Tuesday, January 8, 2013

The Ladder

This memo was written in mid-2012 as a start of a series of memoirs that I thought would be of interest to my children.

I had been at the bank for seven years and over the 4th of July, 1982 the Penn Square Bank of Oklahoma City filed for bankruptcy.  Seems quite unrelated, but a bank going under in 1982 was a big deal and of note to us and a lot of others.
The guy in charge of our dealings with that bank turned in his resignation on Friday, July 5.  We had loans that were guaranteed by the Penn Square Bank that, at the time of the bankruptcy went from being very secure to being very risky.  I applied for the job.
The President of the bank had a knack for making others do work.  Because of the team he assembled, the bank was quite successful and a great place to work. 
I remember visiting with him about something else a few years earlier when we had purchased the grand piano.  He asked how much it cost and I told him that it cost $12,000 (this was about 1979) and he looked puzzled and said, “You could buy a real nice organ for that.”
The cutting edge work that my associate, Bill, and I were doing on Asset/Liability management was way beyond his comfort zone.  But that was pretty understandable since we were among the few in our size in the nation to be doing that type of analysis, a practice that became widespread in the ensuing years.
Anyway, we had branched out into the purchase of some loans backed by lines of credit through the Penn Square Bank of Oklahoma City, but if memory serves, some of them were backed by other banks, too.  These loans backed drilling programs in the days of high interest rates and oil shortages brought on, in part, by the ineffective governance of the Jimmy Carter years.
The President of the bank didn’t know what to do with the problem and the resignation, so I went to him and said that I would take over that position if he wanted me to.  Within a few hours, they offered me the job.
I remember going home, gathering everyone on the patio at the picnic table, Amy was almost 13, Marcee was almost 11 and Matt was not yet part of our family.  I explained that I had been offered a job that would be quite a challenge and that there was risk.  Amy reasoned that if I didn’t like it or if I couldn’t do the job, I could just go back to my old job.   I told them that it would not be good if I failed, that it was sort of like climbing a ladder and that they took out the steps behind you.  I said, “If I fail, there really isn’t any going back.”  Amy thought a moment and said, “Don’t fail.”
End of discussion.
We worked really hard on that situation, went to Oklahoma City a lot, and one of the meetings I vividly remember was headed by the stud from Continental Illinois, Chicago and seconded by the guy from Seafirst, Seattle.  They went on and on about how they were going to pursue all legal remedies, not negotiate and these investors owed them the money.  No argument, but I got up in the room of about 50 bankers and observed that a lot of the investors didn’t have the money to pay.  They insisted that their course of action was appropriate.
They went their way, we went ours.  We negotiated with each borrower and eventually got all of our principal and half the interest we were owed.  Both Continental Illinois and Seafirst, banks who were in the top ten in the US, went broke and disappeared from the map.
I remember walking into the offices of three borrowers in Philadelphia.  They were attorneys and Jewish.  I told the guy I was with that we were WAY out of our league—Jewish Philadelphia lawyers and it is their own money!  The art work in the offices could have paid off the loans easily.  They paid.
Things went along, I learned a lot from managing the commercial loan department, the mortgage loan department (we were among the first in Iowa to generate loans and sell them in “packages,” an almost universal practice these days), the correspondent banking department (that was a mess), and the investment department.  We went on to weather the 1982 farm loan crisis, Willy Nelson starting Farm Aid and the killing of a few bankers by farmers.  The first year, 1982, we barely made any positive earnings, but we established a basis for terrific profitability over the next few years.
The investments I made in the bank stock back in those early years financed the college educations for both Amy and Marcee (well, almost, for Marcee).  There was money set aside for Matt, but that sort of disappeared a few years later, but that’s another story.  The bank was really profitable and I shared in that success over several years.
There are tons of stories from those days, we moved to Sioux City the summer I was 30 in 1975.  Lincoln was the default place to live for U of N graduates, so the salaries were extremely low.  My first job at Bankers Life Nebraska (now Ameritas) paid $600 per month.  Both of the girls were little, in fact Marcee was born in Lincoln.  The insurance company was a source of a lot more stories (like working with the future poet laureate of the United States, Ted Kooser) and it was sort of like another college degree because I learned so much, but we were really poor.  I went to work for First National Lincoln in the Trust Department for a short while, and a headhunter recruited me for the job in Sioux City. 
