It’s not all our fault, but go ahead and hate us
Glenwood Springs, Colorado CO
Right now, lawyers love bankers. There are several reasons for this. For example there are millions of dollars in legal fees defending all of the suits brought against the big banks in the fallout of the Great Meltdown. And then there’s the Dodd-Frank Act, which redefined banking regulation in the wake of the crash. The legal profession affectionately refers to this law as “The Regulatory Attorneys’ Relief and Support Act.”
And now comes a survey of the most-hated industries in America. More than 60 percent of the respondents said they disliked bankers most, even more than lawyers.
This has to have the attorneys dancing in their Guccis. Partners everywhere are probably putting paralegals to work rewriting lawyer jokes to make bankers the butt of the punch line.
A good deal of the resentment is directed to the big money center banks, the Wall Street players that are perceived to be the perpetrators of the global crash, because they’re the ones that ended up holding all of the bad mortgages. Of course, they were just members of the team, the other players being just about everybody, including borrowers. (As noted in this space more than once, some 42 percent of the bad deals that the bank that I was associated with had to eat were a result of borrower fraud.)
But every catastrophe needs a scapegoat, and big banks are just too good of a target.
The post meltdown fallout is causing even more angst. There are borrowers who are bewildered and bitter as their previously friendly bank puts the pressure on to get rid of them and their loans. When the loans were made, the borrowers were generally made to feel that their deal was a jewel in the bank’s crown. Now, it’s viewed as toxic waste.
What these hapless bank customers don’t understand is that a bank examiner probably classified their loans as “substandard” and put them on a “non-accrual” basis, which means that the bank can’t book interest on the deal, but has to apply all payments received to principal.
If an institution gets too many of these loans, it’s in big trouble. Even a few constitute a very bad thing for the bank, its stockholders, and by inference, at least in the eyes of the regulators, for the FDIC insurance fund.
Much of the discretion has been taken out of banking. Back in the day, it wasn’t uncommon for a successful business owner to say, “The bank had faith in me. If they hadn’t believed in me so that I could get this thing off the ground, it wouldn’t be the booming business it is today.”
Banks can’t afford to bet on character very much these days. The regulations won’t let them. Your banker might believe you’re the best risk in the world, but unless you’ve got cash flow and liquidity, that perception won’t count for much.
During the bubble years, banks were doing exactly what everybody wanted them to do, regulators, borrowers, stockholders, everybody: make loans, make things happen.
They did, and it didn’t turn out so well. Now they’re being vilified. There’s an old, true story about the developer who sued his bank and won. His allegation? “You, Mr. Banker, should have known I wasn’t qualified to borrow all that money you lent me, so it’s your fault I didn’t pay you back.”
Do we bankers deserve all of the antipathy? Probably not.
But it’s really kind of fun to hate us, isn’t it?
Pat Dalrymple is a valley native. He’s been in the mortgage and banking business since 1961. He’ll be happy to answer your questions or hear your comments. His e-mail is firstname.lastname@example.org.
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