Don't Worry, Be Happy

Optimism has been the guiding force of conservatism for almost 40 years at least. Liberals and progressives who have warned of the dangers of recinding regulatory protections have been called "Chicken Littles", "Nervous Nellies", cowards, and Enemies of the State. Election campaign after election campaign has been labeled a referundum on whether Americans are optimistic about the future, and the primary selling point of many Republican campaigns has been their claimed ability to calm Americans' supposed fears (most of which the GOP created out of thin air) and turn a terrifying illusion into a comforting fantasy - "the shining city on a hill" myth.

But optimism has been a driving force in US business for even longer. For over a hundred years books and pamphlets have circulated freely promising wealth for anyone who would just believe. Those of us who warned that optimistic assessments in the face of all ration and reason could lead to dangerous consequences, were, at a minimum pooh-poohed, and at a maximum told we should be taken out behind the barn and shot as traitors to America. One of the results of this pervasive, militant optimism in business has been the mortgage crisis, which would not exist if idiot bankers hadn't insisted, against all historical evidence, that they were optimistic that this time the housing market would NEVER lose its value, that it would simply continue to be worth more every year in perpetuity.

Well, they were wrong, of course, and another optimistic bank - Florida's largest regional bank - is struggling to stay alive after CEO Alfred Camner, $$$ in his eyes, optimistically put as much as 3/4 of the bank's assets into risky sub-prime loans.

A cheerful sign outside the glistening offices of Bank United beckons consumers to tap into “Mortgage-ade.” Another promises a “59 Minute Mortgage.”

But easy money, it turns out, has created enormous problems at Bank United, Florida’s biggest regional bank.

By aggressively peddling a popular type of high-interest loan to risky borrowers, the bank tripled its profits in 2006 as real estate on Florida’s Gold Coast peaked, only to lose nearly $100 million in late 2007 and early 2008 as the market cratered. Now, its chief executive, Alfred R. Camner, is scrambling to raise $400 million in capital, an amount nearly eight times the bank’s shriveled value on the stock market.

Analysts and a corporate governance group are monitoring the bank’s asset quality and asking why Mr. Camner was allowed, with board approval, to amass a pool of volatile loans that at one point represented 75 percent of the bank’s mortgage portfolio, despite what has since proved to be great risk.

(emphasis added)

Why indeed would the bank's BOD let him do such a thing when it's against all the rules of finance? Canmer explains.

Mr. Camner, who is also the bank’s controlling shareholder, testily defended the bank’s strategy. “We did it for over 10 years,” he said, referring to the bank’s use of a risky but highly attractive product known as an option adjustable-rate mortgage.

“For a very long time, it was an excellent performing package.” he said. “It gave the borrower a chance to manage his money. If they qualified, it was an excellent loan.”

He also dismissed as “completely absurd” and “idiotic” concerns that the bank’s practices have eroded the strength of the bank’s assets, despite a recent revision by one brokerage firm of its shares to underperform.

Which can be translated as, "We made money for as long as it lasted. Who cared about the future? Anyway, it's all a pack of lies."

There's nothing new at this point about United Bank's story but I thought it might be helpful to record - in the words of one of their very own - how these guys think. The future meant nothing, the country's economy meant nothing, it was all good as long as the money kept flowing. And just like Camner, they're all still denying and defending even as the economy they undermined comes crashing down around their ears.

Would "pathetic" be too strong?