Funny Money by Mark Singer

Author:Mark Singer [Singer, Mark]
Language: eng
Format: epub
Publisher: Houghton Mifflin Harcourt

Above all, banking at Penn Square was expedient. A borrower did not have to make four trips to the bank to get his money. You could sign a note in blank and accomplish everything at once. The only problem was that often Bill Patterson seemed not to have time for details. Days and weeks would go by in a blur and Patterson would be so briskly in motion he would not get around to reading his mail. Secretaries, receiving instructions over the telephone, would end up signing his initials to hundreds of loan documents. Patterson, in his haste to get a deal done, might overlook this or that credit precept. Never lend people more money than they can pay back, for instance—that precept got overlooked.

As long as the upstream banks bought loans, it seemed reasonable to think of Patterson as highly idiosyncratic rather than in way above his head. Other officers or directors, or occasionally a national bank examiner, might express less than overwhelming enthusiasm for one of his loans, might observe that the size of the credit exceeded the value of the collateral, might dare to suggest a few changes. Invariably, Patterson's response was "Hey, that's a done deal"—meaning, no way was he going to renege. To be able to work both sides of the deal so effectively, to maneuver so adroitly between borrower and loan buyer—that was a remarkable skill. Patterson knew how to go to Chicago with a bunch of deals in a briefcase and return twenty-four hours later bearing commitments for ten million dollars' worth of loans. It might be ten million dollars all in one loan and the loan might be a 99 percent participation—meaning that Penn Square would lend only a hundred thousand dollars, and the rest of the deal would belong to, say, Continental Illinois. Penn Square's 1 percent loan origination fee would come to ninety-nine thousand dollars, and thus the bank would have earned, overnight, a 99 percent return on its portion of the credit. Most loan sale agreements depended upon a simpatico understanding, the equivalent of a handshake. The paperwork, the "documentation," would come later. If Continental Illinois was involved, that meant that the greatest corporate lender in the country had agreed to buy the loan. Who would dare to stand up and say that the deal was no good because a few pieces of paper were missing? The upstream bank had saved a lot of time and inconvenience and its money had gone to work, earning two points above the prime interest rate. The lender had sacrificed direct access to the borrower but in return the lender had Bill Patterson's implicit and explicit assurances that this done deal could do no wrong.

No cadre of Harvard Business School graduates did Patterson's bidding. Secretaries armed with high school diplomas found themselves being anointed as banking officers and then as assistant vice-presidents. They worked for one of the fastest-growing banks in the country, one that showed fabulous earnings, that had a long-distance sprinter—a

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