2010 and Banking

So many topics to talk about for a first blog I figured I would talk about the lending industry. So in the words of Jerry Maquire ”Well, don’t worry! I’m not going to do what you think I’m going to do, which is FLIP OUT!” I mean who could blame just the banks when there are so many others that played key roles in this recession (are we allowed to say that word?). We had Freddie and Fannie out there saying we want more loans given to those that didn’t deserve them in the first place. We had developers building retail centers on letters of intent that were probably worth less than the paper they were printed on. We had commercial realtors convincing buyers that yes it’s a 6% cap rate now, but man that thing’s going to be a 4% cap rate in 5 years. But that’s not what we want to talk about now is it!

The banks take a lot of heat for this mess somewhat rightfully so. It doesn’t make it any easier when we give out “stimulus money” only to hear about huge bonuses being paid to executives. Goldman Sachs had to go so far as to have bomb sniffing dogs and police barricades at their headquarters before an earnings announcement. Here’s a tip if you have to go so far as to hire bomb sniffing dogs you may be doing something to piss people off.

Now I know the banks aren’t  in the business of making people happy, and maybe we don’t care as much about them as our parents did. I mean I probably has as much loyalty to my personal bank as they do to me. If I were to have a problem I would have to talk to 3 different people and maybe one from India to get my internet banking issue resolved.

What’s the answer? Does anyone really know. We can go from an idea, to a 60,000 square foot building built to suit that idea in less than 6 months if pushed. So banks to have to compete at a speed that makes it tough to fully analyze the right decision to make. The smart banks are the ones realizing there are opportunities to make. Maybe we should loan more money to those that have been good to us by making the payments on time. I have a very successful client that purchased a vacant piece of ground and paid cash for the land. He went to get a construction loan on the property only for them to ask for 50% down on the loan. For those of you that don’t know much about commercial lending that’s a bit much! 3 years ago the same client and bank for a vacant piece of ground, the loan was based on 3 non-binding letters of intent from tenants, and he got a 80% Loan to Value on the ENTIRE loan package which included the purchase of the ground and the construction loan.

OK one more entertainment quote this time from Katy Perry “Cause you’re hot then you’re cold, you’re yes then you’re no, you’re in then you’re out, you’re up then you’re down.” I have the answer and it may be a bit crazy but how about consistency? Don’t buck to the latest trend to compete with the new CMBS down the street offering 90% LTV on a spec office building in a spec housing market community. Figure out what you’re good at and stick to it. Realize that the money you’re hording like Scrooge McDuck can be reinvested to credit worthy investors. That means without asking for DNA samples, promissory notes from their grandchildren, and the first right on a liver should it go bad. Ok, maybe that was a bit much.

The point being is I believe the worst is behind us. 2010 is going to be a much better year as long as we can get that”stimulous money” (still laughing on how well that one worked!) to come out of the banks. I think the adage is buy low sell high, right? So for those hiding your money in the mattress get it out . That means you banks!

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