Bank of America to Some Small Businesses : pay your loan in full NOW

Originally posted by TheRedneck


This is the theory behind the 'free market': not total absolution from any requirement for fair and equitable behavior. Who can better control the actions of the local business than the local people? They have direct and immediate control, via their spending habits, on whether or not that business succeeds or fails. Customers also have the ability to offer feedback and even negotiate with businesses. There may be a conventional wisdom that a business has fast and fixed rules - this may even be true for larger businesses where control is centralized in another area - but the fact is that a business that is not responsive to the needs and wishes of its customer base will fail. Don't like the price? You have every right to make an offer, but of course the business has every right to refuse it. If you refuse to pay the price, the business loses a sale and you lose the purchase. If the business accepts the offer, it makes a profit and you get the price you wanted. There is incentive there for both parties to negotiate, as long as the final negotiation is in the best interests of both.

In an ideal world, this would work. However, what we have is a situation where a local business can do everything right, but a company that breaks all the rules like Wal-Mart will just take over and start to dictate their terms. Most people do not follow the path that the "free market model" indicates that they should follow.

That is just one example. I could come up with a relevant example for virtually any industry.

The very nature of capitalism and year-over-year profit growth dictates that over time smaller businesses MUST be taken over by bigger businesses in order for growth to continue. Once a company gets big enough, they dictate how certain markets work. Take the beef industry and McDonalds as an example.

The core problem is stock ownership and the expectation of year-over-year growth. It is an unsustainable business model.

Edit- I kinda went off on a tangent. I meant to address the topic of handling things on a local level by saying that it never stays local. Big business, which is located somewhere else, will always destroy that localized ideal.

reply to post by DragonTattooz

In an ideal worl, this would work. However, what we have is a situation where a local business can do everything right, but a company that breaks all the rules like Wal-Mart will just take over and start to dictate their terms. Most people do not follow the path that the "free market model" indicates that they should follow.

I have a hard time disagreeing with this, but I place the blame in a different direction: the consumers. The consumers also have a responsibility for making good decisions; after all, it is their best interests that these decisions affect.

We have evolved into a society where value takes second place to convenience; quality takes second place to price; customer service takes second place to apathy. BoA is a prime example: despite how many atrocities published on these very pages, despite multiple news stories about BoA problems on the MSM, people still choose to bank with them. Nothing could state apathy about customer service any clearer. WalMart is another example; people who cry long and hard about WalMart's customer service and personnel problems are there day after day giving WalMart the very thing they want most: money. How can anyone not understand the contradiction of rewarding unacceptable behavior?

It even goes industry-wide. The oil industry provides a service (fuel) that is constantly referred to as being 'necessary', but in the same breath those who deem it such wish it would disappear. And apparently no one can see the irony in this?

Consumers must be the regulators of the various industry if ever there is to be attention paid to consumer needs. Any other decision will lead to unavoidable problems, as we see now. As proof, the very fact that WalMart can enter a community and drive off small business is an indication it is "too big to exist". This is one vital area which consumers cannot effectively regulate; hence the plethora of anti-trust legislation that is no longer being enforced. It is there for a reason.

The very nature of capitalism and year-over-year profit growth dictates that over time smaller businesses MUST be taken over by bigger businesses in order for growth to continue.

Congratulations; you have hit on one of the evils that is inherent in Capitalism, and the very reason I support anti-trust legislation and a progressive tax policy.

No company should ever become so large as to control an industry. Industry should be controlled by market forces, which contain built-in checks and balances. Our removal of the anti-trust legislation has allowed these companies to grow in excess of their usefulness to society; thus, they should be split up by force of law into smaller companies that can then continue to expand under a more equitable fair market as consumers choose.

The core problem is stock ownership and the expectation of year-over-year growth. It is an unsustainable business model.

Stock ownership (or some similar arrangement) is an absolute necessity for society.

No single individual can ever hope to accumulate enough wealth to operate a multi-million-dollar company. Multi-million-dollar companies are required in order to produce the devices we enjoy today: automobiles, computers, appliances, etc. Therefore to state that we do not need stock ownership on the Internet is an exercise in hypocrisy.

I will admit that continual growth is an unsustainable goal. All businesses go through cycles: establishment, growth, and maturity. Today's business model tries to escape the establishment mode by infusing huge sums of money into advertising and immediate entry at large production levels, then tries to escape the maturity phase by purchasing smaller companies and continuing to grow well beyond their ability to provide their product or service effectively. This is possible because, again, huge sums of money are thrown at these small business owners in order to extend the growth process.

The effect is a bubble. Stock prices rise quickly and consistently, making the company even more money. But then, when growth is no longer possible, the business collapses. Witness K-Mart and Sears Roebuck. Customer service and consumer input is no longer feasible, but a few actually are able to feed on themselves to continue to keep stock prices high. Witness WalMart itself for this phenomenon.

The solution, again, is to return to anti-trust legislation which served us so well for such a long time. Not to "throw the baby out with the bathwater."

