BENEWOLF ... on banking

Riding Drag

Riding Drag - The job on a cattle drive taken by the Drag Rider: a person on horseback who takes the position at the rear of the herd;  who picks up strays and bust cattle out of hard to reach places and does all of the jobs no one else wants to do while in inadvertently eating copious amounts of dust.

I don't know about the other loan sale advisors in the country (loan buyers too for that matter) but by the amount of dust on my hat and in my mouth it sure makes me feel like I've been riding drag.  Do-able deals are about as rare as hen's teeth.

I hear stories each week about loans being sold in the 30's or low 40's but they usually begin with "Once upon a time."  As more and more lists come out like the "Texas Ratio" identifying problem banks and as another bank bites the dust each Friday afternoon, you've got to believe that next week is the week that "all hell will break loose."  However it is always "next" week.

Folks, the loan loss reserves are just not there!  Bank Implode's website had an outstanding article this week http://bankimplode.com/viewnews/2008-09-11_BanksWhereTheMoneysNot.html entitled "Where the Money's Not."  You need to read this.  If you think there is an easy solution for banks to shed their non performing loans, think again. 

Texas politico and former HUD Secretary under President Clinton and Countrywide board member 2001-2007 (earning over $5.8MM as a result of selling off Countrywide stock) Henry Cisneros, this week was quoted as saying "it is time to consider another RTC type entity."  As I said in an earlier post "be careful what you wish for."  I invite you again to study closely the effectiveness of the RTC and learn about who, and how few, actually benefited from their halcyon days.

In the mean time I'll keep riding drag and picking deals out of the brush.  I'll pull down my hat and tighten up the ol' bandanna.  At least drag riders don't get killed in a stampede.

What I did on my summer vacation...or not

As the summer of  2008 draws to a close I feel compelled to report on my fun, relaxing vacation or rather lack of one.  I spent my warm balmy Oklahoma days primarily doing three things.  Talking on the phone, reading and writing.  Sound relaxing?

It does until you learn that I have been talking to scores of bankers that are totally distraught about their capital positions (or lack of capital) their loan loss reserves (or lack thereof) and the present (and rapidly declining) value of their loan collateral and their ever-growing REO portfolios.

It sounds like a nap in a hammock until you learn that I've been visiting with dozens of investors that have hundreds of millions of dollars of ready capital but are unable to buy assets from lenders at what most believe are fair market prices.  Prices that most likely will continue to erode.

It was almost like curling up with the latest John Grisham novel until you know that I have been reading twenty or more daily periodicals that are chronicling this ever unfolding, and seemingly unending, financial crisis that now appears historic by any standard.

And don't forget the leisurely writing of my diary (this blog).  This has been an attempt to explain to my clients and prospective customers what I am seeing from the bowels of lending institutions and disseminate what I've learned from the data overload of the financial encyclopedia known as the Internet. 

Feel sorry for me yet? Don't, I have home movies of the whole vacation.  Wanna see?

Do we want to close banks..or fix them?

In Alan Greenspan's biography "The Age of Turbulence" he writes of speaking to the Japanese in January of 2000 and summarizes the RTC's success as follows; "I suggested that the U.S. government strategy of (1) bankrupting a large part of our failed thrift industry, (2) placing the assets in a liquidation vehicle, and (3)unloading the assets at large discounts in a manner that would reliquefy the real estate market  fit the Japanese situation rather closely."  He went on to say had the Japanese done so it would have shortened their 15 year economic stagnation considerably.

In an earlier post I quoted Mr. Greenspan as saying ...

An RTC comeback?...hold your applause

There has been a good deal of press the last couple of days about FIRREA and what someone called "non-feasance" by regulators by not enforcing actions sanctioned under the Act.  One of the actions allowed under FIRREA was the development of ...

Live Trading of Dead Loans

I announced last week Benewolf's participation in Loancowboy's upcoming "What Every Banker Needs to Know About Selling Loans" conference.  I am excited to announce today, for the first time in print, that a second day will be added to the conference where we will attempt to trade distressed loans live in a new format we call ...

What if everyting goes right?

I saw this quote last week and have not been able to get it out of my mind.  "What if everything goes right?"  I have heard the reverse of this my entire business career.  We always ...

Loan Sale Conference - Atlanta

Benewolf is once again co-sponsoring "What Every Banker Needs To Know About Selling Loans" conference produced by Loancowboys, LLC.  If you missed the inaugural conference in July here is your chance to catch up. 

We are expecting significant participation from ...

Due diligence - Electronic vs War Room

Over the past several years almost every bank in the United States has electronically imaged their loan files.  This has made file review a snap right?  Not exactly.  Although Adobe and the pdf format have made viewing images easy and accessible it is not as fast as the old fashioned pick up the file and thumb through it.   Looking through a 150 page bankruptcy document in a pdf file takes a good deal more time than a physical thumb scan.  While it is certainly more ...

Market Timing

I read an article yesterday titled "Investment Discipline in the Year of Capitulation".  It went on to say; "At times like this, it is essential to have a sense of perspective and rely on sound long-term investment disciplines when making decisions. It is important to avoid panicking because of short-term market concerns and uncertainty. It is easy to put too much ...

I have decided to sell a loan - what about the borrower?

One of the many questions I get asked by banks considering selling loans, especially community banks, is "What about the borrower?"  Do we inform him of the sale?  Do we let her bid?  Do we allow the potential bidder to speak to the borrower?  What will happen to them? 

Typically a loan is slated ...