Even though my business is IT, not lending, I have seen the correlation between the two. For example, right now Georgia leads the country in the number of failed banks (22.5 percent). The six New England states have zero. I worked for several banks in Georgia as a consultant. I worked for one bank in Rhode Island (later acquired by Bank of America) as an IT guy. I doubt if the bank examiners are using my methods (zip code focus) for spotting risky lending practices, but I offer some real-life observations.In Atlanta, everyone knew about "goob" loans. Good ol' boys got them based on friendships, with very few questions asked by the bankers.
In Rhode Island, one of my tech guys told of an experience with a loan officer at our bank. Steve couldn't get a summer job between semesters so he became "self employed." He wanted to buy an old clunker, fix it up, sell it, and pocket the profit as his salary for the summer. He needed a thousand dollars to buy the clunker but didn't have a cent to his name. So he did what any decent aspiring entrepreneur would do-he went to the bank for a loan.
It just happened that when Steve's turn came up in the massive lobby-type loan department of the main office, Henry was the next loan officer to accept an applicant. The reason I mention this is that 10 years later, Henry rose to the position of top lending executive for what had become a bank holding company equivalent to a mini Citigroup, a couple of hundred miles down the street from Providence. Henry was no pushover. He wanted to see the car. He wanted a parts list for the repairs. He wanted a timeline showing start, finish and time to sell. Steve returned three times before Henry accepted his documentation. Henry approved the loan, but wouldn't release funds until Steve showed progress after each phase of the project. It all ended well. Henry was all-Yankee. He never showed emotion. He never smiled. He never congratulated Steve. He never even said, "Have a nice day" on pay-back day. If Steve hadn't peeled off a grand plus interest in cash, Henry would have held back the PAID documents until Steve's check cleared.
My stories are dated. My lessons are fresh. On this day when there seems to be a dose of optimism in the banking industry, I am pleased to say, I can see the uptick even in my tiny business. Now a boomlette wouldn't hurt either just to make 2009 the year of the turnaround.