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Author Topic: Illinois vs. BoA. Fight!  (Read 2081 times)
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Caine
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« on: December 09, 2008, 12:06:08 AM »

ok, so there's this little business (Republic ) in IL which just happens to bank (or used to anyways) with BoA.  BoA dropped their credit line, preventing Republic from paying out pay or severance packages. 

their response?   get IL governor to mandate all state agencies cease doing business with BoA on the basis of the gov't bailout. 

post article

this raises an interesting question which is:

should any financial institution be forced to extend credit to a company when that company is having difficulties staying afloat?  should a bank recently under strain act with a higher standard for lending to at-risk entities? 
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Doopri
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« Reply #1 on: December 09, 2008, 12:21:24 AM »

this is one of those "fine print" issues with credit lines

when people / businesses get them, they think theyre fine and will have them as long as they stay under their ceiling

but the fact of the matter is, fine print exists where under certain (sometimes extreme, sometimes not) circumstances the bank can immediately terminate that line, and sometimes even demand PAYMENT IN FULL... yea

so if a state doesnt like the idea of that, i suppose this is a good way to apply pressure to the institution.  as to the should haves of it, hmm its a tough one.  the bank granted the line in the first place.  but then again circumstances did change so i guess the bank should act - but then again if all banks acted like this to all business during this downturned wed be HUGELY fubared - so i dont know i cant make a call on this one way or the other.  boa also recently got an enormous injection of taxpayer cash from the govt for the express purpose of keeping liquidity in the system though, so i can see where the state would be getting ticked off
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Caine
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« Reply #2 on: December 10, 2008, 07:33:23 PM »

BoA folded it's hand and is going to extend credit to Republic after all, "for the good of the people".  sure you are.

of course, this event is now shadowed by the bigger scandal surrounding blago, but it should be noted that there exists a link between republic and another window company now based out of iowa, run by Gillman's wife. 

apparently chase wants to get in on the goodwill by giving them 400k as well.  of interest here is that Chase's midwest chairman happens to be brother to richard daley and a chase subsidiary owns 40% of Republic.  does this look like a giant CYA exercise to you too?

Quote
"These negotiations are about salvaging the Christmas these hardworking families deserve,"
  :|
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Blackadar
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« Reply #3 on: December 10, 2008, 08:11:21 PM »

Quote from: Caine on December 09, 2008, 12:06:08 AM

should any financial institution be forced to extend credit to a company when that company is having difficulties staying afloat?  should a bank recently under strain act with a higher standard for lending to at-risk entities? 



The better question is "should a financial institution that recently accepted billions of dollars in public funds designed to increase market liquidity be subject to pressure to extend credit to a company when that company is having difficulties staying afloat?"

The answer is...I'm not sure.  I think that BoA loses some of its independence when it accepts public funds.  They also knew that Republic was shutting down in January and there was no reason not to extend the LoC.  So using public pressure to get them to do this isn't a bad use of the "bully pulpit".  It also sounds like the owners of Republic are pretty shady and the workers are caught in the middle. 
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Eduardo X
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« Reply #4 on: December 10, 2008, 10:56:46 PM »

Hooray for BoA! They did a good thing here...

...under pressure and horrible publicity.
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brettmcd
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« Reply #5 on: December 10, 2008, 11:10:43 PM »

Quote from: Eduardo X on December 10, 2008, 10:56:46 PM

Hooray for BoA! They did a good thing here...

...under pressure and horrible publicity.

I dont see it as being a good thing, we are in this crisis because of loans being made to bad credit risks, so forcing a bank to keep a line of credit open to a company they see as a bad credit risk is not a good thing.
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the Nightbreeze
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« Reply #6 on: December 11, 2008, 01:38:16 AM »

Quote from: brettmcd on December 10, 2008, 11:10:43 PM

Quote from: Eduardo X on December 10, 2008, 10:56:46 PM

Hooray for BoA! They did a good thing here...

...under pressure and horrible publicity.

I dont see it as being a good thing, we are in this crisis because of loans being made to bad credit risks, so forcing a bank to keep a line of credit open to a company they see as a bad credit risk is not a good thing.

And the liquidity and consuming power of the families who will now get a severance package is just awful for the state of Illinois and the communities in which these people live, I'm sure. 
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brettmcd
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« Reply #7 on: December 11, 2008, 01:44:08 AM »

Quote from: the Nightbreeze on December 11, 2008, 01:38:16 AM

Quote from: brettmcd on December 10, 2008, 11:10:43 PM

Quote from: Eduardo X on December 10, 2008, 10:56:46 PM

Hooray for BoA! They did a good thing here...

