This week, October 28th 2008, I went to lenders to extend terms on a loan that I have paid down from $16,000,000 to 2.5 million dollars. The property has a wholesale value in today's marketplace of 7.5m. I was asking the current lender to extend the term of the existing loan for another 36months as we have reached maturity. Keep in mind, I have never missed or been late on a payment and have paid the loan down from 16m to 2.2m in just four years.
When I went to the lender to ask them to extend the terms they offered me terms that were expensive, short term and refused to work with me. They offered me a twelve-month extension when I have a perfect borrower's record and then suggested "this is a failed project and we need to limit the bank's exposure as much as possible. It is possible this loan will be down graded at the next review by regulators." Failed project? I have paid it down from 16m to 2.5 and only owe 1/3 of its value and it has a positive cash flow. This is anything but a failed project!
I could not believe what I was hearing from this guy. Who teaches bankers how to think and communicate? Are these people unable to differentiate between their good customers and their bad ones? Are you unable to tell the difference or is no one paying attention to their good customers because of all the attention on the unethical, criminal few?
The reality is, if I was late ninety days this lender would do everything possible to work with me, including kiss my ass in order to not take the property back. Banks and the government now are doing it everyday with Presidential candidates offering it up as a solution to our current problem! I watched a builder in Southern California use fraudulent credit applications in order to get tens of millions of dollars in loans to develop condo projects and the moment he couldn't make his payment obligations the lenders lined up to work it out with him.
The government is now asking lenders to rework loans with individuals home buyers for 150,000 dollars to keep them in their homes while the same lenders ignore and insult those individuals that are ethical, financially able-solid customers and businesses that are looking to and will continue to expand their businesses but need help in this environment.
Everywhere I look today the chant of our culture is "reward, support, subsidize, and bail out the losers and penalize those the winners and the ethical!
What is happening in our culture and in our businesses today? We give you a reward regardless of what you do or how you perform. I know the school system is encouraging this today with everyone child that plays gets a reward for playing regardless of their performance. All players are equal. You can't run and you can't score but you still get a trophy! Everyone that puts on a uniform gets a reward for playing! When did this happen to our culture and when did it start infiltrating our businesses?
And why are the people that are playing by the rules and winning getting penalized and ignored? I can't blame the sub-prime and unethical for taking advantage of the system I would do the same thing if I was built that way but I just was not brought up that way and don't have it in me. America and American businesses are failing because they reward their worse customers and penalize and ignore their best customers.
And this thinking is permeating American business everywhere with lenders. I remember Washington Mutual had my checking account business on over $600,000 of deposits a month from rental properties that I owned. One month I became aware of a $15 service fee for a renters bad check and I asked that the fee be removed and the bank refused. I went all the way to the President of the bank and it was still denied. The next day I removed the deposits from WaMu. This is a company that was spending millions of dollars a year on customer satisfaction ads. Where are they today?
Delta Airlines refused to grant me their upper fliers status one year after I spent over $100,000 in the same year in cross country first class airline tickets. They denied my request stating I had only traveled 94 trips and 94,000 miles and was just short of their requirements. By the way I had traveled over one million miles with Delta in previous years. A friend of mine traveled on 100 trips with Delta between LA and San Diego that resulted in less than $5000 dollars in revenue and was rewarded the same status I was requesting. How many times has Delta been in bankruptcy?
Go to almost any grocery store in America today and the less you buy the faster you get served with special lanes for those purchasing seven items or less. While the family spending with two full carts and $300 of groceries has to wait in the longest lines! Is customer service being imported to the USA from communist countries?
Car dealers spend a majority of their dollars on advertising to people that aren't even in the market for a car while ignoring those that are buying cars and servicing cars from them! Didn't someone say that over 4000 car dealers could go out of business this year?
As long as American business and the Government subsidizes and rewards the sub-prime and penalizes and ignores the needs of the prime they will fail!