I Can Write a New Banking Story Every Day

A friend of mine was recently hired by Bank of America to assist in managing its problem loans – also called special assets, special situations, workouts, choose the metaphor of the day…

Beginning with his first day on the job, until he quit 3 weeks later, he was provided with five new files every day. Each file contained between 1,000 to 1,500 pages of information on a particular commercial real estate asset. His job was to read and review each and every document in the file, determine what documents were missing from the checklist of the bank’s required documents needed to dispose of the asset, and manage the asset through complete resolution.

I read at an average speed. I imagine Evelyn Wood reads fast. But how many people can read between 5,000 and 7,500 pages daily (translating to 25,000 to 37,500 pages weekly) of documents related to different asset classes, properly analyze the documents, and determine the correct steps required to asset manage each problem asset through to resolution? I’ll guess no one.

This is the experience at only one bank. At least on residential assets, I’m aware this is occurring at other banks. The sheer volume of problem loans, or whatever they need to be called, will not allow for the assets to be properly resolved by the lenders. Bureaucracy will not maximize the value of the assets; it will merely provide an opportunity for weak people to act like bullies.

I know all banks are actively loaning money. That’s what they all tell me. Meanwhile, Wachovia Bank recently told a 20 year plus client that it would not renew the client’s line of credit. The reason provided – “new management is viewing the credit differently”. Differently from what, I don’t know; but they view it differently nevertheless. While there are some credit questions related to the client’s financing needs, the client rarely uses the financing and has never been in monetary or other default on its line of credit.

Unfortunately, 2009 was not the worst of times. More important that bracing yourself for the upcoming tsunami of loan problems hitting the street, is getting prepared for the opportunity that this credit crisis is creating.

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2 Responses to “I Can Write a New Banking Story Every Day”

  1. Elaine Custead Says:

    Oh this, I can speak of personally. The banking industry is now gun shy after years of free wheeling and dealing. I understand the concern, but it’s as if the banking industry as taken the ” one bad apple spoils the whole bunch” outlook ( and to it’s own detriment)

  2. Brittany Wismer Says:

    This illustrates one of the many benefits of using a Community Bank. The lack of bureaucracy enables the Bank to serve their clients quicker and better. You’ll also find that community banks tend to have minimal or no bad loans/”special assets”. Thank you for sharing this, Bob.

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