...under pressure and horrible publicity.

I dont see it as being a good thing, we are in this crisis because of loans being made to bad credit risks, so forcing a bank to keep a line of credit open to a company they see as a bad credit risk is not a good thing.

And the liquidity and consuming power of the families who will now get a severance package is just awful for the state of Illinois and the communities in which these people live, I'm sure. 

I think banks continuing to be pressured to make loans and extensions of credit to bad credit risks is worse.

And when the bank gets screwed and the company never pays back the line of credit that doesnt matter to you i guess.

Banks need to be allowed to make appropriate decisions on the creditworthiness of the entities they lend money to.   If a company is a bad credit risk to lend money to, that needs to be what the decision is made on.
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the Nightbreeze
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« Reply #8 on: December 11, 2008, 03:59:45 AM »

And where did you miss that this institution has given the borrower a line of credit in the past? 

If banks ought to be responsible in their lending, they came to it too late in this scenario, and only when it suited them.  I'd rather see the bank hurt than the families here.

This country isn't going to recover from this mess by banks holding back credit tightly from here on out.  Home Loans to people with no proof of income and poor credit histories?  Yeah, that shit banks can knock off immediately.  But revoking a line of credit that impacts a sizable community?  That's cutting the bank's own throat.   

If your next door neighbor is doing well and paying his taxes, just like you are, that's where the impact of society will be felt.  Your schools will be funded, your roads repair and public services will be funded. Your house value will be more stable and higher.  They have money to deposit in your precious banks and pay their mortgages, educational and car loans,  and keep your bank liquid.  They buy goods and servicces to maintain their home and automobiles.

But you're right.  Fuck upwardly mobile and secure families.  What could they possibly offer the economy?
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brettmcd
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« Reply #9 on: December 11, 2008, 04:56:48 AM »

Quote from: the Nightbreeze on December 11, 2008, 03:59:45 AM

And where did you miss that this institution has given the borrower a line of credit in the past? 

If banks ought to be responsible in their lending, they came to it too late in this scenario, and only when it suited them.  I'd rather see the bank hurt than the families here.

This country isn't going to recover from this mess by banks holding back credit tightly from here on out.  Home Loans to people with no proof of income and poor credit histories?  Yeah, that shit banks can knock off immediately.  But revoking a line of credit that impacts a sizable community?  That's cutting the bank's own throat.   

If your next door neighbor is doing well and paying his taxes, just like you are, that's where the impact of society will be felt.  Your schools will be funded, your roads repair and public services will be funded. Your house value will be more stable and higher.  They have money to deposit in your precious banks and pay their mortgages, educational and car loans,  and keep your bank liquid.  They buy goods and servicces to maintain their home and automobiles.

But you're right.  Fuck upwardly mobile and secure families.  What could they possibly offer the economy?


The company is going out of business, how the hell is continuing to extend credit to that company a good thing?   They show no ability to pay off more credit.   Lines of credit can be revoked at any time if there is a change in the creditworthiness of the company.   In the past the company wasnt going out of business, so what the bank extended to the company in the past means nothing.
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Blackadar
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« Reply #10 on: December 11, 2008, 12:40:22 PM »

Quote from: brettmcd on December 11, 2008, 04:56:48 AM

The company is going out of business, how the hell is continuing to extend credit to that company a good thing?   They show no ability to pay off more credit.   Lines of credit can be revoked at any time if there is a change in the creditworthiness of the company.   In the past the company wasnt going out of business, so what the bank extended to the company in the past means nothing.

And that they took public money intended to extend more credit (which they haven't done) means nothing?
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brettmcd
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« Reply #11 on: December 11, 2008, 01:26:41 PM »

Quote from: Blackadar on December 11, 2008, 12:40:22 PM

Quote from: brettmcd on December 11, 2008, 04:56:48 AM

The company is going out of business, how the hell is continuing to extend credit to that company a good thing?   They show no ability to pay off more credit.   Lines of credit can be revoked at any time if there is a change in the creditworthiness of the company.   In the past the company wasnt going out of business, so what the bank extended to the company in the past means nothing.

And that they took public money intended to extend more credit (which they haven't done) means nothing?

