I've been concentrating on my consulting business, which focuses on assisting banks with problem loans and trying to find sustainable business lines for them that the regulators will bless. Haven't made much money, but boy has it been interesting looking at the soft underbelly of banking and regulation.
I live in western Colorado. At certain times of the year migrating deer and elk can make our highways look like lunch time on Times Square. If you could put a suit and tie on the animals, that startled, stunned look in the headlights would be a perfect approximation of bankers and regulators alike right now.
THE BAD BANKER:
Fear and denial certainly characterizes the banker with problem assets. He (or she) is scared to death that the bank will go down, resulting in a fate worse than death. So, deny the stituation. Believe that the current appraisals are right. Don't listen to the real estate broker who whispers to you over a martini that sales prices are going down 10% per month. Convince yourself that you've got your arms around your bad assets, and that you don't need any help working those assets. Then convince your board and stockholders that "All is well".
When a rookie becomes a bank regulator there are two standard issues of equipment: a laptop and a prayer wheel. The latter is spun constantly for the next umpteen years and each revolutions says "I gotta keep my job". These are perilous times for regulators, witness the criticism in the wake of Countrywid, Indymac Bank and WAMU. The profession has learned from these debacles:
- No Regulator ever got fired for being too tough.
- If I don't make a decision, I can't be faulted for making a bad decision.
- We let too many people in banking. If, now, we don't let any people in the club, we won't have bad people.
There's a ton of private capital out there that could, and would, relieve a lot of pressure on the hapless taxpayer, but the FDIC has made too difficult for private money to help. What the heck: do nothing, and nothing will happen, and that prayer wheel can go on spinning.
THE GOOD BANKER: He (somehow I don't see the feminine gender in the picture I'm about to paint) sits toadlike in his executive chair and his litany of ribbits translates to "Loans, we don't need to make no stinking loans. They just go bad" or, "We'll just lay low, watch some of our competition disappear, and when all of the rest of you have pulled the country out of the recession, we'll see what we can do about getting back in the lending business".
Actually, I don't blame them. But now would be the time for banks to be looking for new business lines and new ways to enhance revenue. The whole lot, good, bad, ugly and regulators, will go back to the same old format, which will assure us that we get to repeat this whole experience in a number of years.
One thing for sure: everybody's hunkered down with a blanket over their heads and pillows blocking their ears. Just try to talk to a banker today about a new idea or ways to alleviate the pressure of problem assets. Their phones are blocked, their eyes are closed, their ears are stopped, and the only emails they open are from the regulators, or maybe Amazon touting the most recent banking expose.