What the heck?? Banks in lockdown

OK, so I can't speak for most of the country, and not for most industries.

But this bank lockdown is driving me nuts- I absolutely have no ability to understand what the heck they are thinking.

I just completed an interview with a guy with an ENORMOUS resume in the banking industry. He did specialized commercial lending, for a bank that did not get into risky stuff like sub-prime loans.

He's been laid off,and is now willing to take a floor sweeping job if necessary just to get into a new industry.

This guy personally managed a $30 million portfolio of loans. Until 6 months ago, the bank pushed 2 million dollars of business across his department's desk per month. They have since cut that to $60,000. This is not a personal cut, this is the entire department.

$60,000??? WTHeck??

I thought they made their profits by loaning money!?!

I work for a company that is rapidly expanding. We experienced 100% growth in '08, and already have PO's in hand for 500% additional growth in '09. Should see 10 fold increase. Solid company, great financials. Good credit. This is a banker's dream customer.

We're currently trying to line up capital to enable our growth, and are in discussion with 3 separate banks. 2 national banks that say they have money to lend, tell their bankers the kind of customer they want, which we fit the model perfectly. Review boards shoot it down for no apparent reason. So much so that it leaves the bankers dumbfounded, one was in tears. He makes his living off commissions, and they won't let him lend to a great customer.

3rd bank is a local one. They'll work with us, but only have $9 million in total lending capital, and we would represent 30% of their money, so the exposure level on one customer is a bit high. $9 million??? Shouldn't banks be lending more than that?? That's a ridiculously low number for commercial lending.

So we are ready to expand. We are ready to hire. We're an excellent risk. But capital is not available.

THIS DOESN'T MAKE ANY SENSE.

If banks in other areas are acting this stupid, we can all expect pink slips very, very soon.

As much as I hate government intervention, it's time to demand banks cut the money loose.

We are currently posturing ourselves to succeed without bank involvement. We'll turn to private investors, or involve customers for capital money. Doesn't matter, we're gonna survive, but there sure are going to be a heck of a lot of closures, and we can thank the banks for the mess when it's all over.

Wasn't the whole point of the bank bailout to get them to lend money again (and not throw lavish parties, give out big executive bonuses and buy $50million jets?)???

If banks lend out money instead of hoarding it the FDIC will declare them on the verge of collapsing and then the big Wall St. banks will swoop in and buy them on the cheap with government money. The way it is now risky behavior gets rewarded (if you do enough of it) and smart business practices get you shut down by the government and swallowed up by the cabal,

That is REALLY STINKIN' THINKIN'

Totally stupid.

Wasn't the whole point of the bank bailout to get them to lend money again (and not throw lavish parties, give out big executive bonuses and buy $50million jets?)???

Somewhat logical version: If that was the intent, you'd think someone would've said "WHOA...wait a minute, these douchebags have gotten themselves damned near broke already. Shouldn't we specify what the money should be spent on so that they don't just burn through it all again?"

Crazy whack job conspiracy theory version: IIRC, it's specified somewhere in these "loans" that the banks dividends are to go directly back to the fed (disclaimer: I may be totally full of E36 M3 here-) Would you invest in a bank w/no dividends? A few months down the road, the banks fail, the government owns the stock, throws up their hands and says "Well folks, we did what we could, but it looks like your infinitely wise and gracious federal government is the only entity that can keep your money safe..."

...and the "Firstfederalbanko'gimmealldatmoney,bitch" is born. Stranger things have happened. Look at Social Security.

All right. So this is beautiful.

Today, the company owner plays a gamble. He had a sense that this was a garbage perspective from the banks that had less to do with profits, viability, or risk, and more to do with bookeeping and the stupidity of the banks.

So he dips into some family money a bit. Injects $250K nto the business (in an obviously VERY well secured note), and moves some short term debt into the long term catagory.

Keep in mind, the debt is still on the balance sheet.

So now the banks want to talk to him again.

What a sham!

He took $250K in short term debt (all within 60 days of current with long track records of handling cash flow FAR in excess of that) and made it PERMANENT on the books.

Now the banks want to talk again.

Of course, that in no way prevents him from running up the same short term debts in the first 60 days after making the deal with the bank.

Seems to me the only people stupider than the bankers are the government agencies like the FDIC that think this is good business.

I want in, I have some capitol, where do I send the check.

Short of that, I am a Data Security Analyst with a CISSP (from www.isc2.org ) (perfessional certification) I have 14 years of Information Technology / Information Security Expeirence. I am also a Veteran (7 years in the U.S. Navy).

So what have you got going on over there?

Eric Mosher CISSP

I tried that. I told him I'd throw in some capital for a little piece of the action- not gonna happen.

He got financing at 4%, and offered me the same percentage.

I'd rather take 0% interest with a 1% stake in the company.

Are you asking for a job, Eric?

I agree with you SVreX. The banks need to start lending the money we gave them in the first place.

Bought a house in October. Before all this mess really got started. It was ramping up but only one band had failed at that time. The hoops I and my g/f had to jump through were patently ridiculous. Our loan broker was beside himself.

We have perfect credit. Down payment was over 20%. Our monthly income was double what we would need to make the payments.

Banks are hanging us out to dry. They are contributing to their own problems....again.

SVreX wrote: I work for a company that is rapidly expanding. We experienced 100% growth in '08, and already have PO's in hand for 500% additional growth in '09. Should see 10 fold increase. Solid company, great financials. Good credit. This is a banker's dream customer. So we are ready to expand. We are ready to hire. We're an excellent risk. But capital is not available. THIS DOESN'T MAKE ANY SENSE.

Hey Paul, great numbers and prospects! What does your company do/provide?

Todd

I think it is a little bit of being in the right place at the right time.

It's a small production chemical company and R&D lab, but I don't think that matters. I've talked to several other companies that are in a similar situation.

My opinion- here's the important part. This company is 5 years old. We have put a lot of effort and capital into growth in the past few years.

So the key is: we are out of the start up phase, but have not grown to be a dinosaur yet.

Start ups are toxic. Nobody wants to take a chance on them, and capital is not available. They are untested and unproven, therefore a big risk, at a time when risk is really bad. Risk to lenders, investors, customers, vendors, everyone.

But dinosaurs are inflexible. Microsoft, Dow, GM, whatever. They do no have the ability to change gears, or re-position themselves for success. It's tough to turn a battleship. So, they've established their methods and SOP's, and they are factually unable to change. They can cut back and try to shave expenses, but they can't try it a whole new way in a reasonable amount of time.

We are getting a lot of business from the dinosaurs (because we can do it cheaper), and a lot of business that start-ups might otherwise get (if they could get their feet off the ground). We are EXTREMELY flexible, even to the point of none of our equipment being permanently installed, and having a full time crew dedicated to continuously changing stuff. We market and purchase extremely smart, and worldwide, and we never say no to a new project, even if we are not currently set up to do it.

That's a winning strategy in any industry. I wish our government could understand that and stop throwing money at the dinosaurs. They need to invest in the future of our country , and it lies in the great small businesses that are ready to be flexible and expand. We doubled our workforce in '08, and have already added an additional 50% in '09. That's how you put people back to work, and it breaks my heart to see how idiotic our leadership is acting.