A banker, like any other successful business owner, they need to be emotionally self sufficient to do their job effectively. They should be, but they are not always. Bankers, like many of us, frequently are controlled by their emotions and sometimes make bad business decisions because of this unfortunate fact, a personal weakness. This is more prevalent then one would imagine. We see it way too often.
Recently I had a banker admit he would rather not accept the appraised liquidated value of the assets in an asset sale as the number was “embarrassingly low’ and would make him look bad, so he believed, thus he preferred to reject the offer and go to auction were he agreed he will get significantly less but it is more acceptable as it is based on auction value not his personal effort to liquidate the assets, thus he saves face by going to auction and not having to support a very low buyout of the assets….amazing! Less cash but less embarrassing, so ok.
The offer was for $120,000. the exact liquidated value as appraised. The loan was $1.8 million, and the likely return at auction wasl $25,000 if anyone bids at all ad not considering the coas of foreclosure and liquidation by auction. Yet the banker rejected the offer to save face. He said he could not bring such an offer to his committee he would prefer to make less at auction. It would make him look bad he said.
This is not unusual. I have experienced this in other instances.
In another situation, the banker stated his preference to wait a few years before liquidation, as maybe the market will return by then and the collateral will be worth more then it is worth now…again, WOW! Another emotional response hardly in line with expected and appropriate debt resolution practices, certainly inconsistent with bank and SBA standard policy, but it felt good emotionally, for the banker, so he made an emotional decision.
None of these practices are in the best interest of the bank, or the borrower, but the loan officer or workout officer acted emotionally as described.
Something is wrong here, not the least of which is the bank officer’s failure to recognize and respect the banks fiduciary responsibility to the borrower, a very real standard that must be adhered too. Clearly the banker were driven by emotional feelings which are counter productive and damaging to all concerned.
It is important to understand the driving force behind your banker so you can best address it with an effective counter strategy. Emotional instability is a huge issue which must be recognized and dealt with despite its inappropriateness.