TheRedneck

Originally posted by hadriana
My mortgage has been sold so many times - is the initial contract I had still what's valid?
I never got another.

The first 2-3 years after we bought the home we never knew WHO to pay - we were always getting letters it had been sold but nothing else. It finally ended up with Wells Fargo and has been there for years.

edit on 3-1-2012 by hadriana because: (no reason given)

Ask to see the bank's 'wet ink' copy of the loan agreement. If they can't produce it, it constitutes fraud, or in the very least, you have no responsibility to honor the voided contract.

A friend of mine has lived in his house for 3 years now without making a single mortgage payment. They have taken him to court and served everything they can, but they are unable to get him out or make him pay.

F'n great ;0)

reply to post by TheRedneck


I'm horrible once it gets to breaking up the quotes and responding, so I'll just do them in order...I'm sure you'll figure it out...

We actually agree totally on the first point. When I said "people don't follow the model..." I was referring to the public. For some reason, people just don't do what is in their best interest, mostly for the sake of convenience. The Free Market Model says that people will shun companies with bad business practicves, but in reality it just doesn't work that way.

Regarding stock ownership- Again, I agree that stock issuance is the most viable way that we currently have to enable businesses to grow large enough to make automobiles and airplanes, etc. I don't know the answer, but I do know the problem. I have thought long and hard about this and I wish I could come up with a new paradigm...heck, I would probably win a Nobel Prize, but alas, i am just not that creative and/or knowledgeable regarding big finance and industry.

reply to post by DragonTattooz

There's a certain talent involved with breaking those quotes up. You'll get it too with a little practice.

The reason this is happening is really pretty simple: greed. At one time people started businesses because they needed an income and could do something good enough to provide that income. But today people start businesses to sell; they get the stock when they start the business, hire people to actually do the work, use various (usually legal but often illegal) accounting tricks to make the investors happy, watch the stock price rise, and at the opportune time either sell off the stock or sell the business completely for an insane profit.

In other words, business is no longer about pursuing a goal of helping out the community by filling a need; it is about turning a quick profit.

The way to solve this dilemma is simple: educate the people again that they have the power in the marketplace, enforce the anti-trust laws again, use the tax code to encourage production of good-paying full-time jobs in the local community, and tax business takeovers heavily to discourage them (and help pay off that insane national debt).

TheRedneck

www.latimes.com...

Let me help shed some light on this story. First, and foremost, borrowers were mailed letters a year prior to their maturity date that the loan would need to be paid in full at the date of maturity. Read the story - The borrower was given ample notice of the maturity date.

If the borrower didn't read the letter, ignored the letter, or otherwise didn't pay attention, then that is not the bank's fault.

At most large banks, each business is assigned a bank representative that proactively reaches out to the Borrower on at least a quarterly basis via telephone to discuss their loans, deposits, and other banking needs. These discussions would naturally include making the borrower aware of the maturity date, and to determine how the loan will be paid by the maturity date.

As the article states, the large bulk of these loans were renewed for an additional 12 months, and renewable annually thereafter, after the bank reviewed the pay history, credit scores, and general credit strength of the borrower.

Most of these loans were given out post 9-11 in an effort to boost the economy. $100,000 Business Lines of Credit were given out to small businesses with very little questions asked, aside from a credit check. These are Unsecured loans, meaning there is No Collateral attached, and the bank has little recourse in the event of default. These are considered by the industry to be super high risk loans. Default rates can run as high as 25% of all the loans originated - This is common nowadays with the economy being in a slump.

Worse yet, many of these Business Owners weren't even legitimate businesses, or were "home-based" businesses. Many of these Lines of Credit were grossly mismanaged -- The borrower simply maxxed out the Line of Credit from day 1, and never repaid the principal balance after all these years. The banks have no other option but to institute measures to get these loans repaid.

As far as this article in the LA Times is concerned, the borrower is a bike messenger service. He maxxed out a $80,000 Line of Credit, and never repaid the principal. The Line has had an outstanding balance for years and years. Comment section of the article indicates that the borrower drives a Range Rover and lives in a million dollar house. The borrower is now crying hardship, and complaining about the Big Bad Bank. The bank is simply trying to recoup its principal balance from a borrower that has been grossly irresponsible in mismanaging the Line of Credit.

Lines of Credit are supposed to revolve, meaning the principal balance is to go up and down, or "fluctuate". You use the Line to buy Inventory, which increases the debt owed on the Line, and when the Inventory is sold, you pay the Line back down to a $0 balance. That is how it is supposed to work. Instead, the Business Owner never repaid the Line when the Inventory was sold. And, you have to ask yourself, what kind of "Inventory" does a Bike Messenger service carry? None. And no Receivables either. So....if you didn't spend the money on Inventory, Mr. Business Owner, and you didn't spend the money on managing your Receivables, how exactly did you spend the $80,000 exactly? Fancier bikes for the messengers? New uniforms? Hmmm....

Just remember.. There are always 2 sides to every story.