Per Thomas Paine, “These are the times that try men’s souls.”
I did not steal the use of that line from SD. This story had already been written and I am not changing it because it is applicable. Over the coming weeks you will read about what many continue to question and presuppose that happens in DC and Wall Street. I am just one person who lived through some of it. Magnify it exponentially with many differing perspectives over many years.
I will be leaving the name of our team’s new employer out of the story. The name is not relevant to it and I prefer to not expose any of its past employees to unwanted contact. I will use the generic name of the company whose products Wile E. Coyote used, Acme, to identify the bank going forward.
This is story is a little longer than I plan going forward as there was no stopping point that made sense. So please bear with me, there is a payoff.
Acme Small Business Begins – Uh, oh…
It was two years after 9/11 and our team was being assembled in our new offices in the same building that housed us with TVB. Everything was going according to plan and our sales force was beginning to gain traction with customers. My SCO, NSM and I were traveling to various SBA and USDA program offices around the country as time permitted, building relationships and securing SBA preferred lender status (PLP), which was earned through doing things right over years. I had been called to Nashville to meet with our bank Chairman/CEO and state banking officials to inform them of our operation and plans. The meeting went very well and we were cleared to continue nationally with our program with no restrictions. Full steam ahead was the plan. Except there was this little problem that cropped up…
W was the POTUS and he had a nasty habit of hiring incompetent cronies to important cabinet and agency positions. Which is what happened with the above by hiring Hector Barreto to head the SBA. Wanting to make inroads into Cali politics and solidify his hispanic base, W hired an empty suit who had been his co-campaign chair in the state as well as him being vice chair of the Hispanic U. S. Chamber of Commerce. He had zero government experience, much less SBA experience. Unlike today, it was a time when the annual federal budget appropriation passage still meant something to elected officials.
SBA became a target for exclusion from adequate budget appropriation. Many RINO political forces parading as conservatives (sound familiar?) within the GOP Senate were pushing everything toward the globalism. The Dems in the Senate were not helpful at all, just wanting to throw a monkey wrench into it all. Our industry was growing as the safety of government guaranteed financing had become more attractive to lenders with the quiet fear and unknown of a country at war. Small businesses that needed capital were directed toward the programs we promoted, so overall credit quality was good.
The rising demand meant the annual federal budget appropriation for guarantees was drying up quickly. More lenders than ever sought the credit protection of the guaranty. Despite the respective banking industry involved in the programs applying pressure toward elected officials, nobody in the Senate would respond. Requests and complaints to the SBA fell on deaf ears and Barreto pretended to know what he was doing with the media, when he clearly did not. In early 2004 he announced plans to decrease the maximum loan sizes by 50% to slow the volume and make the remaining appropriation last longer. He also announced major changes to loan credit policy parameters that were backbreakers. One involved excluding refinancing of existing debt on more favorable terms, another was reducing loan to value ratios on collateral of loans, and a third was the elimination piggyback loans. I will not bore you with explanations and implications of each. Just know that each were considered important to the industry and customers as things stood. All of Barreto’s changes were meant to throttle the loan volume in a draconian way, like running into a brick wall. He was not competent enough to know the repercussions. He was simply doing what somebody else up the food chain wanted him to do.
This next part may sound ridiculous to the reader with what we all have seen today. Two decades ago, over 50% of our nation’s employed population worked for small businesses. So, you would think the politicians would understand they should pay attention and take care of their needs, especially following the uncertainty of 9/11. All they needed to do was increase the appropriation to satisfy the needs of the industry and customers for the balance of the fiscal year. The amount was, are you ready for it, was…
Yup. That’s it. Consider all the wasteful spending in federal government. I cannot begin to describe how stupid it all was. They were $25 M from helping thousands of small businesses succeed which would continue to increase the tax base for decades.
The SBA 7(a) program collects fees from borrowers and lenders to cover the projected costs of the program including servicing underperforming and defaulted loans. That $25 M was the projected shortfall of average guaranty funds paid out to recover versus fee collection from borrowers and lenders for that period of time remaining in the fiscal year based on historical performance. It would provide for $2-2.5 B in loans nationwide BIMD in a period where the related 7(a) loan program did $7-8 B per fiscal year. That would carry the industry through without Barreto taking any action. Yet, no elected official in either political party in the Senate would take the lead and sponsor it. None. Some did not know, some did not care, and others wanted our industry to die. There will be more on that last point as we progress in the next story.
It could not have come at a worse time for us. We were in our first full year of operation. Our partial previous year produced a breakeven beginning. That was an excellent performance and testament to our team. However, we now needed to turn a budgeted profit for the calendar fiscal year while our elected officials and the SBA had undercut our industry as well as all of the small businesses that needed capital through their programs.
