Even Bankers Occasionally Make Emotional Decisions
A banker, like any other successful business owner, needs to keep their emotions in check to do their job effectively. They should, but they do not always. Bankers, like many of us, are frequently controlled by their emotions and sometimes make bad business decisions because of this unfortunate fact, a personal weakness. This is more prevalent than one would imagine and 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” which would make him “look bad” or so he believed. Thus, he preferred to reject the offer and go to auction where, he agreed, he will get significantly less but he found it more acceptable as it is based on auction value not his personal effort to liquidate the assets. To him, this saves face, going to auction and not having to support a very low buyout of the assets. Amazing! Less cash but less embarrassing? Well, 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 was $25,000 if anyone were to bid at all, and that’s not considering the cost 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 so he would prefer to make less at auction. It would make him look bad is what 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 would return by then and the collateral would be worth more than it is worth now. Again, WOW! Another emotional response hardly in line with expected and appropriate debt resolution practices and certainly inconsistent with bank and SBA standard policy. But, it felt good emotionally for the banker so he made a decision based on that.
None of these practices are in the best interest of the bank or the borrower but still the loan officers or workout officers act emotionally as described.
Something is wrong here, not the least of which is the bank officer’s failure to recognize and respect the bank’s fiduciary responsibility to the borrower – a very real standard that must be adhered too. Clearly, the bankers were driven by emotional feelings that were counterproductive 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 appropriately.