It means they shouldnt continue the mistakes that got us unto this mess, extending credit to bad credit risks.   It keeps coming back to that for me.
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Blackadar
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« Reply #12 on: December 11, 2008, 01:34:03 PM »

Quote from: brettmcd on December 11, 2008, 01:26:41 PM

Quote from: Blackadar on December 11, 2008, 12:40:22 PM

Quote from: brettmcd on December 11, 2008, 04:56:48 AM

The company is going out of business, how the hell is continuing to extend credit to that company a good thing?   They show no ability to pay off more credit.   Lines of credit can be revoked at any time if there is a change in the creditworthiness of the company.   In the past the company wasnt going out of business, so what the bank extended to the company in the past means nothing.

And that they took public money intended to extend more credit (which they haven't done) means nothing?

It means they shouldnt continue the mistakes that got us unto this mess, extending credit to bad credit risks.   It keeps coming back to that for me.

Do you know this was a bad credit risk?  Or are you just assuming it?

Also, if IL thought that BoA was being unfair, even if that way is legal (and perhaps prudent), why can't they use the bully pulpit and refuse to business with the BoA?  Isn't that their prerogative, much like it's the BoA's prerogative not to extend the LoC for Republic?

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brettmcd
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« Reply #13 on: December 11, 2008, 01:39:12 PM »

Quote from: Blackadar on December 11, 2008, 01:34:03 PM

Quote from: brettmcd on December 11, 2008, 01:26:41 PM

Quote from: Blackadar on December 11, 2008, 12:40:22 PM

Quote from: brettmcd on December 11, 2008, 04:56:48 AM

The company is going out of business, how the hell is continuing to extend credit to that company a good thing?   They show no ability to pay off more credit.   Lines of credit can be revoked at any time if there is a change in the creditworthiness of the company.   In the past the company wasnt going out of business, so what the bank extended to the company in the past means nothing.

And that they took public money intended to extend more credit (which they haven't done) means nothing?

It means they shouldnt continue the mistakes that got us unto this mess, extending credit to bad credit risks.   It keeps coming back to that for me.

Do you know this was a bad credit risk?  Or are you just assuming it?

Also, if IL thought that BoA was being unfair, even if that way is legal (and perhaps prudent), why can't they use the bully pulpit and refuse to business with the BoA?  Isn't that their prerogative, much like it's the BoA's prerogative not to extend the LoC for Republic?



The company is going out of business, that hardly makes them a AAA credit risk, and the bank considers them to be a bad credit risk or it would loan them the money.   Government can do whatever it wants, but I think this is a stupid use of the bully pulpit to try and force a company to give money to a company that it has determined is a bad credit risk.    The same bully pulpit was used to entice banks to give mortgages to people who shouldnt have gotten them, see all the good that has done us.
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the Nightbreeze
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« Reply #14 on: December 11, 2008, 03:19:04 PM »

One failed bank loan should not topple BoA.   It's not the slippery slope that you want it to be.  It's one loan, not thousands of them.

And the result is several households being better able to participate in the economy.

The more households we can get or keep participating the economy and paying taxes, the less all of our taxes will have to go up, the more jobs will remain to service the households and the produce the goods the residents consume.   The banks will get more deposits, too.  it will come back to them in the grand cycle.

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brettmcd
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« Reply #15 on: December 11, 2008, 04:18:46 PM »

Quote from: the Nightbreeze on December 11, 2008, 03:19:04 PM

One failed bank loan should not topple BoA.   It's not the slippery slope that you want it to be.  It's one loan, not thousands of them.

And the result is several households being better able to participate in the economy.

The more households we can get or keep participating the economy and paying taxes, the less all of our taxes will have to go up, the more jobs will remain to service the households and the produce the goods the residents consume.   The banks will get more deposits, too.  it will come back to them in the grand cycle.



Every bad credit risk could then use that argument and how could the bank refuse any loan without threats like this being something they have to worry about.   What makes this business more special then any other failing business that wants money from a bank?
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the Nightbreeze
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« Reply #16 on: December 11, 2008, 08:02:58 PM »

Not everything in life is a slippery slope.  Settle down.

And this Business already had a loan with this bank, which was revoked and then restored.  And then a whole other bank stepped in with even more credit.  Every business is a risk.  If you want to black and white every situation, how does any business get any credit anywhere? 

Something good happened here.  One loan to one business from one bank is not toppling everything.  Not every loan from here on out will fall out just like this one.  Until you accept that, I see no point in continuing this with you.
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