The director of our industry’s trade association contacted the larger and more accomplished lenders, including me, to hold a conference call to form a plan of attack to remedy the issue. Desperate times call for desperate measures and all of us were becoming desperate. The association employed its own full time lobbyists who had proven ineffective. Each person on the call offered suggestions and informed the director what they could do, which included contacting their elected officials. When it became my turn, I made my suggestions. The director asked if I personally knew, or knew anybody else who could contact GOP Senate Majority Leader Bill Frist of our state. He said they felt they had the support of key leaders in the HR, but the Senate was unresponsive. There were only two of us on the call from Tennessee, a prominent industry investment broker in Memphis who purchased and pooled some of the guaranteed loans the industry closed as well as me. I knew three of our four owners were major GOP backers. So I offered to talk with them and see if we could get a message to Sen. Frist.
A couple days after contacting them I received a call from my Chairman/CEO who provided the phone number of the chief Senate floor aide of Sen. Frist. He told me he was expecting my call. Impressed and thankful, I made the call to a super nice, sharp and helpful guy who took time to listen and ask intelligent questions. This guy…
We discussed a plan of attack. After the call I contacted our trade association’s director to inform, who then took care of all travel arrangements and the appointments. For the first time in a while we were hopeful.
Which led to Goober Gump going to Washington DC – again.
Days and Nights in Babylon
After having a prior visit to DC being for the purposes of worshipping and spreading the Gospel, this time I felt like Daniel walking into the Lion’s Den. I shrugged it off, somebody needed to do it, might as well be me. Rock Star, daughter (affectionately named “Best Kid”) and co-workers were proud of me for responding to the challenges, so I had already won.
The trip and agenda had been carefully arranged by the director. Upon arrival and check-in at the Hyatt, I had dinner with the two lobbyists; one each for the Senate and House (HR) as well as a couple of other lenders who were meeting with key HR officials. We discussed the lobbyists’ past attempts and what they had learned. The Senate lobbyist was a bit of a beta snob who commented on liking my tailored suit and asked why I wore a buttoned down collared shirt with it. My hillbilly instincts almost got the better of me, but I brushed it off. He was going to walk me to the offices for the meetings the next day, so I remained cordial.
The next morning after breakfast we met and walked to the Russell Senate Office Building. As we entered this nearly century old landmark of our federal government, the history of who had walked through its corridors and negotiated the nation’s business was not lost on me. However, it was time to focus on the task. Our first scheduled meeting was with Senator Olympia Snowe, Maine’s other faux moderate Senator with Senator Susan Collins.
Senator Snowe was Chair of the Committee on Small Business and Entrepreneurship (SBE), which would be our ticket to a larger appropriation as an industry. She was the key. If she agreed, we would be gold eventually after all of the horse trading was finished, which was Senator Frist’s job using Rohit. She was relaxed, cordial, and had a confident air about her. She fit the part of a stately Senator. She also fit the part of a self made woman of note. Her story is inspiring for what she overcame early in her life to rise to that position.
The meeting included the lobbyist, one of the Senator’s aides to take notes, and me. I felt no nerves, just resolve to tell our industry’s story in more of a ground report style and answer any questions she had. I knew I was in the Lord’s care and had asked him to speak the words that needed said through me.
After greetings and small talk, the lobbyist made some brief technical remarks about legislative and agency needs involving the budget. He then demonstrated some respect and asked me to take over. I referenced Senator’s Frist’s interest and his staff’s involvement with our issues. She immediately responded that we were in very good hands, that she thought the world of the Senator as well as Rohit with whom we were working. She stated that they had worked together well on many projects and bills, that their interests were generally aligned. In fact, if she had been a schoolgirl, one might have detected a crush on our Senator. I told her that Tennessee residents were proud and honored to have him in the role he handled for our country.
Sen. Snowe proceeded to ask questions that indicated some homework was done on the subject. I was able to provide the answers as well as insight from the lender and borrower side of the critical nature of consistency in the program’s policies as well as application. I gave her a bit of appropriation funding issues history over the years of my involvement and could tell she was becoming concerned. Being a Senator from a less populated state where the vast majority of businesses were small and would be qualified under SBA and USDA loan programs, she understood completely. I then explained some of our nation’s more prominent international businesses were assisted by SBA financing in their early days; such as FedEx, Apple, Nike and Intel. I finished with more truth, that none of us could predict the next small businesses that would grow to become industry leaders that would employ thousands of Americans while lifting the nation’s tax revenues, but that it would certainly happen as it always had when conditions were consistent and fair. As an underdog at one time in her own life, I think it resonated.
