The headline running at the top of the Washington Post's website reads "Wall Street Executives Go On Image Offensive," neatly setting today's storyline as CEOs come to town to throw themselves on the money -- I'm sorry! I believe I meant "mercy!" -- of Congress. And in a fantastic column, Steven Pearlstein tries to make that as difficult as possible. Pearlstein comes hard; his piece is frontloaded with two fistfuls of populist fury. But it's not the anti-Wall Street pyrotechnics that make the piece, it's the populist wisdom that truly lowers the boom. By casting Wall Street's "Titans Of Finance" against a small-time banker who got the economy right, Pearlstein's column is worthy of being quoted at length in today's hearings.
Pearlstein tells the story of Citizens South Bank of Charlotte, North Carolina and its CEO, Kim Price. Price and his bank avoided wading into the subprime market, and stayed profitable. But since they were eligible to receive Federal bailout money, they applied and won themselves a modest slice of the TARP, to the tune of $20.5 million. As Pearlstein relates, Price then found an excellent way to use that money:
...that got Price to thinking: What if Citizens were to use its federal bailout money to offer below-market mortgage rates with no closing costs to consumers who would buy a house, or a house lot, from builders and developers who had borrowed money from Citizens?
Price asked some of his loan officers to check with the builders and developers, who not surprisingly were excited enough about the project to be willing to chip in some money to help cover a portion of the forgone closing costs. So last week, Citizens launched its marketing campaign for the $20.5 million program, in collaboration with its builder-developer customers, offering 30-year loans with an initial teaser rate of 3.5 percent for the first two years, rising to a fixed 5.5 percent rate (the current market rate) for the balance of the loan.
"As we see it, it's a win-win-win situation all round," Price explained to me. The builders and developers win by having a tool to help move their unsold inventory. The consumer wins by getting a cut-rate loan. And Citizens wins because it lowers the risk that it will have to write off even more of its commercial loans while taking a modest step to help stimulate the local economy. And, of course, the public relations bump isn't bad either.
But look at what Pearlstein zeroes in on here:
What's striking, however, is the attitude Price expresses in talking of the new program. He's enough of a profit-making businessman to know that when the government is offering 5 percent equity money, he'd be a damn fool not to take it, even if his bank is already well capitalized. And yet he's sensitive enough about obligation that he feels comes with taking taxpayer money that he was anxious to use it in a visible way to benefit his community and his customers, as well as his shareholders.
See, it's almost as if the understanding that one has obligations outside the balance sheet is an important ingredient to, as I like to say, "getting it right."
It's powerful, well-elucidated stuff from Pearlstein, who signs off by putting a good question into the hands of the Senate Finance Committee: "How is it that Kim Price, a community banker with an undergraduate degree from Appalachian State University, a tiny executive staff and a pay package that you would consider insulting, somehow managed to come up with a more creative use for his government bailout money than any of you?"
I should very much like to hear that question!