Friday, January 30, 2009

A weekend thought - am I naive?

Remember the market after 9/11? Deals could not get done in large part because of terrorism insurance. Actually, it was the lack of terrorism insurance. Insurers did not want to write the risk, and lenders did not want to lend. For months I sat on my hands with large deals waiting to close. Then the government stepped in, backstopped the policies and risk and we suddenly moved like crazy people doing deals.

I think if I were the president I would throw the bankers in a room and say, "Okay. You have hundreds of billions of our money. And you are still hoarding it and buying banks and, with some notable exceptions, not lending in the volumes we want. That ends today. Using even semi-reasonable underwriting guidelines, if you lend more than X dollars (numbers people can give each bank the number), we will backstop all your loans. All of them. If you do not, then you are on your own. Period. No TARP money, no cash, no backstop -- nothing. And we in many cases are your largest shareholder, so don't think we will not watch your every move or take actions such as temporary nationalization (much as I loathe that idea) to get what this country needs. Have a nice weekend."