At this point she leaned in. That is always THE indicator that you are in sync with each other in negotiations. You may agree or disagree with each other’s position, but you know you have the other’s focus with this body language signal. I was not expecting what she asked next. She asked me what I believed were the three most important things that we needed help in getting done besides the increased appropriation amount. I prioritized them in order, which were the previously mentioned credit parameters within the Standard Operating Procedures with piggybacks as the last one in priority. It was the one that none of us in the industry expected to get done. I knew if there was one that needed to be cut for the opponents to have their pound of flesh and reduce funding needs, it should be the one we viewed as the least likely to be approved. She and her aide took notes as I spoke while asking for clarifications when needed.
I did not tell her that my personal goal was to bat three for four counting the increased appropriation. Getting the appropriation plus our most important SOP credit parameter relating to permitting refinancing would even be a win for the industry.
I sensed that it was time to go as she had no further questions; that the case was made and she was a very busy with much on her plate. I stated my personal appreciation of her time and consideration, that it was an honor to meet her and be given time to tell our story. She stood with a smile and we shook hands.
It was about a thirty minute conversation. I felt confident as we exited back into the hallway. Something inside told me I had not made a fool of myself or let the industry down, that she sincerely cared and could follow what I proposed. I had the peace from the Lord that surpasses all understanding. Even the lobbyist had become a fan boy as we headed toward the next meeting. His prissy attitude the night before had turned joyful.
Before we leave my time with Sen. Snowe, a few observations should be stated. One, the Russell Building is filled with history, however, Trump Tower it wasn’t. It sort of looked like a cluttered firetrap to me in various places and offices. It needed a good HGTV type facelift. Common areas and the rotunda are nice enough., but less than I expected. I have no idea if the interior offices have been renovated since that point. The exterior was a dozen years later. Another thing is the power of the desk in her office. The desk was old with beautiful wood that totally dominated her office. It represented the past years of the Senators who preceded her. The guest chairs were comfortable and sat low, much lower than the Senator at her desk. I suspect that it was arranged that way with purpose to exude the power of the position.
The last observation, which will mean more later, Sen. Snowe was not in the Heritage Foundation’s pocket.
Next Stop – Senator John Kerry’s Office
The Ranking Member of the Senate SBE was Sen. Kerry. That placed him at that time as the SBE’s head of the Democrat minority. I learned that of course, Sen. Kerry would not be meeting with us, that he was out of the country. Well, at least he was consistent. There have been politicians through the years I could not stomach and Lurch was near the top. He would have blown off a meeting even if he had been in town. He never showed up for SBE meetings as its Ranking Member.
Instead, we would be meeting with his chief committee aide, Kevin Wheeler. Before you wonder who that guy was, understand Kevin is a real woman, not a tranny wannabe woman. Information about her included in this press release about an award she received.
She has made a career of working in roles associated with the Democrat Senate and HR SBE’s as well as within SBA. In summary, she’s a Democrat operative and influencer. She is listed as Deputy Democratic Staff Director for the HR’s SBE.
I already knew Kevin from past conferences of our trade association. As a result the meeting was informal, short and friendly. She was very knowledgable of the industry, SBA, the politics and the issues at hand. I simply told her the 7(a) program needed fixed before politics and Baretto of SBA killed the goose that laid the golden egg for small businesses. She agreed as she had been a proponent for years. She said she would deal with Kerry about it when he returned. Which is what she always called him – Kerry – with folks she knew. No matter, I knew Kevin would champion our industry’s interests at all times.
At this point the lobbyist was nearly wetting his pants. He was rethinking his opinion of hillbillies.
A Little Help For Our HR Friends
Even though the HR was clued in and likely to approve what our industry wanted, they still would have to reconcile the related omnibus bill in conference with the Senate. So our association’s director thought it would be good for me to have a discussion with the Chair of the SBE in the House, NY Democrat Representative Nydia Velasquez.
We finished the day with her. She was a strong backer of SBA programs for many years and still is as the current Ranking Member. I had spoken with her previously at conferences as well. We discussed why I was there and conversations we were having with their Senate counterparts on the primary credit parameter issues and appropriation. She was well aware and reassured me they were on it. I stated our appreciation and wished her well. By nature she is a serious as well as intelligent lady. We may not agree on many other issues, however, we had common ground on this one.
At this point the lobbyist was just shaking his head. Our time together was done. We shook hands and I wished him well. After that week, I bet he understood the power of wearing button down shirt collars with his suits. 😀
One More Quick Visit
I spent the evening in the hotel, calling home and checking through emails. The next morning after breakfast I checked in with Rohit to let him know how the previous day went. He told me he would have a plan in place, inform Sen. Frist, and call me as needed. Rohit is a pro’s pro, a doer. He was not just juggling our needs, he had dozens of other fires to put out every day. I had great respect for him.
