Posted on 04/05/2009 10:29:05 AM PDT by rabscuttle385
While the nation's lenders ran amok during the boom, Andy Beal hoarded his money. Now he's cleaning up--with scant help from Uncle Sam.
BY BERNARD CONDON & NATHAN VARDI
Standing outside the glass-domed headquarters of his Plano, Texas, bank in March, D. Andrew Beal presses a cellphone to his ear. He's discussing a deal to buy mortgage securities. In just a few minutes, the deal's done: His Beal Bank will buy $15 million of face value for $5 million. A few hours earlier he reviewed details on a $500 million loan his bank is making to a company heading into bankruptcy--the biggest he's ever done. A few floors above, workers are bent over computer screens preparing bids for chunks of $600 million in assets dumped by two imploded financial firms. In the last 15 months, Beal has purchased $800 million of loans from failed banks, probably more than anyone else.
Andy Beal, a 56-year-old, poker-playing college dropout, is a one-man toxic-asset eater--without a shred of government assistance. Beal plays his cards patiently. For three long years, from 2004 to 2007, he virtually stopped making or buying loans. While the credit markets were roaring and lenders were raking in billions, Beal shrank his bank's assets because he thought the loans were going to blow up. He cut his staff in half and killed time playing backgammon or racing cars. He took long lunches with friends, carping to them about "stupid loans." His odd behavior puzzled regulators, credit agencies and even his own board. They wondered why he was seemingly shutting the bank down, resisting the huge profits the nation's big banks were making. One director asked him: "Are we a dinosaur?"
(Excerpt) Read more at forbes.com ...
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"Banks are on a prayer mission that somehow prices will come back and they won't have to face reality," Beal says. And that reality, according to Beal, is going to get a lot worse. "Unemployment is going over 10%, commercial real estate hasn't even begun collapsing and corporate credit defaults are just getting started," he says. His prediction: depression, without bread lines this time, thanks to the government safety net, but with equal cost to society.
Have fun!
Interesting man. These people fascinate me as I have no money or business savvy at all. It would be fun to sit in for a day and listen to the proposals and verdicts.
Amazing story.
All the indicators were there that we had a huge realestate bubble and irresponsible..idiotic..loans being made for many reasons. The bad loans haven’t stopped..the prices are just down. Eventually the loans and the real value of the underlying property must match.
The lack of a read “free market” for these assets is the problem..the govt, with their plan, is still trying to overvalue them.
Good businessman, no doubt. But if Beal’s organization practices fractional reserve banking, which I’m sure it does, he’s just another cog in a machine that must be dismantled.
He’s just another agent of inflation at the end of the day.
Beal's a smart guy, no doubt. But, if we hit hyperinflation... those cheap loans will be a disaster unless he can adjust the rates. He's gambling that the economy stabilizes and people continue to make the loan payments. If the $15 million note he bought for $5 million defaults, he's toast. Worse, if the $15 million is repaid in hyper inflationary conditions, the value of the money will be substantially less than his board realizes. In all, though, I hope he succeeds!
If he’s making loans of any kind, he’s creating money and causing inflation.
Just the way fractional reserve banking works, that’s all.
This is a good example of why a subscription to Forbes is worth the price you pay.
The guy sounds like he knows what he’s doing when other don’t. How I wish more people were like him, including our supposedly intelligent leaders.
More than sad, absolutely disgusting.
bump
Thats awesome.
There's always the underlying collateral
I had wondered what was going on with him. He was a major player in the last downturn, bought the new Fina headquarters when they disappeared, started playing around with rockets, dropped that project, and then just faded out of sight.
http://en.wikipedia.org/wiki/Beal_Aerospace
From late 2005 to summer of 2006 I worked in correspondent lending at Washington Mutual. My boss was a brilliant man. He had worked in banks most of his life, and was in his sixties.
He told me he went to a meeting at WaMu where they discussed Alt-A and other subprime loans. He listend for a while and finally said, “These loans are crazy. They are going to blow up and ruin us.”
He was told, “You don’t understand these loans. Don’t poke your nose where it doesn’t belong.”
He told me this before everything went to heck. I respect him more than any boss I ever had.
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