My Comfortable Banking Relationships

What I do need to know about banking from an insider’s perspective?

When asked to participate in this blog I was asked to write about my knowledge of and experiences with lending and borrowing money, I had to laugh. This subject is broader than it is long, deeper than it is wide, and changes daily. The only consistent answer that I can muster is if you absolutely, positively, do NOT need the loan, you have a 75% chance of success. Everyone else, including the bankers, must play the New Banking Game. The only real rule to remember is that bankers work off two emotions: Greed and Fear. Social conscience and philanthropy are taboo subjects and are not part of the loan making decision. I will attempt to share my insight about the New Banking Game from my personal experiences over the last two and a half years.

What in the devil happened to my comfortable banking relationship?

It is fair to say the local banking meltdown started very late 07 and officially January 08. After leaving the bank, I stayed in contact with a lot of my friends and I tried to keep my banking senses keen. I underwrote most of my own deals myself and then presented the paperwork to my loan officers who thought that was great. My dad sits on the board of a local bank that I use and my relationship there was WONDERFUL. I had only happy thoughts with happy loan officers and a spotless write ups from the regulators. Then, one day, the Regulators announced that their annual inspection would be delayed at my bank from November 07 until January 08. No one was worried and everyone knew there was a sub-prime bubble forming and the market was due for a correction. All was quiet until the regulators got out the NEW Rule Book and also started enforcing the rules in the Old Rule Book. That is when the chaos began. Policies and procedures that had been in place for 30 years of prosperity were no longer valid. Younger loan officers, who only knew good times, and older ones, who had forgotten the hard times, had no clue or direction. Many banks suddenly found out that they had the equivalency of “stage 3 cancer” as the policies and procedures used for the last 30 years had taken fundamental loan inspections out of the loan process. Fear took over as Bankers began running for the doors. It was a stampede. The regulators offered no help in directing these lost sheep as their answer to the bankers was “You read the book and make your move; but watch out, you only have one chance to get it right and you will pay the consequences if you are wrong.” Fear tuned into terror as banks began closing. Grid lock became the norm. It looked as if the Regulators were on a witch hunt; they were just doing their job and trying to find a bottom in a sinking market. No one had any direction… except down. I cut my teeth as a commercial loan officer during the stock market crash of 87 and the recession of 88-89, but this new melt down was off the charts. What we witnessed was a complete re-write of the industry. We are just now getting a handle on its meaning. Eddie Murphy said it best “There is a new sheriff in town!”


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