An
open letter - 9-22-2008
An open letter to
anyone who will listen:
Well it has finally happened! I have resisted it for years but the
events of the past two weeks have driven me over the edge and
I
am now one of the thousands of crazy loons who have thrown open their
windows and are screaming to anyone who will listen, “I am
mad as hell
and am not going to take it anymore.”
As a community banker,
we have watched the lunacy of Wall Street over the past years with
great concern. Wall Street (and to no small degree the regulatory
system) has handed your children and grandchildren their largest tax
bill ever and in the process have essentially nationalized a financial
system. Wall Street’s hunger for more and more products has
really
answered two burning questions. One, “Is bigger really
better?” And
two, “What does ‘too big to fail’ really
mean?” Wall Street’s voracious
hunger for loans to package into investment pools and sell to
international investors has created the “mirror underwriting
program.”
Yes, we also thought that mirror was an acronym for some highly
developed underwriting program that managed risk and return and helped
create a safe investment product... Actually, the mirror program was
just the mirror program. Wall Street told loan people to hold a mirror
in front of a borrower and if they fogged the mirror with breath, they
were alive and therefore approved.
As a community banker, we have struggled in this environment because we
did not participate in the
madness of Wall Street. It
has been harder for us to make loans when we would not abandon our
credit underwriting standards — such as the ability to repay
and asking
the borrower to have equity in the loan. We also did not report the
amazing financial performance that other firms who participated in
those programs did. BUT we are able to write this letter to you today
because we are still here and have remained the safe steward of your
deposits and have maintained our credit quality.
Our
government has instituted a “know your customer”
program for community
and large banks. This program is designed to help financial
institutions identify weak and potentially dangerous customers. I
recommend that you develop a “Know Your
Bank” program
where you as the customer and owner know who is running your
institution and how sound their business is. Ask to see their financial
reports and talk to their senior managers. Ask what their business
standards are and if you hear those two questions that I referred to
earlier in this letter. “Oh! We are very large and bigger is
better” or
“We are too big to fail” you may have just met your
grandchildren’s
next tax bill. Do not be afraid to question your banker because we must
become completely transparent to our clients and owners if we are ever
to regain their trust.
It is my sincere hope that our
industry will be able to rebuild America’s and the
world’s confidence
in the banking system. I can say with the utmost confidence that United
Labor Bank will continue to be the safe steward of your funds until you
call for them. We may not be the most profitable, pretty, or flashy,
BUT we are still here.
Malcolm F. Hotchkiss
President and Chief Executive Officer
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