Buoyed by petroleum dollars, the state's economy is stable. Commercial banks in Alaska are financially strong, which keeps them in a good position to help businesses finance operations and expansions.
Alaska Journal of Commerce file photo Northrim Bank President Marc Langland sits in his office. Langland says the state's economy is holding steady, but is seeing some effects from the Lower 48 Wall Street problems.
This shouldn't cause problems but it does mean that credit will be more expensive, Langland said. Banks will also be cautious because there will be stricter oversight by regulatory authorities. "They don't want to see this happen again," he said.
Meanwhile, Alaska businesses are being cautious in their spending but they're not canceling large orders, even for discretionary items.
Ralph Whaley, a senior sales representative for Northern Printing Co. in Anchorage, says his customers for printing services are negotiating prices more aggressively but are still ordering. "The purse strings are definitely tightening," he said.
Still, Whaley said he was surprised, given the recent national headlines, that one client, a major Alaska bank, went ahead with a large order for the printing of seasonal gift calendars.
Phylis Halverson, a client advisor at BMW of Anchorage, said sales of upper-end autos at her dealership are still strong. There was a dip when the worst news hit the headlines but aggressive promotions by the company brought the numbers back up, she said.
In Palmer, Hans Vogel, president of Triverus, a firm that designs and builds specialized high-tech equipment, said the Wall Street downturn has had some effects but that his business is still doing well.
"We're OK," he said. "Our main financing is that we have government customers, so we are in a stronger position. We did have one tangible piece of evidence (of the effect of Wall Street). We had a deal with a customer but it fell through when his financing fell through."
Many small businesses that have lines of credit through banks or vendors haven't been affected. Dan Michaud, owner of Alaska Fireplace and Accessories, said, "My lines of credit are substantial and through vendors, not the banks. People are spending money on heaters. My line of credit is with Spenard Builders Supply and I have no problems as long as I pay my bills."
Langland said Alaska banks like his have strong customer deposits and engage in conservative investment practices, mostly in short-term government bonds, which can be called on to finance lending to customers.
"We have pretty good liquidity," he said.
Banks in the state haven't invested in sub-prime mortgages or other forms of risky investments that are bringing down large financial institutions in other states, and real estate markets in the state are still strong.
Alaska businesses and homeowners aren't falling behind on loans, which is a good sign, he said. High energy costs in Interior and rural Alaska have cut into incomes and reduced discretionary spending, however, and the effects of that can be seen in softer sales of big-ticket items in those markets, Langland said.
Langland added that Alaskans wouldn't escape some of the national problems. The decline in the stock markets affect savings here as well as elsewhere, and the effect will be to cause people to tighten up on spending, he said. In the longer-term, a national recession will cut into the state's tourist industry because fewer people will spend money on vacations and travel, he said.
If commodity prices fall, as oil has done recently, there will be fewer revenues to state government and some dampening of mineral exploration.
Overall, the state's economy is in good shape, Langland said.
"We've had a 20-year run of slow but steady growth, but that means things haven't gotten out of whack either," he said.
The situation is unlike the 1980s, when a boom in Alaska petroleum spending was followed by a sharp regional recession when oil prices collapsed.
Langland says he believes the federal government and governments of other industrialized nations did exactly the right things in making investments in bank and guaranteeing commercial lending transactions to boost trust and confidence.
The U.S. government's decision to guarantee non-interest-bearing bank deposits will assure depositors, too, he said.