An Honest Banker Speaks Out

I’m a 35-year veteran in the banking industry. And I’ve spent the better part of my career working for the big banks as a small business banker and credit underwriter. Small business lending, in industry terms, is defined as a business that has less than $20 million in revenue and that borrows less than $5 million. I’ve been a lender for most of those years and I’ve been appalled at the changes in the industry.

The government has already done plenty for the big banks. It needs to stop worrying about them now. Instead, it need to pump money into the local community banks because those are the bankers who understand their markets, and know the businesses in their markets. They lunch with small business owners at Rotary Clubs and Chamber meetings. They learn, first-hand, about their businesses and the challenges they face. They go to their stores and factories and “kick the boxes.” And most importantly, they learn about the ways in which those business owners are making the tough decisions in cutting back expenses to stay ahead of this economic crisis.

Big banks like the one I work for typically have an aversion to lending to companies whose sales and profitability trends are deteriorating, even in tough times like these. Thus, very credit-worthy businesses are having their lines cut back or closed down. Not only are banks not making new loans, they are systematically withdrawing from the loan commitments they already have in place.

Why do the big banks act like this? Because they don’t have a personal relationship with their small business customers. Instead, over the years, they have come to rely on impersonal credit scoring. They let a computer make the decisions previously made by the local bankers. Then they started to “reduce paperwork” and processing time. They allowed businesses to use a one-page form for loan applications where the owners could “state revenue and income and personal assets” without verification. Then, for loans under $150,000, the banks decided they didn’t have to file UCC filings. These filings are important because they tell all the other banks who lent money to whom. So loans made by one bank became invisible to everyone else. And since business loans, which the owners personally guarantee, are not reported to credit agencies on personal credit reports, they are even more invisible.

So far, despite doling out more than $125 billion in new capital to banks, the government has been unwilling to do anything more than politely ask the banks to make more loans. That approach is never going to work. Since 1999, the government has issued several guidelines to the banks, warning them of the potentially disastrous consequences of diving into the risky subprime mortgage market. It has urged them to curtail this behavior. The banks refused to listen and went head-long into that market, driven solely by greed. For the government to now believe that the big banks are somehow going to have an epiphany and change their behavior is delusional.

And let’s not hear another word about how government control is somehow a move towards socialism. Tough times requires touch choices and difficult decisions. And they also require that bad behavior be curtailed and good behavior monitored. Right now the banking industry needs more government regulation and oversight. And it needs enforceable guidelines on how and under what criteria banks should make loans. To the headline writer of Joe Nocera’s column on Saturday I say, “Banks don’t give loans,” (as the headline read) they make loans.” “Give” implies that the money does not need to be repaid. And that is at the very core of this issue. We need to ensure that the banks apply reasonable lending criteria, but still criteria that encourages them to make loans to the many, many borrowers in this recession who remain credit-worthy, despite declines in revenues and profits. To do that, banks need to re-establish the old standards and verification processes that served the banking system so well for so long. And they need to once again look the borrower in the eye instead of relying on a credit scoring system that is doing far more harm than good.

If we make the bailout funds available to the community bankers, I promise they will know what to do with the money. They will lend it and they will make prudent lending decisions, based on direct and comprehensive knowledge of the borrower. So what are we waiting for? Link.

The Truth About ACORN

Another Republican Down on a McCain-Palin Victory: Sarah Palin!!

Well, she should know. Even her.

Noisily planning for her defeat….

And John Sidney McCain III’s people aren’t happy?!

Election Day Message from My Congressman; How Not to Get Screwed at the Polling Place

Make sure your vote counts!

Hon. John Hall (D-NY19):

Did you know? 

• You do not need to show identification unless it is your first time voting at that location.
   
• You have the right to be assisted in voting if you cannot read or see the ballot, if you cannot enter the voting booth, or cannot operate the machine due to a physical disability. You may be assisted by a person of your choice, other than your employer. Every polling place is required to have an accessible ballot marking device available upon request.
   
• You have the right to bring children under 16 into the voting booth with you.
   
• You do have the right to vote if your home is in foreclosure. If you still live in the home you can still vote in that district.
   
• You have the right to take time off from work to vote. If the polls are not open for 4 consecutive hours before or after work you can take off up to 2 paid hours from work. You must notify your employer at least 2 days before Election Day.
   
• If for some reason you cannot vote on the voting machine due to a technical problem or a conflict with the voter registration information, you have the right to vote on a paper ballot. It’s always better to vote on the machine if you can, but in an emergency or if there is a conflict that cannot be resolved on site, do use the paper ballot option.

76 Smart Cookies Choose Obama

Who and why are here.

Commies!

Maybe Sarah Wasn’t the Best Choice; Another Failure of President McCain

Yeah, well, it ain’t over yet. They win, and we’re really

War Room:

When one looks at Palin’s favorability ratings, Noonan, Brooks and Frum seem to have a point. A recent Newsweek poll found that Palin is the only major candidate on the presidential ballots that has an overall negative rating with voters. The poll also indicates that she has hurt McCain with independents — 34 percent said that Palin has made them less likely to vote for McCain. The most recent Washington Post/ABC News poll also found that a majority of likely voters view her unfavorably and doubt she is qualified to be president.

Quoted

War Room:

At a rally in Miami earlier today, John McCain continued his attacks on Barack Obama’s tax policy along what’s now become a familiar line, suggesting that Obama will bring socialism to the U.S. and saying that the Democratic nominee is running for “redistributionist-in-chief.”

Speaking at a rally in Raleigh, N.C., Obama responded to McCain’s charges with a quip of his own. Obama told the crowd:

Lately, he’s called me a socialist for wanting to roll back the Bush tax cuts for the wealthiest Americans so we can finally give tax relief to the middle class. I don’t know what’s next. By the end of the week, he’ll be accusing me of being a secret communist because I shared my toys in kindergarten.

ACORN Strikes Back!

The nerve of them, empowering citizens who aren’t millionaire rightists… like this is a democracy or something (which the GOP has actually historically denied)….

Thought

Play your part in the comedy, but don’t identify yourself with your role! — Why Lazurus Laughed by Wei Wu Wei