DOWN WITH “WALL STREET” !

 

       To really finish the title to this admitted diatribe, I, a “somewhat liberal Democrat,” would add to the addressees of this all of the hide-bound “money-changers”–political and otherwise–who, from their lofty, secure perches are so totally out of touch with everyday reality, and basic human dignity, that they have no understanding of nor care about what their actions are doing to an entire generation of wonderful, able, successful Americans. 

    I have a young friend to whom I am very, very close.  He and his family are in terrible straits today due to nothing ill of his doing.  Rather, he is a real world victim of those persons on “Wall Street,” i.e., troubled, asset-short mortgage lenders and securities traders which the Bush Administration (representing the taxpayers) in October 2008, and under the Troubled Asset Relief Program (”TARP”), “bailed out” by massive cash infusions to make certain that those lenders deemed “too big to fail” were able to continue to function. 

          The purpose of the program, of course, was an attempt to make certain that they would not lose money in situations where the value of secured property had dropped to less than it was when the loan was made, i.e., it was an “under water” loan, and, by extension, that our economy would not careen into yet another Great Depression.   Now, however, many of these institutions bailed out with taxpayer money, including the Little Rock branches thereof, refuse to follow the TARP program and have, to my mind, purposefully determined not to use the taxpayer funds for its purposes.

             My friend lives in Little Rock now, having moved back to his and his wife’s family’s home state only four or five years ago when offered a new job for which he was highly qualified and to be superbly compensated.  He had, after all, been the leading individual sales person, as well as National Director of Sales for his previous employer–based in a populous eastern state–which is a manufacturer of products essential to the residential and commercial real estate construction business.  He was very well known, even nationally, in his niche of the construction business, and he was highly sought by the “big boys.”  He is currently the District Manager of his new employer’s operations in Arkansas–one of the larger “chess pieces” that this World-wide company moves around on its very, very large, marble chess board.

    This wonderful person, a husband and father, came to Little Rock when the construction business, both commercial and residential, was still booming.  Everything was booming!  Only we have all since discovered that the failure of the economic system–with world wide echoes and impact, was due to the to machinations of “Wall Street” and its rapacious greed and stupid, illegal misuse of lending and accounting practices (I know, I am retired legal counsel to commercial real estate development mortgage lenders) that created much of the “bubble” and caused it to burst.  The end of the bubble, I might add, came very close and may still lead to a second Great Depression.

     This young man, the type of sales person who could, according to the salesman’s proverb, “sell ice to Eskimos”, came to Little Rock and, in hindsight, bought a home that was perhaps too big and too expensive.   But, what would most expect?  He was riding high, had a child with another on the way, he needed a big home, and he bought a nice one–which was, in 2005 or 2006 when he moved in, well worth what he paid for it.  And he was well worth the six figure income for which his new giant conglomerate employer hired him.

    But now, for systemic reasons within the scope of TARP, this young man is in great difficulty.  There is almost no commercial construction business in Arkansas now and has not been for more than two years.  The residential business has recovered somewhat, but the size of homes has decreased dramatically–so, there is substantially less product to sell.  Due to the erasure of that portion of his anticipated income based upon commissions upon all sales of his products, he made a contractual arrangement with the Little Rock office of a National mortgage lender to re-finance his home as the Bush Administration had envisioned.  Interestingly, we have learned that this lender was one of the very first lenders protected by the Bush Administration, to the tune of over Twenty Billion Dollars, and by its actions one could conclude it never intended to carry out the bargain.  It was two years of “We need more papers; More information please; what is you first son’s shoe size? etc.”   Oh, and they contractually required that he make no approach to any other potential lender for re-finance since they “…wanted to keep his business!!!!”

    At the end of the two years, just a few days ago, he was told he was approved.  He was, however, offered but a reduction of seventeen dollars per month in his mortgage payment!  And he was ordered to immediately pay all of the fifteen thousand dollars in principal that the lender had agreed to defer since the re-finance procedure had contractually started.  No lender, I assure you, that acts like that has any intent of doing anything but force this young man and his young family out on the street.

          This young man is not a dead beat; he’s one of the good guys, a “player” running in the right circles, known by everyone, a great husband and father and, seemingly, always the “smartest guy in the room.”  But when a man’s home becomes worth approximately one half of what it was when he bought it and his income is about one-third of what it used to be, there are no good answers except for the lender to follow the law–which protects the lender absolutely! 

         I was initially puzzled by the position taken by the lender, but it has now begun to make sense.   First of all, unlike most foreclosures this bank might have made, this is one that has little or no downside and possibly a large upside–for the young man was “foolish enough?”, “bright enough?”, to make a very large down payment, and the balance owing after a foreclosure would be very little…if any.  So, its thinking could well be that is could then just “mow grass” for a couple of years and make a ton of money on the home!

    I know, too, that it was anticipated that, nationally, over 250,000 “under water” loans were to be refinanced (with taxpayer money!!!) so that lenders would lose no money, but only 17,000 have been completed to date!   Then I happened to be walking through the den of my home a few days ago when I noted there was an interview being re-played upon CNN where some Congressional Committee was raking some lender representatives over the coals for their failure to comply with the TARP program–as is obvious from the numbers just noted.  One of the representatives was from the lender in question, and its representative stated with astounding clarity that the reason was that its senior executives had determined that such re-financing “…would not be a prudent thing to do with its shareholder’s money!”   All of which was, of course, actually taxpayer money.

    How about either Arkansas or the United States government (whichever be appropriate)  revoking this lender’s license to do business either in Arkansas or Nationally because of the company’s failure to follow the most basic tenet of corporate law?  Something of this nature must be done by the “government” to get the attention and focus of these people back where the law demands that it be.   Every corporation (bank or otherwise) is required by law and equity to operate with the welfare of all of its constituent/stakeholders in mind, i.e., not just its shareholders, but, also, it customers and the Public at large.  That is the “trade-off” all individual incorporators/shareholders receive from placing their capital into the business, which is at risk, but without personal liability beyond that investment.  Making business as we know it possible.

 

Don Switzer
2739 White Oak Drive
Rogers, Arkansas 72758
(c) August 23, 2010