Are Banks Getting A Bum Rap?

Most definitely NOT!

The Obama Administration is blaming banks for the sluggish recovery. The banks are fighting back. The administration and the banks are full of bull dinky.

The Associated Press ran an PR piece for bankers the other day, Banks getting a bum rap on not lending enough?. It featured Stan Wilmoth,the CEO of a small bank in Nevada who "didn't make a lot of dumb loans during the boom."

Wilmoth says his bank is not lending because demand is down for loans to credit worthy borrowers. To make money he's paying 1.3% on CDs and earning 3% on AAA rated municipal bonds.

He's putting a great deal of faith in the same credit rating agencies who gave their stamp of approval to securitized mortgages, derivatives, Fannie and Freddie.

Demand is down for loans because the government and the banks spent most of 2009 suppressing economic activity. The government suppressed economic activity by creating enormous uncertainly over the future with the Obama/Pelosi/Reid socialist agenda. The banks, large and small, suppressed economic activity by running scared and implementing a wholesale contraction in their exposure to consumers and businesses.

Small banks that are run by thinking people are not as much a drag on our economy now as the big banks are. Have you tried talking to someone at a big bank who has the authority to make a decision? It is almost impossible.

Unless you have a seven figure relationship with a big bank, you don't get to talk to a decision maker. You interact with a computer, or if you press 0 you talk to a "customer service" representative who tells you what the computer would have told you if you pressed the correct number on your phone or read the correct page on the bank's website.

Small banks who tell the public that they didn't make dumb loans during the boom and that the lending criteria is the same now as it has always been are lying. They shut down private lending in 2009, regardless of the credit worthiness of the borrower.

Big banks, the ones run by computers, implemented a massive contraction in their exposure to their "good customers" regardless of the relationship with or performance of the customer. I experienced this first hand many times in 2009.

American Express

American Express was the worst offender. Between my business and my personal accounts I had a high 5 figure relationship with AmEx "during the boom," 2 personal accounts and 3 business accounts. I always paid them on time. In late 2008 they closed a business line of credit I had with them, just because. They said they were discontinuing that line of business.

I should have known better, but a month later I paid off a personal line with them.

A couple of months after that I was heading out of town for some business and pleasure in the sun and wanted to leave some extra cash in the business "just in case." AmEx had a promo rate on the card I paid off so I swiped the card at my business. I was shocked that it was declined and called them to see what the problem was. After twenty minutes on the phone with customer service rep trying to get the computer to tell them what the problem was, I hung up and used another card with no problem. The promo rate was no big deal..I'd be paying the card off when I got home as long as "just in case" didn't happen.

That evening my wife came back to our hotel room in Florida after picking some sun screen, etc. at the pharmacy and informed me that her AmEx card didn't work. That was weird, I had just checked into the hotel with my business AmEx card. I called to find out what the problem was and was connected to a representive who didn't have a computer script to read from. She told me that my personal cards were closed because I had attempted to use one at my own business and that was a violation of card agreement. I actually read those card agreements. I said, "It is not." "Yes it is, and you committed fraud," she retorted. I flipped out on the rep while my wife smiled and shook her head. She'd seen me go off like this before.

"What paragraph of the card agreement did I violate?" "Well, that's hard to say, we change them all the time." "I know you do, I read them. You just accused me of a crime in addition to violating our agreement. Tell me what clause I violated." "Please hold." Music.

"Mr. Gallagher, this is Ms. Supervisor, you violated your merchant agreement with us. Paragraph X prohibits you from using your own card at your place of business." I hadn't read the merchant agreement, my customers rarely use credit cards. "So cancel my merchant account and reinstate my personal accounts immediately," I replied. "I can't." "Who can?" "No one?" "Who's the head of your department?" "Doria Camaratta." "Let me talk to her." "She's gone for the day." "What is her phone number, I call tomorrow." "954-XXX-XXXX." "Thank you."

"Sorry about that honey, let's get dinner."

The next morning I called the number and asked for Ms. Camaratta. "This is Ms. Camaratta's Executive Assistant, can I help you?" I identified myself, gave my account numbers, told my story and asked her to fix it. "I'll look into it and call you back, Mr. Gallagher. It might take a couple of days." "OK, thank you."

