Wednesday, October 14, 2009


I work in the construction business and I really liked it - when there was business. Lately, like many other industries there's not much going on. About the only projects out there are public works and federal projects. This is great until you pick up the planholders list and see that over 30 General Contractors are bidding each project.

All of our private projects are on hold. This continues to be true for most projects that are privately owned. The cost to build is prohibitively expensive so what makes the most sense financially if you own a piece of dirt is to let it sit there... or sell it because you can't afford to develop it.

In the midst of this rather stressful time in our economy the banks - the same banks that received hundreds of millions in TARP funds have started "restructuring" existing loans no matter how you've managed your money. In our case we had a $250,000 line of credit which we use for cash flow. When our loan came up for renewal the bank looked at our balance sheet and our receivables which were respectable and decided that they were going to reduce our LOC by $150,000.

Now we never actually used more than $100,000 of the LOC but I liked knowing that I could if an opportunity arose or if we got a big contract. Big contracts involve carrying material bills and payroll, often for 30 to 60 days before you get paid.

My response to the banks decision to do this was to cast around and see if we could find another LOC with another institution. I was thinking a bank that got a lot of the TARP money would be a good shot because, stupid me! I thought that "bail out" money would include businesses, but apparently not.

The banks I talked to all refused to lend us even $1 despite the fact that our balance sheet looks better than any of theirs, we actually have healthy receivables (although I'm not certain that people can pay us since no one besides the banks seem to have any money) and we carry virtually no debt. All this and we can provide security in the form of real estate that is owned free and clear with no note.

In this extremely tedious process I was passed from person to person, all of whom were very professional, but none of whom seemed to be very intelligent or inspired. One gentleman, Josh who said he was the underwriter had a voice that sounded not all the way changed - I imagined acne, braces and ears that appear still a bit too large for his head as we spoke, asked me what I attributed our drop in revenue to over the last year.

Me: Seriously?

Him: Well yes, there's been a significant drop.

Me: Gee Josh, let me think... near as I can figure I guess it would be the fact that over the last 5 years or so banks, such as your own employer practiced predatory and irresponsible lending to people who couldn't afford the mortgages you put them in, well not you Josh because 5 years ago you were in middle school, but as I was saying, since the banks made all of these incredibly bad decisions, including those derivative things, they started to fail and go out of business, and as they were sliding into that black hole they'd dug for themselves they began pulling in large corporations who had also made some questionable, greed based financial decisions, something that corporations can do in this country because in the current system no one has to actually be culpable, and the CEO's still got paid their million dollar plus salaries and bonuses, but they do employ thousands of people so the government had to get involved and they took hundreds of millions of the tax dollars that we all pay and gave it to the banks to "revitalise the economy", except that the banks are holding onto the money to try to fix their very sick balance sheets, thus there is no money out in the world to pay for the projects that would allow us to continue the growth that we had worked so hard to create a real foundation for.

So basically Josh it seems to me that the drop in our revenue is your employer's fault.

Then I asked him how much TARP money his bank had accepted and what exactly they did with it.

Because I would really like to know.