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Old National leader says inaction will hurt local economy

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Bob Jones
Bob Jones

If Congress and the White House fall over the “fiscal cliff” at year end, the U.S. economy will dip back into recession, and the aftershocks will be felt in Columbus, warns Old National Bancorp President and CEO Bob Jones.

“If we go over the fiscal cliff, the impact will be pretty significant,” said Jones, who runs the Evansville-based bank with $9.4 billion in assets. “Basically, recession equals job losses.”

Jones, whose bank recently expanded in Columbus via its purchase of Indiana Bank & Trust, thinks Democrats and Republicans will craft some sort of agreement in time, but he doubts it will be comprehensive.

“I expect a temporary solution,” Jones said during a visit to Columbus on Friday. “You can’t reform the tax code in three and a half weeks. A holistic solution won’t happen. I expect we’ll find a way to kick the can down the road another year.”

Jones, speaking to a business group of accountants at the Clarion Hotel and Conference Center, said the fiscal cliff debate comes at a sensitive time for the U.S. economy, threatening to derail modest gains in employment, housing and consumer spending.

If Bush-era tax cuts disappear for most Americans, the average person’s paycheck might be 5 to 10 percent lighter in January, he said. “People will have less money to spend.”

If Washington manages to avoid the fiscal cliff, Jones said most economists think the U.S. economy will grow by 2.3 percent to 3 percent next year, a level the banker called “good, not great.”

Jones spoke at the Columbus luncheon on a day the U.S. unemployment rate dipped to 7.7 percent and the national economy added a better-than-anticipated 146,000 jobs for November.

But those slight gains mask other risks both here and abroad, he said.

“We have to worry about Europe and a slowdown in China,” Jones said to an audience that included a number of employees from Cummins, the global engine manufacturer.

Cummins, hurt by weaker foreign sales of engines and power generation equipment in recent quarters, already is in the midst of trimming its global workforce by 1,000 to 1,500 jobs. That includes cuts of 150 jobs in southern Indiana by year end.

Negative growth in Europe and a weaker Chinese economy will continue to be a challenge for Cummins and other big employers, Jones said.

In praise of Bernanke

Jones, who sits on the board of the Federal Reserve Bank of St. Louis, gives high marks to Federal Reserve Chairman Ben Bernanke.

“I have never met a man more passionate about what he does,” Jones told his luncheon audience. “He’s an educator who has worked hard to be more transparent (about policy). It’s a tough job politically and economically.”

Still, the bank president thinks the Fed should tweak its fiscal policy by raising interest rates — even by a quarter-point — to send a signal that the U.S. economy is on the mend.

He thinks slightly higher rates would help savers, particularly older Americans on fixed incomes, and coax more corporations to start making capital expenditures with cash they now have sitting on the sidelines.

Jones’ appearance here came nearly three months after Old National’s purchase in mid-September of Indiana Bank & Trust, a transaction that added $493.5 million in loans and nearly $785 million in deposits to Old National’s balance sheet. He said the merger has gone better than anticipated.

“Columbus is arguably the best market economically in the state right now,” he said, adding that overall loan demand is showing signs of life in manufacturing, distribution and auto-related industries.

Old National, with about $9.4 billion in assets, is still interested in buying other banks, Jones said, adding that purchase prices have declined for acquisitions as some banks struggle to make money in a low-interest rate environment while coping with tougher federal regulatory controls.

Meanwhile, Old National will pay a 9 cents per share quarterly dividend to shareholders on Dec. 17.

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