Wednesday, September 24, 2014

"The Banker Who Said No"

Classic article

Beal plays his cards patiently. For three long years, from 2004 to 2007, he virtually stopped making or buying loans. While the credit markets were roaring and lenders were raking in billions, Beal shrank his bank’s assets because he thought the loans were going to blow up. He cut his staff in half and killed time playing backgammon or racing cars. He took long lunches with friends, carping to them about “stupid loans.” His odd behavior puzzled regulators, credit agencies and even his own board. They wondered why he was seemingly shutting the bank down, resisting the huge profits the nation’s big banks were making. One director asked him: “Are we a dinosaur?”

Now, while many of those banks struggle to dig out from under a mountain of bad debt, Beal is acquiring assets.

6 comments:

ChrisD said...

He was the subject of a book: the professor, the banker and the whicide king. Seems apropos given our current market environment.

whydibuy said...

What about those banksters ( like Mr Orange,lol ) who pocketed millions or even billions in stock gains over those years ?
THESE KIND OF ONE SIDED ARTICLES IGNORE THE MANY WAYS PEOPLE PROFIT FROM BOOMS.
Articles like this implies that everyone except one guy went bust. wrong. Many made huge gains and pocketed it.

eah said...

Many times it is definitely better to sit on your hands ... wish I had learned that earlier.

Good article.

eah said...

THESE KIND OF ONE SIDED ARTICLES IGNORE THE MANY WAYS PEOPLE PROFIT FROM BOOMS.

The article is not about 'the many ways to profit from booms'. It's about one businessman/banker and his philosophy.

Dummkopf.

James said...

THESE KIND OF ONE SIDED ARTICLES IGNORE THE MANY WAYS PEOPLE PROFIT FROM BOOMS. Articles like this implies that everyone except one guy went bust. wrong. Many made huge gains and pocketed it.

Warren Spector is one person who pocketed huge gains from the housing boom. He was the co-president of Bear Stearns until Bear's hedge funds collapsed at the beginning of the financial crisis. When the funds blew up, Jimmy Cayne used Spector as a scapegoat and fired him. After being fired, he sold all of his Bear Stearns stock, $400mm of stock in total. He got out near the top while other Bear execs lost 90% of their money. Who knew being a sacrificial lamb could be so profitable?

CP said...

This is a good book (4/5):
http://www.amazon.com/The-Professor-Banker-Suicide-King/dp/0446694975

I'll probably review it someday.