I’m Saddened By What The Government Did

DECEMBER 8, 2010 BY GEORGE LOVATO JR
I Guess The Government Dodged That Bullet
Well the cat’s out of the bag…the Federal Reserve loaned money to foreign banks. This is not new news. The long and the short of it is that these are different times than in ’08. This was a full blown crisis of epic proportions. As you all know I am a real fan of Chairman Ben Bernanke. I think he is always the smartest guy in the room. If you all recall the United States was being blamed for creating risky junk investments to which we conned the European banks to invest in. I know that is an exaggeration but that was the tone and tenor at the time. Politically I am sure the Chairman was under a mountain of pressure. Well most of the money has been repaid. Whew! I guess the government dodged that bullet.
Carte Blanche Lending to the Loudest Banks?
However I think it would be wise and prudent to analyze history and the events of years past. My first question is how much true analysis went into who, how much, for what reason and the potential of payback of the potential borrowers. Was this carte blanche lending to the loudest banks? I hope not. But the question needs to be asked. What was the criteria? Who made the calls on who got what? We need to know. Now insofar as frequency goes that is another story. Morgan Stanley borrowed over 200 times. You mean to tell me a bank could not project its actual liquidity needs? Jamie…shame on you.
The Golden Pen
Then there is the issue of hedge funds getting assistance. What? Since when did they qualify? I would like to have been the fly on the wall when that decision was made. I feel that was a huge mistake. They are in the risk business. They should have never received the golden pen from the Federal Reserve. I am disappointed in that decision. As you all know I think the automotive industry should have never received the golden pen either. I am on record that it should have been survival of the fittest. We broke a rule of commerce on that one. I am appalled about lending to a British bank that buys the very same assets from a failed American institution we allowed to fail to begin with. We should have saved Lehman! There is the proof in the pudding.
We Must Stay Within Our Own Boundaries
I hope we learn from history. We are bankers and we have to follow our own rules. We must be prudent but forward thinking. We must be aggressive but controlled in order to stimulate and complement the needs of small business. We must be disciplined for all concerned and conduct the business we are educated and trained to conduct. In other words stay within our own boundaries. We must look to the past and learn. We must use those lessons for the benefit of commerce.
I Am Saddened By What The Government Did
The cat is out of the bag and the cat is laughing. I am saddened about what I know now about what our government did. I wish they had not done some of the things they did. I am disappointed in some of the behavior of some of my fellow bankers. In the end we need to follow our own rules of commerce and capitalism and never allow our government to use the golden pen like that again. Are we better off for what was done? We will never know. We can only speculate.

What Would Have Happened to GM….

NOVEMBER 12, 2010 BY GEORGE LOVATO JR L
…If the Government Had Not Stepped In?
I have my own theory. But applying the rules of commerce and survival of the fittest concepts lead me to believe GM would be a quite different animal today. So let’s travel down the path of speculation.
Piece By Piece It Should Have Been Liquidated
GM was in terrible shape. Heavy at the top and strained at the dealership level. Individual models were stagnant and stale. Compensation was out of line with performance and the consumer thought it would be common place for the company to lumber along in losses. So in the real world what should have happened? First of all management should have axed and removed from top to bottom. A new search should have been deployed to find new and innovative talent to steer the company. Each division/brand should have then undergone a thorough evaluation to ascertain if it would be viable as a standalone entity. Then the brand popularity should be measured. The least desirable brands should then should have been spun off and generate cash and eliminate debt. Piece by piece it should have been liquidated. Then in the end the remaining desirable divisions/brands should have made up the new GM. Funny though, I think all the brands would have survived but just in a different configuration. The consumer would have most likely had access to all they see today but just run and manufactured more efficiently.
A New Finance Division Was Needed
Instead of floating a dead stock issue the company should have then recapitalized a new and more vibrant finance division with new creative minds at the helm. Out with the old and in with the new and more capable. This new finance arm should be able to provide an array of products and services to not only the consumer but the dealer as well. This finance company should have been prepared to invest in every dealer remaining worth his/her salt. This new company just should not have been renamed but rebuilt from the ground up.
The Formation of a New Dynamic Company Was Required
The newly structured GM should have floated a separate stock issue to re-tool the dealership distribution network and put the money where the most return could have been realized. The remaining brands should have put money into new more cutting edge product development. Instead of floating stock to pay off the US government/taxpayer, money should have been deployed to form a new more dynamic company. Instead what we have is a top heavy company with old management, just less of them, in place doing what they have always done. Yes it is making money but they should have been doing that all along. Yes they should be making money because they have less debt. That sort of seems like a no brainer to me.
It Is The Same Old GM
A GM trying to make a sows ear look like a silk purse with this upcoming offering. I think my imagination would have served GM better and the public as well and it would have saved the government/taxpayer a ton of money. The rules of commerce and survival of the fittest were derailed. I thought those rules were what out capitalist system were all about? I guess I need to rethink all of this.

Government Has Not Learned Anything From History

SEPTEMBER 13, 2010 BY GEORGE LOVATO JR
Banks Get New Restraints
Front page news reads “Banks Get New Restraints”. Globally governments are agreeing to add more regulation to avoid future financial melt downs. That assumes that all the governments involved have a crystal ball and the view from here is in fact what we will need seven years from now.
And it Was Not Good
As for now we need a little less regulation to allow the financial industry the latitude to maneuver in choppy uncertain economic waters. So now government, the icon of not knowing what is right for business is using its fuzzy image crystal ball to predict and control the future. I cannot disagree more. I have seen firsthand what over stepping regulation can do to an industry. I have seen what the perspective and inexperience of regulators can do to a perfectly healthy business. And it was not good.
Arm Chair Quarterbacking
Imagine for a moment a person that has no real world business experience making sea changing decisions for a financial institution. This government regulator is now arm chair quarter backing the strategy and business practice of a bank. Dangerous. Now put the factors together. More regulations phased-in in the future, of which we know nothing about, along with government regulators whom know little if nothing about how to interpret and integrate these new regulations into safe and sound business practice for banking institutions.
The Complex, the Mundane and the Futile
This is clearly a case where government has not learned anything from history. The government is going to over reach, over regulate, force over capitalization and overkill, at a time when we need to free up time of bankers to get back in the business of lending. Instead we are now going to increase cost and take away valuable time to understand the complex, mundane and futile. Wow!