Letters to the Editor: Find Me a Bank That's Seriously Lending
The following were received in response to a Feb. 2 letter in The Wall Street Journal from Ed Yingling, president and chief executive of the American Bankers Association, on the lending situation at today’s big U.S. banks.
I wonder if Mr. Yingling would volunteer the actual hard numbers in terms of loan volume and quantities of loans made compared to 2008 and earlier. If my bank and the banks of my customers are any indication, that letter is mere puffery.
From what I see, banks (not only secondary/non traditional lenders) have become ostriches with their heads buried so deep in their own jacked-up balance sheets with the fear of saving their own jobs and 401(k)s, that the only borrowers deemed worthy these days have no debt, and no exposure to any business cycle or sector whatsoever.
As long as consumers can’t get financing for autos, homes or business lines of credit, the economy will continue to shrink and put further downward pressure on the prices of all asset classes. The banks are shooting themselves in the other foot by cutting off performing loans and forcing businesses to shut their doors. I believe we will see a fundamental shift in the consumer's attitude regarding borrowing and the lending institutions themselves. These banks cannot accept bailout money and then simply line the pockets of the executive committee with “badly needed” bonuses while shutting out their customers who are bearing the burden of this bailout.
Shameful doesn’t even come close to describing the actions of these banks. Criminal activity shrouded in pure lies is a more accurate description.
I saw the Wall Street Journal letter from the representative of The American Bankers Association. I have also read in the same newspaper a couple of articles defending the banks, written by “financial consultant” Bert Ely, who is obviously a shill for the banks. Both the letter and the article are jokes. Who do they think they are trying to kid?
America’s banks have failed home builders and they have failed the American people. They are destroying businesses every day and our entire economy. They are making us a third-world country and forcing us to pile up debt that will take generations to pay off.
Read the current edition of Time magazine and an article titled “Why your bank is broke.” This tells the tale of years of excess lending and undercapitalization by our banks. It tells the story of the misuse and failure of TARP (Targeted Assets Relief Program) funds. It demonstrates the reason why builders are being put out of business every day because our banks are going broke. The combined net worth of the Bank of America and Citi today is $56 billion, which is $34 billion less than the $90 billion in TARP money they have received.
What the story tells us is that the under-regulated banks have over-leveraged themselves, going as high as 30:1 debt to equity, whereas builders were at 1:1. When house prices fell the banks were toast.
A recent Washington Post story reported that a local bank spent most of its $32 million TARP money to buy a local competitor, and the Los Angeles Times recently ran a story about the failure of the TARP program and the lack of lending to business. Every day the media is full of stories about bad bank behavior. It's either the failure to lend money or it’s outrage over banker bonuses, corporate jets or sponsoring the NFL experience with taxpayer dollars. Or the Bank of America sending $7 billion to The China Construction Bank while bailing out on American builders.
Please go to www.pathtosolutions.com to see more stories about bank behavior. You will see that banks have been creating "contrived defaults," often using "made-to-order appraisals" to pull the rug out from underneath builders. As a result, in 2008 this country lost a home builder every business hour. It is expected in 2009 that we will lose a home builder every 15 minutes. Analyst Ivy Zelman believes we will lose half our builders during this recession.
The lack of builder liquidity and bad behavior by banks is the number-one issue facing our industry. I urge NAHB to set up the framework to deal with this issue and deal with it quickly.
It’s almost hilarious to think that a letter from an obviously biased source defending his industry could be expected to come anywhere close to convincing the business community, especially home building. If there is a bank out there that is seriously looking to lend money, I know of hundreds if not thousands of builders and developers who would love to talk with them. Please ask the author of the letter for contact information. I’m sure they would love to hear from interested borrowers.
Brian W. Binash
I am in Denver and am interested in banks you might know of who are doing lot loans and construction loans? I read everywhere that banks say they are still lending, but I have not found this to be the case. Can you help me out with some fresh construction lending leads? I appreciate any assistance you can provide. Thank you!
As home builders who have been in business for over 38 years and whose affiliated companies built more than 180 homes in 2007, we can tell you that our recent experience with banks is quite different from what banks are telling the public. Most banks are only lending to dig themselves out of bad deals. The builders that are paying their bills are being asked to come up with more equity on the pretense that the values of the assets in the loans are not worth what they used to be. The main reason they are worth less is because the banks are dumping assets at unreasonable prices. Do not believe what banks are telling you. The bank examiners are ruling what banks are doing to survive at the expense of the home building community.