widespread bank failures are expected in states like California, Florida and Nevada, stemming from bad loans and declines in the housing market.

Housing prices are still climbing, however, in Oklahoma, which had its share of bank failures in the 1980s after oil prices plummeted.

Now, Thompson said, “Oklahoma banks are well capitalized and well managed and they were not involved in the subprime market to any degree.

“What we hope is that the public and the bankers do not overreact to these issues. To say that there will not be some long-term fallout would be naive, but I don’t think it will be very dramatic.”

Thompson pointed to Oklahoma City recently being classified as the No. 1 recession-proof city in the country by Forbes.com.

“We’re living in a vacuum right now,” he said.

Officials said Oklahoma’s Teacher Retirement System has more dealings with Merrill Lynch than it does with Lehman.