I contacted our association director to let him know that I was heading back to Tennessee. I brought him up to speed on everything and he was very appreciative. I told him that when Rohit had news for us he would call, so he should keep his his cell with him at all times. It was Friday and time to take a taxi to Reagan to hop on a jet and get back to the hills and the real world. Coming home, baby…
During this Goober Gump adventure I had no discussions with anybody who was like minded with me in personal belief system as well as political matters. We shared a common bond on the need for capital for small businesses and support of the SBA loan programs, which was the purpose of our time together. I doubt any of us would choose to be friends socially, although I sincerely liked Sen. Snowe. We were all different. Some were swamp critters, some were helping swamp critters, others were fighting off swamp critters. They would have little use for a hillbilly outsider if it were not for the business at hand. I was not there to make friends or enemies, I was there to get an important job done.
It was not necessary to be friends; it was necessary to be friendly. It was not necessary for them to know everything I knew about the programs; it was necessary that they could trust the information I provided them. It was not necessary to be an ideologue; it was necessary to be pragmatic to achieve the primary goals. It was not necessary to put on airs and play the dog; it was necessary to be down to earth and truthful. It was not necessary to use precise or overly technical language; it was necessary to be easily understood. It was not necessary to bow down to authority; it was necessary to establish a bond of equals.
We all have equal value and a purpose, no matter the position or power.
Respect others to be respected. Love others to be loved. Help others to be helped. Be kind to others to receive kindness. That they all allocated me their time and truly listened to what I had to say was enough. In contrast we are in a period of history today when precious few actually listen to understand first before demanding to be understood. The multitude are screaming nonsense, activated by evil people to destroy rather than build.
We need civility and critical thinking restored. One does not have to compromise one’s values to be civil with others. It’s hard to gain an understanding and perspective of another’s position on things with so much anger. Proverbs 15:1 – “A gentle answer turns away wrath, but a harsh word stirs up anger.” (NASB)
I hope some of you picked up on a few things that might be useful going forward. Thank you for taking your time. The story continues…
Darn it, and me just starting to practice my “triggered! 😂 ” Thanks for reminding me that pull works better than push, TradeBait!!
Thanks for reading, Barb.
Another great story, thanks again. Civility being useful is to often overlooked in our me me world.
Thank you, friend. The beatings will continue until the morale improves approach is a non-starter for most people.
Enjoyed the read. Hell, I actually understood it all. (No test please.) Superb information, including fundamentals.
Not Small business stuff.
So I understand many articles saying bank consolidation. Even down to six or so biggees.
Hard to believe, but OK.
What is your estimate on credit unions. Immune from all the bankruptcies, consolidation?
Yes – currently immune since they are not for profit membership institutions. They could hit them harder on deposit insurance fees, some financial ratio tests, etc. that would need passed through to members. But so many government and union members – a lot of the base of the leftists – bank with credit unions. Add in the military in a major way. The bigger money is in the banks. That’s where they can screw with things and make a bigger impact quicker.
NCUA steps in like the FDIC on failing credit unions. Most of the time they are consolidated into other strong ones. Link below summarizes it.
Thanks for reading, bud.
This really illustrates how poorly the shrieking horde at “elite institutions” is being poorly educated. If you cannot meet with those of opposing viewpoints in a civil manner and discuss topics that advance your mutual interests, you don’t belong in society — you belong in a playpen.
Even the playpen has rules! No hitting and share and give hugs.
They still dont qualify!
Unfortunately, it’s a feature today. It needs to stop.
Charming stoicism rooted in Southern Christian hospitality, knowing your business and testicular fortitude are nice traits youve got there Tradebait2.
How wonderful it would’ve been to have a mentor like you as a teen. I hope people out there realize how important your skillset is for success(and not just in banking).
You are way too kind, giloo. Rock Star and Best Kid would be rolling their eyes at reading your comments. 😆 Thank you for reading.
I learned so much when I gave in to the Lord, He accelerated everything. I understood that it was not just for my benefit, I had to pass it on to help others. So many folks hear stuff, very few actually listen to understand. I cannot condemn them for not doing so because I was the same way for many years.
Will just keep putting it out there until people say to stop.
Our own kids always see things with a different pov, cant help that. I think our hope is its ats least not negatively skewed!
Thank you for the time you put into BIMD. If people could get beyond themselves things definitely can get done. Hopefully it’s not to late for the USA.