An Iowa State University economist is skeptical of an analysis by BusinessWeek magazine which places two Iowa cities in a list of top 20 towns likely to be hit the hardest by the financial crisis. David Swenson says the report is based only on the percentage of residents working in finance, real estate, insurance and leasing – and does not take into account if those firms are actually linked to the mess on Wall Street.
"Iowa’s finance industry, banking sector and insurance sector – by all intents and purposes – appear to be quite distinct from what’s going on nationally and tends to be much more conservative in its orientation, does not seem to be exposed to some of the big issues associated with the sub-prime issues and some of the bad commercial paper issues," Swenson said.
The BusinessWeek survey ranks West Des Moines fourth and Urbandale 12th on the list. Swenson says there are a few reasons why Iowa is not as vulnerable as other states to the financial fallout. First, Swenson says, Iowa banks did not get caught up in risky housing loans like institutions in Nevada, California and Florida.
"Second of all, our population wasn’t composed of a large number of people who might have been targeted for the sub-prime lending, so that wouldn’t have been as prevalent in our area," Swenson said. The BusinessWeek story points out that the towns on the list are simply "places to watch," and may not necessarily be in trouble.
Swenson does acknowledge that the financial crisis will be felt industry-wide. "The indications though are that Iowa’s firms have much less exposure than the national average," Swenson said. "Even though we have a much more higher concentration of employment, that’s offset by the lower level of exposure to these issues."