As a business owner in Washington, employing hard-working Washingtonians, I am struggling to understand some things.
I am working with a number of banks in Washington and Oregon. They have told me that their intent is to continue to use government money (at .25 percent) to purchase the land assets of failing institutions. They will then "sit" on those assets in order to constrict the supply of building lots and drive prices up to serve the narrow interests of their shareholders only. Their customers and taxpayers will not benefit from this and are suffering now as a result. Job growth in the construction sector is being artificially stifled by the actions of these bankers and it must stop immediately.
Here are my questions. As a tax payer, an employer, an entrepreneur and an American, I would like a reply.
Why are banks getting near interest free money from the Federal Reserve in the current environment?
Why did the U.S. Federal Reserve transfer hundreds of millions of dollars to the nation's top 2% performing banks in early December and almost NONE of that money has gone into economic stimulation projects? (In one case, a bank in Washington sent several million dollars to a project in Mexico being developed by an American customer).
What is the purpose of not charging banks a fair rate of interest for the money they are using to buy the troubled assets of their failing peers?
Why are banks not being held accountable for their lax underwriting guidelines several years ago? When is Congress going to haul the leaders of the nation's banks to answer questions about their underwriting guidelines?
Why are the bank regulators not being held accountable for their lax oversight of bankers? When is it their turn to face Congress?
Why is that only tax payers and hard working Americans are being forced to pay higher taxes and to pay for the failures of a narrow few? And those narrow few are still getting free or near-free money from the same people -- the American taxpayer?
And, why are banks -- who have been given cash from tax payers and our government -- being allowed to buy distressed assets with that money and turn around and foreclose or threaten foreclosure for the full amount of the notes due when they have little to NO basis in those assets to begin with?
How is that they are being allowed to make money on something they paid nothing for?
Imagine for a minute that a few years ago, I gave you a $100,000 loan. Imagine that I asked you for almost no proof that you could pay it back and simply gave you the loan without checking to see if you could really afford it. Now, let's say you called me a year later and said you could not pay me back. Imagine if I could simply call the government and ask them to give me the $100,000 so I could be made whole and I would then pay the government back when I was able to collect from you.
In this scenario, I am back to even. You are still on the hook for the full amount owed. The good news? I am not punished for my poor credit-making decision. The bad news? YOU still owe 100 percent of the money. Oh, and you have to keep paying the government taxes so they can subsidize my stupidity and the stupidity of my peer lenders (or greedy brilliant thinkers depending on what side of the transaction you are on).
Imagine that I took the government's money, squandered it some more with poor decisions and now I need another government loan to bail me out. The government would give another bank 100% of the money they need to buy my note at say, 20 cents on the dollar, and so I am saved again. YOU, though, are still on the hook for 100% of the money you borrowed. Senator, that's called a scam.
Chief Credit Officers in several Pacific Northwest banks are buying assets from failing banks with money given to them by the FDIC and the Federal Reserve. That's fine, I guess. But they are only paying 20 cents on the dollar at the most for these assets AND they money the government is giving them is costing them almost zero. So now they control most of the permit-ready building lots in Oregon and Washington. They have NO incentive to sell those lots at market rates as they have almost no basis in the lots. So, their stated policy is to hold these lots to purposely constrict supply in order to drive prices higher in the false belief that the value of these assets will rise to the same unsustainable levels to which they rose three years ago.
They are in error in their thinking. I am a home builder. I need lots. But, I cannot get those lots from these bankers who bought them for 20 cents on the dollar because they greedily believe they will be worth even more three-to-five years from now. The Pacific Northwest is already one of the most expensive housing markets in the nation. It is being made more so -- at a critical moment in our history -- by bankers who care only about their shareholders.
It is wrong. It should be a crime. At the very least it is un-American, selfish and greed-driven.
Nathaniel Clevenger