Four days later and no call back. After my morning business meeting I dropped my wife off at Butterfly World and drove over to AmEx's office in Ft Lauderdale. Ms. Camaratta's picture was the wall behind the security desk.

Dressed in my shorts, sandals and fishing shirt I approached the security guard and asked to speak to Ms. Camaratta. Drones were swiping their ID cards and walking through turnstiles on their way back from lunch or to start their shifts. I wondered if one of them was the one I flipped out on.

"What is this about?" the security guard asked. "Problems with two of my accounts." "Have your tried calling customer service?" "Yes, and I have already spoken to Ms. Camaratta's Executive Assistant. Please call and tell Ms. Camarratta I am here." Two more security guards were now standing behind the glass with the first guard.

After about 10 minutes and three more security guards showing up, the first guard pointed to a phone on the wall. "Hello Mr. Gallagher, this is Ms. Camaratta's assistant, I'm sorry I haven't called you back yet." "That's OK. Is Ms. Camaratta there? That is a very nice picture of her on the wall down here. Are you one of the other people hanging on the wall?" Giggles. "No, my picture is not on the wall and Ms. Camarrata is not available." "Sure she is, she just doesn't want to talk to me."

"As you know, I'm here in the building, can we meet?" "I'm sorry Mr. Gallagher but since 9/11 we don't allow customers into the facility." "I'm not a terrorist, if I was even on the watch list you'd know that from my credit report that you looked at this morning." Giggles.

"I'm sorry Mr. Gallagher, but we are not going to reinstate your personal accounts, but your business account it still open." "How about just the account that I pay off every month, I need that to keep personal and business expenses separate. I don't need the line of credit anyway." "I'm sorry." "What about my membership rewards points? I tried to transfer them all to an airline, but they are frozen." "I'll call you back on that later this afternoon?" "Really, four days ago you said you'd call me in a couple of days." "I'm sorry. Really, I'll call you back this afternoon."

On my way back to Butterfly World to pick up my wife, the nice assistant called to say my membership rewards had been transferred to my business account.

Two weeks ago I got a letter from AmEx thanking me for my business and good performance. They reinstated one of the business accounts they had canceled. I won't use it until Ms Camaratta calls.

Chase

This was a six figure business and personal relationship "during the boom." During 2008 I paid off a business loan, as agreed, that Chase acquired when they bought Bank of New York. I called my representative and asked if they wanted to do it again. "Thanks for remembering me, she said. Well you'll have to fill out an application." "I already have this other loan with you..before I go applying just tell me with the exposure I have with you now, are they lending?" "Would you like me to send you an application?" "No thanks. Nice talking to you again."

During the spring of 2009 I received a letter from Chase informing me that they had reduced my credit line on a personal credit card by half. There was a phone number to call if you had questions. I called and asked, "Why did you do that?" "What was your income last year?" I told the nice lady my income. "You have $xK in credit card debt, why so much?" "Why do you think that's a lot?" "How are you going to pay it back?" "Just like I've always paid it back, only yours in going to be paid back very quickly." "Please hold." Music. "Mr. Gallagher, I've restored you credit limit and raised it $1000" "Thank you."

That went a lot better than American Express did.

A few months later I received a letter from Chase about a business loan that was interest only for another couple of years before it was to convert to a fixed term loan. They were changing the terms and requiring principle payments now. There was a phone number to call. Screw it, I'll just start paying them off. I closed my checking account that they took the payment from every month and started sending in the payments.

Citi

About a week after the first Chase letter, I get a similar letter from Citi reducing a personal credit line. I called the phone number and asked, "What are you doing? I don't even need the line, but if all you banks keep reducing my credit lines my scores will suffer and I'll be out of business." "Please hold." Music.

"Please disregard that letter Mr. Gallagher, we've restored your credit line." "Thank you."

F Ms. Camarrata and her pretty picture on the wall. It was a Citi card that I swiped for the "just in case" transaction after the AmEx card failed.

Sovereign

I have a seven figure relationship with Sovereign and can get a decision maker on the phone. However, Sovereign invested heavily in Fannie and Freddie and they were close to insolvency when Barney Frank's s**t loans hit the fan. They were taken over by a huge Spanish bank and the decision makers are scared for their jobs.

