When it comes to big-ticket deadbeats, local banks call in the "work-out teams" not too dissimilar from the ones in Tom Wolfe's A Man in Full.
by Mike Gibson
In his 1998 best-selling novel A Man in Full, nouveau journalist extraordinaire Tom Wolfe breathes literary life into a number of already out-of-the-ordinary spectacles with his inimitably explosive prose: the savage mating of two randy breeder horses; a latter-day underground railroad for Asian migrant workers; an Atlanta society benefit that uneasily mixes both the city's liberal, culturally permissive arts patrons and its reluctant homegrown Cracker elite...
But perhaps the book's most memorable passage involves a scenario that would seem to be one of its most potentially mundanea chapter-long dissection of a meeting between the protagonist, wealthy Atlanta developer Charlie Croker, and a surprisingly bloodthirsty group of banking executives, default specialists for promethean Plannersbanc, the lending institution to which Croker is some half-a-billion dollars in arrears.
"They were all settling back and eyeing the mark, the quarry, the prey, or whatever you should call the butt of a practical joke involving half a billion dollars... 'Shithead' was the actual term used at the bank and throughout the industry. Bank officers said 'shithead' in the same matter-of-fact way they said 'mortgagee,' 'co-signer,' or 'debtor,' which was the polite form of 'shithead,' since no borrower was referred to as a debtor until he defaulted. Why did bankers turn so quickly to scatology when loans went bad?"
By chapter's end, the bank's "work-out team" leader Harry Zale, a sawed-off wolverine of a man given to strapping death's-head suspenders across his barrel chest, has verbally reduced the imposing Croker, a former Georgia Tech football star, to a sweaty, quivering hulk, full of impotent rage and fiscal anxiety. His well-tailored white button-down shirt, meanwhile, has been soiled by two enormous half-moons of perspiration at the juncture of his upper arms and torso"saddlebags," in the Plannersbanc vernacular.
"We're going to have a lender's cactus, now," Zale concludes in his biting coup de grace, asking that the sopping, red-faced developer and his entourage exit the room. "A lender's cactus...we want all the pricks on the outside."
Though A Man in Full is indeed a novel, its author has always maintained that his fiction is rooted in exhaustive journalistic research. And while the Plannersbanc chapter has the undeniable whiff of exaggeration, some of its seemingly knowing details still beg the question as to how close its depiction is to reality. Do the sterile fluorescent halls and tellers' paste-on smiles at local lending institutions act as clever camouflage for the ravenous Harry Zales that lie in wait? How do our banks really treat the shi...uh, clients whose loan payments run afoul of schedule?
Burr-headed and burly, with a mustache chiseled sharply into a sinister downward turn, SunTrust local vice president (in special assets division) Jon Clift is possessed of a brooding visual presence mindful of one of Wolfe's elaborately-drawn characters. And his Northshore office is flanked by a Spartan meeting room, complete with a long, foreboding conference table that might well have been yanked from the inner chambers of Plannersbanc.
From there, truth and fiction rapidly part company. "I would say (the book's description) is basically an exaggeration," says Clift, in a soft, earnest voice that belies his gruff facade. "The people I've worked witheven the ones I've foreclosed onI believe they'd vote for me if I ran for governor. The attorneys don't understand why these people like me as much as they do."
Having worked in special assets and recovery at various banks for some 23 years, Clift has seen his share of past-due accounts. Like snowflakes and fingerprints, however, no two of them are alike: "You have to establish first whether the customer is in a situation of 'can't pay' or 'won't pay.' If you're just naturally hard-nosed in your approach, and treat everyone the same, you probably won't stay around long."
"What happens in that book sounds like embellishment; personal vendettas don't come into the process," agrees Tom Tuck, president of TenBank of Oak Ridge. "There is a necessity to collect that can sometimes be interpreted as harsh, but I don't think it reaches those sorts of proportions, where you're actually attacking people."
According to Clift and other local bankers, most lending institutions have special divisions for debt collectionoften referred to as "special assets" or "rehab" or (sure enough) "work-out teams." The latter term, however, has a far less malevolent connotation than that implied in A Man in Full.
