Barrett Rainey's Second Thoughts

Barb and I had an experience recently that angered us and gave us feelings of frustration we’ve never known in our rather lengthy lives. We were refused major credit. First time.

Now you may have recently had this happen to you and, when it did, were as put out as we were. That’s not the way the process is supposed to work. You live responsibly, pay all your bills on time, handle credit honorably for 50 years while creating not one angry creditor. So the process of getting bank financing in keeping with your modest lifestyle is just one of the expectations of being a good citizen. Well, Virginia, not any more.

I won’t bore you with all the details. Let’s just say with a credit score in the low 800 range, no consumer debt, a manageable house payment, a signature line of credit at a local bank and assured retirement incomes, financing an RV through a nearby, longtime reputable Oregon dealer would seem a slam dunk. So we thought.

That’s not the way it is in the new reality. These days, in consumer lending, if you have it and don’t need it, you can probably get it. But if you don’t have it and need it, you likely can’t. Regardless of your lengthy previous history.

We’ve heard a lot about banks we bailed out with our taxes refusing to lend much of that cash infusion back into the economy. Yet we’re being hammered by TV and newspaper ads telling us of the billions those banks are putting out every week as “good citizens.” Week after week. So which is the truth? Depends, I guess, on whether you’re a shareholder they’re trying to reassure or a consumer. Or very gullible.

The recreational vehicle business has been a major casualty of our recent economic calamity. In our Oregon neighborhood, boat builders and sub-contractors took the brunt and some disappeared. Lane County suffered heavily because of manufacturing and supplier jobs that disappeared at Monaco, Country Coach, Marathon and others. The ones still there, along with many dealers, quickly refinanced debt, dumped inventory, cut back nearly everything and hunkered down.

Because of those realities, I suspect our initial rejection was tied somewhat to the large RV dealer who doubtless took a major hit, and to his relationship and creditworthiness with various past lenders. No outfit in the large RV business with that huge inventory could be unscathed. Just looking at consolidation of sales lots and sharply reduced staff speaks volumes.

Bankers now want you to be buried in these major purchases. If they can get you in 30%, for example, then their exposure is no more than 70%. That means if you default the first day, they can go to auction and likely walk away with little or no loss.

Well, that may be good business for them. But it’s too large a pill for this consumer to swallow. Not only do we have a long list of enviable, responsible credit documentation to put on the table, we’re also one of the millions of families whose tax dollars kept some of those major institutions afloat and saved their shareholders butts when they were the ones making risky loans and overextending their own resources. Which, after all, were our resources. We depositors. We taxpayers.

For our part, Barb and I long ago severed lengthy ties with large national lenders we banked with for decades and are once again in a more comfortable and more personal relationship with a fine, smaller Oregon-based institution. Some of these little banks have remained relatively healthy through the maelstrom and a few now seem more so than a year or two ago. Umpqua Holdings, for example, has even grown by cherry-picking assets of some smaller regional banks that went under.

All of us find ourselves in new economic circumstances after the near crash. With layoffs and cutbacks, some have heavier loads to carry than others. But there are many real changes for each of us. While I’m not your cockeyed optimist, it seems safe to say we’ll survive but with many adjustments.

A similar successful adjustment process can’t be forecast for all big banks. This is where political power needs to be used. After all, we – you and I – put up billions of bailout bucks for these institutions. We’re shareholders in some. With rights. And among those rights are expectations that, while banks will lend more responsibly, they will not cut off credit to similarly responsible consumers. That turnover of dollars is what makes our economy work.

If the government hammer needs to be used on a few of those guys, I say swing it! Hard!

-0-0-0-0-0-0-0

Postscript: We were eventually approved by a lender of our choice; not the dealer’s. Better terms, too. But the experience still hurts.

Share on Facebook Both comments and pings are currently closed.