Besides, my big relationship is on the business side. Even though the business reps always asked for my personal business, they couldn't help me if there was a problem with a personal account.

Sometime in mid 2009 I got a letter from Sovereign's home equity area informing me that they were closing my HELOC. This was a substantial line. I had used to buy and renovate other properties. When ever there was excess cash in the business, I paid down this line to save interest and to manage my credit scores. Thank goodness I had just drawn down the line almost in its entirety before they froze it.

I called them to find out what the problem was. They told me my house was worth less than half of what they had appraised it at two years earlier. "That's absurd," I said, "and I've paid down the first mortgage by $X since that appraisal and made $X in improvements since then. (I hope Wayne Pominowski and Charlie Heck haven't read this far). They said they would send out an appraiser at their expense.

A few days later my wife called me at the office. "Honey, there are people from the bank here. Is everything OK?" "Let me talk to them." That was the fastest appraisal order in history. "Hi Mr. Gallagher. Sovereign Bank sent us out for a drive by. The property is beautiful. Your view is breath taking. We're taking pictures. I'm sure everything will be OK." "Thanks."

Two weeks later the appraiser called. Sovereign wants them to come back and take pictures of the inside of the house. "I didn't ask for this. I'm not buying, selling or refinancing. You're not coming into my house." "But, but, but." "I don't care. I'll just amortize the the loan." They called three more times trying to get into the house. No deal.

Wells Fargo

Wells holds a mortgage on one of my properties. This particular property happens to be in a flood zone and Wells requires that I participate in the FEMA scam.

My insurance policies renew at the end of May every year and in June I get letters from my mortgage holders asking for proof of insurance. I have multiple properties on the same insurance policy. This often causes some minor confusion that is usually rectified quickly with a phone call.

This year was going normally. The folks at Wells confused the property I have mortgaged with them for a property I have insured for significantly more and sent me a letter saying I had to increase my flood insurance limits to match the home owners insurance. They actually did me a favor, as I reviewed the policies and reduced limits on both the homeowners and flood on that property.

I sent over the documentation and followed up with a phone call. The nice lady told me everything was fine.

Then in September I got another letter saying that Wells had purchased lenders flood insurance and that I now had an negative escrow balance to be paid immediately to cover the premium. I called them, recited the time, date of the call with the nice lady. A nice young man reviewed the file, apologised and said all was fine.

The following month there was a credit on my statement for all but $65 dollars of the lenders insurance premium. This was getting to be an pain in the butt. I called again, told them they made a mistake and to take the $65 charge off my account. "I'm sorry Mr. Gallagher. I'll have this taken care of."

At the end of November I couldn't find a statement from Wells Fargo. No problem, I just sent in the December payment with my account # written on the check.

A week later my assistant tells me someone from Wells Fargo is on the phone. "Hello, Mr. Gallagher, this is an attempt to collect a debt.." "What are you taking about? I paid Wells Fargo!" "OK, if you say so, good-bye." Click. That was very weird. I immediately pulled out the Wells file and checked my bank account it see if my check cleared. It was too early in the month for them to be calling about the December payment, which had not cleared, but the November payment had.

On the phone with Wells Fargo, they tell me they received the November payment but it was not credited to the account because I didn't pay the $65. I flipped out on them and got bounced back and forth from customer service to the insurance department until I demanded a conference call with both departments until it was resolved.

What a head ache.

Over the next few days I received two letters from Wells telling me that they had tried to call me and needed to talk to me about my account, followed by a letter telling me they understand how hard things are for me now and that I should call them for help. F them.

On December 14 my December payment still hadn't cleared my checking account so I called them again. They hadn't received it, where did I send it? blah blah blah.

I gave them a payment on the phone, fees waived. The next day the check came back in the mail as undeliverable. They changed lock boxes. A day latter I received a letter that the $65 insurance premium had been refunded to them. I could care less as long as they weren't charging me for their mistakes.

Banks continue to thrwart the recovery, not only by being to tight with their lending criteria, but by putting small business people like me through the BS that they do. All the hours I spent dealing with their nonsense I could have been selling, collecting or blogging.