Artur has opinions - be it on ongoing real estate evolution or why history and its lesson are important. He speaks up on local real estate market (San Francisco Peninsula) as well as on social and political events and processes impacting us all.

Saturday, September 04, 2010

Why Banks CEOs should have public performance reviews - OPEN LETTER TO PRESIDENT OBAMA

Dear President Obama,

I am writing this letter because of my frustration with banks over the last two years. I have surrendered. I have just stopped my efforts to assist clients with loan modifications.

I am a real estate broker in California and for the last two years I was trying to help tens of people to save their properties. I worked with anyone, from regular folks trying to save their only residence to property holders of multiple, multimillion dollar properties. At the end I felt like an Orwellian horse working harder and harder in vain towards the goal that cannot be accomplished.

It was a Friday evening a week ago. For months I was spending 100 hr weeks trying to move my clients’ cases forward. The number of my “by referral only clients” grew significantly. I enjoyed the respect of someone who can get to lenders through back doors and get clients relief they needed. However, my business had a tremendous fault. The number of my clients was increasing much faster than the number of cases I was able to close.

That’s true, I was not taking cases that just required filling up an on-line applications. In spite of my in depth knowledge of processes and procedures of key lenders and contacts developed over time, I finally realized that I am on a Mission Impossible.

From day one I knew that I will not get rich doing loan modifications. From day one, even when it was still perfectly legal here in California, I was not charging my clients upfront fees. I knew that lenders’ activities were so unpredictable that no-one could foresee the final outcome.
But as a former scientist and engineer, I got caught up looking for a better solution. I had this engineering desire to find a more efficient way of doing modifications. That ominous Friday, I made my decision to walk away from loan modifications. I was supposed to finalize a few cases I was working on for a long time.

My hopes came to a grinding halt. Despite my experience and connections I developed, day after day from early morning to late evening I heard over and over polite statements: “Sir, this form does not have the number “2008” filled up in the line so and so and it is already 2 month old. Please fax us a correct form; No, we have not received this fax. Can I give you a fax number?; we have only June and July statements and it is already August; there is no signature here, there is not date there, etc, etc, etc.

And despite the fact that in anticipation of these questions, I kept sending new statements ahead of time. And despite that I knew that signatures and dates were there, and the number 2008 and 2009 were all there and despite that I could tell bank reps where to go on their computer screens to find information they said that did not have or did not see, I heard day after day, call after call, “Sir you need to resend…”. That Friday, I finally realized that I was Don Quixote of La Mancha trying to fight wind mills. I realized that during the last two years lenders mastered ways of how to say no and not what I naively expected they should - ways to offer real solutions to their clients.

But even if I got through all obstacles and landmines created “by our neighborhood banks,” they reserved the best answer for the end. Once I thought that finally our paper work was absolutely perfect, I would hear a statement: “Sir, we thought your client qualified, but the investor said ‘no’ and of course there is nothing that we can do”. And you didn’t know on the day we started the process what loan investor requirements were, did you? You needed me and our client to jump hoops for 6 to 18 months to find out?

And then I finally understood! This is the banks’ way to increase employment and reduce joblessness! It is part of the stimulus plan to create jobs with no purpose! No-one ever expected to solve anyone’s mortgage problem. It was all about the jobs. What a fantastic idea! To siphon more tax payers’ funds to create gigantic IT centers with hundreds of IT and customer service employees whose only purpose is to take tax payers on a journey at their own expense. Do I sound frustrated? Yes, I am. Do I exaggerate? No. It is beyond me to understand how banks can justify these huge “cost centers” serving no real objective and post multibillion profits every quarter.

It is irrelevant why people need loan modification - should they receive them or should they be offered - for the purpose of my call “for bank CEOs to have public performance reviews”. I am assuming that loan modifications are important. Otherwise you and your government would not support them. That’s good enough for me.

I follow closely your administration’s attempts to come up with a “stick” to encourage lenders to do loan modifications and enforce directives and incentives already in place. I also know how large corporations operate. I spent many years working for a few of them, before I decided to be a “small businessman”. I worked on three continents and “labored” as a part of many economic systems. I settled in California’s Bay Area as I saw it as the most dynamic and future oriented “country” in the world, both socially and economically.

I am not an economist, but I can observe and think. Communism did not lose its historical battle with capitalism because of Reagan’s brilliance (as a matter of fact, I do believe that there was greatness in his ability to follow his beliefs and set of principles) and Gorbachev’s missteps (control without fear? What was he thinking about?). Communism lost, because persons at the top of hierarchical systems could not figure out how to productively occupy millions of their followers. It was the dynamism of American system letting people do what they can do best (unfortunately, it allows for self destruction as well) that excited (and still does) millions of minds in the US and around the globe that tipped scales of history.

No, I am not criticizing your effort to “correct” the course by injecting funds to the economy and centralizing certain functions. The reason I voted for you and still am in the shrinking group of your supporters is because you impressed me with your ability to grasp facts, analyze and draw conclusions. I saw you and still see as the best qualified politician to take on the challenges we are facing and feel comfortable entrusting our future in you.

Not to lose the American way to evolve and reinvent itself it will be necessary to limit central functions again, hopefully sooner than later. It will not be easy as large institutions including governments develop a sense of self-preservation. We observe great corporations grow and fail once they cut and destroy mechanisms that made them grow in the first place. We see governments grow and not able to shrink themselves back to the size (we don’t have go even abroad to see it today – just look at us in California!). But it has to happen.

So, why do I care about banks? Obviously banks crossed the line of being just “private enterprises”. If they were, we could leave them alone and let them self destruct. After all most of large corporations fail to grow sooner or later, assuming that they have no monopoly or government backing. Banks protect their independence of private enterprises while being supported by government’s pay outs and tax payers’ funds. As long as public funds are used to bail out banks there should be much closer scrutiny of how and why banks are spending their resources.

The “loan modification spending binge” is an insult to every American. Tremendous funds are being committed and results are laughable. Show us, how and why you are spending these funds. It is not because you want to help.

To all Bank CEOs (insert your name here): Obviously loan modifications were not your objective. But let assume for a second that they were. If it was the case, you should be fired! All of you! It should not take two years to build non-working systems to process millions of loan modification applications.

Do you know how many millions of transistors have today’s computer chips? Do you know how much more complex and difficult they are to build? And it is happening every day. We design and build hundreds of complex computer chips every year. And do you know why it is possible? It is possible because it is done by a competitive industry that is not supported by government give-aways. The industry that allows for the positive selection, where best engineers and managers move forward and those mediocre are discarded and not just pushed to the top.
I agree, starting new processes and handling hundreds of thousands of new clients is not easy. However, it could be accomplished by competent executives knowing how to build and run a modern enterprise, assuming of course that they were serious about their objective.

I do not expect you to voluntarily develop transparency that you owe the American public. And this is why you should be forced to explain yourselves. You are partially public employees, as you are using and mis-using public funds. So you should prove to public that you deserve to be entrusted with those funds in a first place. You should have public performance reviews and this public input should be a major factor of your review by your Board of Directors.

Dear President Obama,
Getting banks to show greater financial transparency will not be an easy task and the need for such scrutiny should not be seen as a good excuse to further grow the government. But I am sure that it can be done and that you can devise appropriate solutions. And as soon as you get our financial system back on track I will send you a letter reminding you to shrink the government back.


Artur Urbanski, Broker


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Subscribe to ARTUR'S ATTITUDES posted by Artur Urbanski @ 4:23 PM  1 Comments Links to this post