Ho, hum. Another bank in trouble.
BULLETIN, 1/7/10.
High Desert Bank gets a "cease and desist" order, which "requires the bank to temporarily cease making any new commercial real estate...."
Right, O.
I continue reading.
The usual -- this "sounds a lot worse than it is..." from management. Check.
The bank is "...no danger of failing and remains 'well-capitalized' by regulatory standards."
Sure...that's why they sent you a "cease and desist" order.
No, says management, it's because the "...regulators are deathly afraid of this market and the commercial real estate market, and it's just got them extremely concerned...."
Gee, I wonder why? Cause, you know, nothing has happened lately to cause concern....
So I'm to believe the regulators are a bunch of panicked ninnies, and that we're just fine, move along, nothing to see here?
Except I have the opposite suspicion. Here's what I think is happening with regional banks:
My guess is that they're rolling up bad banks little by little so as to NOT cause a panic. That if they were closing the banks by the old standards, there would be a blood bath.
Anyway, the defense by management so far is what we've heard before from other local banks. All this is to be expected.
Then there is the next comment by management:
"Banks have had some problem loans and I'm not immune to that. I don't think we made poor decisions; they were very good decisions when we made the loans."
Whoa, Nelly. Let me repeat that priceless gem.
"I DON'T THINK WE MADE POOR DECISIONS; THEY WERE VERY GOOD DECISIONS WHEN WE MADE THE LOANS."
For god's sake! They were lousy decisions, as time and experience has confirmed. You're like the guy falling off the hundred story building that is asked at the fiftieth floor how it's going. "Everything's great so far!"
Here's what I'd do if I was managing one of these problem banks. I'd fess up, and tell everyone that I'm doing everything I can to correct the problem. Just that.
Because no one is going to believe you when you say, "We're just fine."
And no one is going to give you much credit for good judgment when you defend very poor decisions, by saying they weren't poor decisions at the time. Every decision that ends poorly was a 'bad' decision by definition. You aren't a politician hoping the public forgets what you said and did a couple years ago. You are a financial institution, and your financial decisions have consequences to you and your shareholders.
Your job as a banker is to manage risk. If you get the risk/reward ratio wrong, you get a "cease and desist" order.
Fess up.
I fear for this economy if -- when this is all over -- all the banks and thrifts and retail stores and politicians and economic professors and stock brokers attribute it all to Bad Luck and Bad Timing and Mysterious Forces and Who Could Have Known? and
"I DON'T THINK WE MADE BAD DECISIONS; THEY WERE VERY GOOD DECISIONS WHEN WE MADE THE LOANS."
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8 comments:
Believe you me, I spent many a year bemoaning my bad luck and bad timing.
I mean, my sports card collectors disappeared seemingly overnight! Who could have known.
Ditto comic, pokemon, magic, beanie babies, pogs, etc. etc.
Except, eventually, I realized I was going to be a 'victim' of 'bad luck and bad timing' forever unless I fessed up.
Good business planning, risk management, should take 'bad luck and bad timing into account.'
Even Acts of God must be planned for, unless you figure that God is laying off the disaster thing....
Great post, Duncan. Keep 'em coming.
I wonder if ANY institution will stray from the "Nobody Else Saw This Coming" defense.
I like your Be Honest approach, but perhaps human nature won't let us take that route ...
Another great post Duncan. You're an excellent writer and you're just as interesting to read every day as Herb Caen was.
FYI:
NOTICE OF SPECIAL MEETING OF THE
BEND CITY COUNCIL
The Bend City Council will meet on Friday, January 22nd at 2 PM in the City Council Chambers at Bend City Hall, 710 NW Wall. The purpose of the meeting is to discuss the Department of Land Conservation and Development Director’s Report on the Urban Growth Boundary Expansion. The meeting is open to the public.
For additional information, please contact:
Patricia Stell
City Recorder
City of Bend
388-5517
"THEY WERE VERY GOOD DECISIONS WHEN WE MADE THE LOANS."
This is just another way of saying "It seemed like a good idea at the time."
Next I expect to hear "The devil made me do it."
Let's be honest here, everybody was doing it,
If everyone one in Bend was at Drake Park eating goose shit then everyone would be doing it. Tourist would say "What are they doing", .. "Hey its Bend", everyone does it.
Employees who made $10/hr were flipping in 2004, and these banks were telling the $10/hr people how to fill out 'state income loans'.
Keep the fee's flowing, the party will last forever.
Now its the next morning the geese-shit is gone, and everyone has no fear of being the fool, cuz everyone did it.
Bend is special folks we're #1 in the whole fucking country, the whole world is watching us in disbelief the morning after.
"Very good decisions when they were made",
Hell yes zero down, zero up front payment, ... 1-2% cash for the banks in fee's at the close.
Very good decision, ... down side? NONE zippo, ...
Could have gone on forever, why the fuck not? Trouble is the WHOLE world is watching, ... and one day soon the whole world is not going to respect folks covered in geese shit with that stupid smile "What me do?" Like mad magazine, ... it worked for gw-bush for 8 yrs, and OR-bam-EO is pulling the same act.
This year there will be another deal to cut taxes for 'first time buyers', whatever the fuck that means, where the clock is reset to zero every year, the party will go on, and our paper ( money ) will be worth less and less.
In the meantime folks keeping looking for a new source of shit to eat, and the world simply watches in disbelief.
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