I was with the bank in Sioux City for ten years, from the summer of 1975 through the summer of 1985.  It was sort of a no-brain decision—I started with Bankers Life making $7,200 per year, was making about $12,000 per year at First National Lincoln, and started in Sioux City at $21,000. 
We sold the big house in Lincoln (that has been entirely remodeled, I guess, it is beautiful) and bought a newer style house that had fallen on hard times.  The sellers were getting a divorce, the husband had been indicted over a gambling episode that led to the closure of the hotel in downtown Sioux City that was, just recently, still standing vacant over 35 years later.
Bought our first color TV soon after moving there (to watch the first real mini-series, “Roots”), and from then on, the financial side of the ledger improved a lot.  I was even able to fulfill a life-long dream and got my private pilot’s license.  We bought the first new car, which was promptly wrecked by a truck running a red light, and then another one that I still remember, a 1979 Chevy Impala, white with red interior and all kinds of bells and whistles.  Even bought a new second car, a Honda Civic that was eventually rolled by someone we barely knew.
One of the interesting things that I observed during this substantial increase in personal wealth and financial growth—I gave generously to the Catholic church, to the United Way and volunteered in a whole bunch of organizations.  I was on lots of boards, like hospitals, the Symphony, Boys and Girls Club and adhered to a high level of giving, both financially and of my time and efforts.  I have often observed since then that the money and time that I contributed came back to me in multiples.  Don’t know if there is a causal relationship, but that is what happened.
In about 1984, I was invited to go hiking with our neighbor, Russ Christenson, and some of his friends.  We hiked from the west side of the Tetons to Jackson Hole, Wyoming.  Soon after that, Russ offered me a job with Midwest Energy.  Russ was the President-elect, and the Chairman of the Board and President was Frank Griffith.  For some reason, Frank did not like me (I barely knew him) and he attempted to block my hire after it had been announced and after I had resigned.  Fortunately, the Board sided with Russ and Frank was out of there in a few months.  He was one of the corporate executives that give corporate people a bad name.  I am not sure what is going on now, but at one time it is my understanding that his sons (there were three) were attempting to get a court order for protection as he had a loss of mental acuity and was still chasing women, one of whom was attempting to get all his money.
I was with Midwest until 1993.  We did all kinds of fun stuff, like the Dunes, financing communication satellites, purchased commercial airplanes and leased them to airlines, and a variety of “economic development” projects.  One of my responsibilities was economic development, this was a time when Iowa was trying to recover from the Farm Crisis and jobs were all heading overseas and to the Sun Belt.  Among the investments we developed was the Chicago Central and Pacific Railroad.  General Electric Credit put up $80 million, we put up $5 million and the railroad was off and running.  Well, for a while.  It eventually tried to declare bankruptcy, that is a whole story in itself, and I will never forget being the only witness in the Bankruptcy Court when we were successful in reversing the bankruptcy.  That railroad is still running, as far as I know, and is so important to the economy of Northern Iowa.
During this time, I served on the Board of Directors of Alexander Energy in Oklahoma City.  Bob Alexander is a valued friend who we saw at his home in Palm Springs a couple of years ago.  Bob sold the company and I left the Board (this was when I was in Fargo), and he had to then come back and bail it out of a whole bunch of bad management decisions.  He thought it would take six months…it took six years because the banks forced the company into bankruptcy a month after Bob came back on board.  That was when he enlisted the aid of an old friend, the “king” of bailouts and leveraged financial takeovers, Carl Icahn.  Icahn and Bob bought the banks out for pennies on the dollar (that is a book in itself as the stupid and the greedy paid for their arrogance), they did two other ones just like it and Icahn cleared $500 million. 
Now, Bob chews tobacco.  Not snuff, like I used to chew and swallow.  This is the messy stuff, and he carries a tin to spit in all the time.  Icahn is notorious for being formal and for being intolerant, so his minions were dismayed that Bob was allowed to show up in boots and to spit in a can during meetings.  Something was said one time and Icahn told the “team” member that if he could “…clear me a half billion dollars, you can spit in a can, too.”
Anyway, the metaphor of the ladder is so true of so many parts of life.  We can’t go back to where we were, climbing involves removing the rungs behind us.  We must go on, whatever we are doing.  And, Amy, you were right, it is better if you don’t fail.

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