Big Bank Box Think - The Jaded Concept Of A Relationship
The big banks and the box-like thinking certainly can wreak havoc on a real estate investor that has the naive notion that a relationship really is a relationship. Try going into Wells Fargo or one of the other big-name banks sometime and ask them if they do business with the people that do business with them. I am curious to know what answers you will get. Undoubtedly the responses will all be centered around account structures, service, etc.
It is completely baffling to me that most of the "bankers" that one approaches today are as unskilled as they are. They are glorified order takers that input data into some prescribed box, ship the file off to a magical person in the sky, and later give you some completely non-helpful response about the file you spent days preparing. What is equally baffling to me is that some of the smaller banks and credit unions exhibit the same behavior.
A relationship between a businessperson and their lender should involve the borrower placing deposits with the lender and sending new clients the lender's way. The lender should, in turn, lend money to the borrower on non-ganster-like terms. Look around now and see how many "lenders" are really lending money on things like spec loans, lines of credit, etc.
Once you find a couple of lenders willing to be rational you will undoubtedly find REAL bankers at the same location. The people understand how to price risk, the value of character, how to collaterlize their position, the value of a personal guarantee from someone with a large income and lofty credit scores. These lenders are who you want to do business with.
Comments (2)
I agree with your comments, Bryan. Mike, not so much. Banks don't want deposits? From their (Wells Fargo) annual report: "Core deposits are a low-cost source of funding and thus an important contributor to growth in net interest income and the net interest margin." Big majority are retail, community banking segment deposits. What makes them money is not at all consistent with your list. http://sec.gov/Archives/edgar/data/72971/000095012311018541/f56816exv13.htm See Table 3 for the details, Table 8 to see FDIC expenses are not material. Why would a bank lend $771 BILLION to their customers? To get $39.8 BILLION in revenue. Loans are 72% of their earning assets.
Chris Martin, over 13 years ago
Truth is Bryan,IMHO, big box banks don't want retail deposits. There are more costs associated with deposits,FDIC insurance rates being the main expense.Let's look at what makes them money: Interest on reserves held at the fed= no risk Purchase of treasury's with fed funds and ride the spread= no risk Revolving credit= credit cards, some risk Trading Equities= risk/hedged by loss-sharing with fdic Selling CDS= income/counterparty risk/consistant cashflow If you think about it, why would a bank want to lend $xxxxx to a customer for 15-30yrs at 4.5%? In no way defending Banks. This is the biz mod. they operate by at this point in time.It sucks to be sure. I agree, relationships don't mean what they did 15-20yrs ago. Thanks for the post!
Mike Morrison, over 13 years ago