The Nature of Narrative in the Age of Networks

This story gives whole new meaning to the term “bank robbery.” But I fear my words are a mere fart in the gale force winds of banks being banks.

I was recently turned down on a re-fi for my primary residence. I have paid faithfully and timely on my current loan for 5 years. My median credit score is around 720. I have worked for the same company for three years, and my current pay grade has been consistent for the last 2 years, and handily supports the current payment anticipated for the proposed new loan.

My current loan is an interest-only that goes adjustable next month. Probably not the best choice, but at the time (2004) it was a good one. Nothwithstanding that fact, the loan to value ratio is still approximately 53%, based on the most recent appraisal. That is, the amount financed is approximately 53% of the value of the home, or I have 47% equity in the home (it was substantially more, but the residential home value bubble has squeezed 20-25% out of the overall home value).

So, based on current interest rates, my monthly payments are set to rise by nearly 20% starting in November.

So here’s the logic: The bank won’t refinance my home so I can keep my monthly payments flat or (heaven forbid!) lower them, but they’ll let me keep paying on the existing loan at 120% of the payment I’ve been making for the last 5 years. So in tough times, where I simply want to keep my payments flat and affordable, the great and powerful Oz-tracizer is making 20% more by denying me the ability to re-fi. Hmmm….

Here’s they’re stated reason: I own more than 22% of the company for which I work, and the company is not yet profitable (FYI– it is a growth company that is financed through venture capital, like so many entrepreneurial endeavors are). So the banks undertakers… that is, “underwriters”– one of those superorganisms that got us into this housing mess in the first place– has decided to attribute the company’s so-called losses pro rata to my ownership position. That is, they’ve decided to deduct from my personal balance sheet the amount the company invested this year multiplied by my percentage ownership. Suffice to say the math doesn’t work… for them.

But the company is a Delaware C-corp that pays me like an employee, and has an independent board of directors that can fire me as an employee. That is, not even the IRS can moosh together the profits-and-losses of a C-corp and an individual who works for that C-corp. So how is it that a mortgage lender is conveniently allowed to do so?

I spoke at length to the in-house broker at this bank– the same bank to whom I have been paying faithfully for 5 years. She is frustrated to the edge of quitting. She and her colleagues acknowledge, even lament that it is ridiculously unfair, and she shares dozens of similar stories. The underwriters, to whom she is subject — that same super-organism that greedily signed up anyone and everyone to a loan, with no regard to whether or not they were qualified, and thus put us into this housing bubble mess– have now become capricious and ultra-conservative. They are arbitrarily rejecting loans for people that have shown *no evidence* of risk of default, have excellent credit, and are by their very nature “low risk.”

I’m one of a class of people who didn’t ask for government help via FHA or some other program when establishing my financing, and thus don’t get any help in the government now. I’m not rich. And I’m not impecunious. Not yet, anyway. But the bank seems happy to squeeze me dry, instead of renegotiating my loan so I can keep my payments flat.

WTF?

A Bit of Shreditorial

I’m an entrepreneur. I’m creating jobs, and products and services of real value. I’m also classified as a small business. Research by the Small Business Administration shows that small businesses contribute 50%-plus to the Gross Domestic Product. 50%! We’re not talking Goldman Sachs. Not AIG. Not GM. We’re talking startups and local businesses. You kill them, you kill the economy. It’s the middle class, stupid. You fuel them, the economy flourishes.

So where is the specific “economic stimulus” to the entrepreneurs and the middle-class? There isn’t any. It certainly stands to reason that 50% of the economic stimulus should be going to businesses that account for 50% of the GDP. Even if you took 10%! Say $150 billion. Ok, let’s be conservative– $100 billion. Put most of that directly into “underwriting” *existing* small businesses to ensure they have the capital to operate and grow; and put the rest into regional venture capital funds with a mandate to support local economies with new, fresh ideas of how to put people to work.

I can hear the arguments like “it’s too tough to administrate” and “how can we trust that the money will got to the right people?”

I assure you I’d much rather put $1 billion into the hands of Michigan entrepreneurs, for example, and trust them to get the at-risk workers of that region re-trained and to work on sustainable businesses primed for the 21st Century, instead of $3 billion for Cash-for-Clunkers to prop up bloated and ineffective gargantuan institutions from the last century. Am I the only one that sees the obviousness of this?

But I and other small business owners don’t have $50 million to spend this year on lobbying Washington, and another $15 million to contribute in campaign contributions, like the automotive industry does. Neither does the fragmented small businesses who comprise 50% of the country’s GDP.

And the banking industry has received TRILLIONS of dollars in government bailout funds to ensure the likes of Goldman Sachs report record profits.

This isn’t capitalism. It’s socializing losses and privatizing gains. Then you hear people like former Goldman Sachs CEO Jon Corzine blame the ire of folks like me as envy of their success. Dude, really? Are you that far removed from the real world. You don’t *make* anything. You make dress up legalized gambling and call it banking, move paper from one place to another, arbitrage anything and everything and call it value-creation, when in-fact you are the tail wagging the dog of real-life and the everyman. If you and all your fellow mega banks disappeared overnight, there would be a few lumps and difficulties to weather, but we and the economy would do just fine. You and your cronies are not as important as you think, Mssr. Corzine.