Bankers’ Hours column: The crisis song we know by heart
It’s a song I’ve heard 100 times. You know what I mean; you can repeat the lyrics without thinking.
No, I’m not talking about “As Time Goes By.” It’s even older than that haunting melody. It’s the refrain that CEO’s resort to when things get dicey, right before they get really bad. They say pretty much the same thing every time, be it the S&L Crisis of the 1980s or the Great Meltdown of 2008. It was about 1986 when I first heard Mike Wise, the chairman and CEO of Silverado Savings (what a great name for an imploded bank!) belting out the words, and it’s a bit creepy. I note that SoftBank, the investment group that takes big positions in tech startups, lost around $13.2 billion in its most recent fiscal year, and CEO Masayoshi Son took the microphone to speak to investors about the situation.
I heard the music, and my ears pricked up. It’s the same song sung many times in the last 40 years.
(REQUIRED DISCLAIMER: This piece is not a prediction of the demise or fragmentation of SoftBank. All I know about the business is what’s available to everybody in the financial news media. To that outfit, it seems, $1 billion dollars is a currency denomination, not an investment number. They seem to have built on the classic comment of Sen. Everett Dirksen: “A billion here, a billion there, and pretty soon it adds up to real money.” Their operation is stratospherically above my pay grade; I do not now, nor have I ever, owned a calculator that can compute the SoftBank math, and I wouldn’t understand it if it did.)
(And it’s certainly not a prediction of a generic economic crash. For the record, I don’t think that’s imminent, and that opinion is worth exactly what you’re paying for it. )
Here’s a sampling of the lyrics of that Oldie but Goodie; some lines may have been repeated by Mr. Son:
Mistakes have been made, and we’ve tightened up our operational and oversight procedures to ensure that they never happen again. Translation: Maybe if we admit we’re human we can buy some time to right the ship before we have to explain it all under oath.
Venture capitalists, like SoftBank, and actual banks for that matter, have a lot in common. Primarily, their reason for existence depends on making a profit on the movement of money. In the first instance, it involves handing a startup with cash in exchange for stock in order that the new business can develop its product or business model, so that ultimately that stock position generates an unconscionable profit for the investor. A bank moves that money to the entrepreneur through a loan, which is secured by various documents designed to assure repayment; during the life of the loan, the bank gets interest, and upon repayment, loans the money out again.
Here’s another verse: These are unusual and unsettled times. We are taking this opportunity to strengthen our operational and strategic protocols and objectives. This will assure our emergence from this period as a stronger and more competitive enterprise. Translation: “We lost how much money last quarter? How can that be? We gotta get rid of some people. No, a lot of people. Desperate times require desperate measures; my compensation may even be cut back!”
And then there’s this one: After a long and successful history of supplying (whatever) for the world’s (whatever) we have to concede that present conditions create an insurmountable set of circumstances, and that the National Widget and Investment Corp. is no longer a going concern. Translation: We’re broke. We’ve lost all your money. Sorry.
We money movement mavens know a good thing when we see it. The SoftBank honcho said pretty much the same thing when the business posted its then-record loss three years ago that he mouthed last week. This routine has stood the test of time, so no reason to tinker with it. Hey, who rewrites Shakespeare?
I’m no venture capitalist, nor an economist. But experience is the best college, albeit a very expensive one. You can matriculate there with full pockets and come out with empty ones. I think I can say that I boast an advance degree from Experience U. I have to say I’m hearing the music.
I honestly don’t think we’re headed for any kind of financial t-boning, keeping in mind that the sentiment is coming from one that’s not the brightest light in the chandelier
But I do believe, unequivocally, the following famous quote from the American philosopher George Santayana:
“Those who don’t understand the past are doomed to repeat it.”
Pat Dalrymple is a western Colorado native and has spent more than 50 years in mortgage lending and banking in the Roaring Fork Valley. He’ll be happy to answer your questions or hear your comments. His email is email@example.com.
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