"All it means is 'Let's get it worked out,'" explains Mike Henderson, regional senior credit officer at Union Planters and a 30-year banking veteran. "Sometimes you can get it worked out with a little sugar. Of course, sometimes you have to use a little legality. It's certainly true that you don't always make everybody happy."
Says Tuck, managing work-out loans involves a certain fiscal alchemy, a delicate mix of art and science. "When you have an under-performing loan, the remedies can be anywhere from gentle forbearance to pursuing legal collection," he says. "And it's always in the best interest of the lender to work with the borrower. The art comes into play as to what the best possible solution is to compromise."
Tuck explains that in the fragile economics of lending, only about 1 to 3 percent of total dollars loaned typically fall into the "past-due" category; and less than .5 percent, or about 10 to 50 cents per $100, will be counted as year-end loss. "In making loans, banks have to be right a high percentage of the time."
Unlike the scenario presented in Wolfe's book, where a large, multi-national bank has made an ill-considered loan to a risk-taking business interest, it's often smaller regional and local banks that advance riskier loans in order to gain market share otherwise held by their bigger counterparts.
In the case of those few loans that reach default status"in the tank" as one officer puts itmost bankers reiterate that it's generally in the institution's best interest to give the debtor enough rope to pull himself out of the hole. As Clift succinctly puts it, "We're not in the property business or the equipment business or the used car business."
There are, of course, those under-performers who, by virtue of sheer audacity, spur work-out team members to take sterner measures, to pursue business and even personal assets with steely, Zale-ish resolve. A mercurial local coal magnate, for instance, thumbed his nose at benefactors by floating expensive dinners on his Gold Card despite ongoing delinquency. And one former "special assets" officer recalls a wealthy debtor who skipped a deposition to attend a tennis match overseas.
"That was kind of in-your-face," he says. "I had to listen to the attorneys talk about all these problems he had while I knew he was at Wimbledon. That really hardened my resolve. We found some 'hidden' assets and recovered in full."
And while Wolfe's emphasis on psychological posturing might be misplaced ("I didn't see a lot of that," says one former banker), rehab specialists aren't necessarily above the use of misdirection and other quasi-subversive tactics. Former banker Ben Plant recalls a peer who called a group of high-living debtors together at a legal deposition, then had an employee furtively snap photographs of their pricey luxury cars.
"He filed liens against all of the vehiclesBeemers, Cadillacs, Mercedes," says Plant, now with Knoxville's J.C. Bradford. "He was trying to change their lifestyles so they'd go belly-up and pay him."
Accordingly, the indulgence level of the bank in question can vary widely. Plant, a former regional president at Union Planter's, remembers waving the interest charges for some of his more sympathetic under-performing clients. At SunTrust, Clift maintains a firmer stance.
"We'd generally rather adhere to the original contract," he says. "If you need a small amount of additional time, we have you sign a forbearance agreement grant-ing an extension. But we use those sparingly. Generally, I've already got a plan worked for people based on what I know about their finances. They may think they can't pay, but I show them how they can. That's where you get back to people who can versus people who won't."
Of the small portion of loans that are legally "written off," Clift says about one-quarter of the outstanding funds are recouped industry-wide (he claims SunTrust generally exceeds 50 percent recovery.) Those reclamations come by virtue of legal actionforeclosures, repossessions, and the likeand by simple cajoling, by the efforts of bank officers like Clift to convince debtors like the fictional Mr. Croker to choose the Higher Path. "I simply try to make people understand that this the way it works, that I am an officer of the bank and that we eventually have to recoup what is ours."
Most local bankers seem to agree that any white collar rough stuff that takes place during a recovery is waged mostly between lawyers.
"When things get adversarial, the attorneys are usually already involved," remarks Henderson.
Still, there is a persisting notion that perhaps the description offered in Wolfe's A Man in Full are just a bit too knowing; that perhaps our bankers are (understandably) still holding a bit of the truth in check.
"We don't want to attack the dignity of anyone we do business with; that's not rational," one officer maintains, speaking anonymously. But then he adds, with just a hint of a hard smile, "But there are times we have to deliver....harsh information that has, um, unfortunate implications. We have a responsibility to our shareholders to collect delinquencies by any means at hand."