Silicon Valley Bank went under followed by Heritage, First Republic, and Credit Suisse. Each bank had a run on their deposits, and they were without the proper reserves to cover the requirements. So, they needed to liquidate assets in order to cover the payments however because of the rise in interest rates, the value of the assets decreased, and they were selling bonds at a deeply discounted price.
Bank closures often come the bogeyman in horror movies. You can hear the music in the background, but you’re not sure where he’s going to jump out from with the bloody axe. My first experience with the axe wielding bogeyman – let’s call him the bank regulator – came when the New York Stock Exchange halted trading on Bank New England stock shares. And I was working at Bank New England.
Welcome to Swimming in the Flood; a podcast where we develop the resilient leader’s mindset by navigating difficult currents in business. My name is Trent Theroux.
My dream job came to me directly out of college. I was going to foreclose mortgages for Bank New England! I can hear the excitement from you as well. It was a shock to me to learn in the newspaper that bank regulators were giving my employer two weeks to do something about the bank’s bad loans and it’s leverage. Truthfully, I didn’t understand at the time. I was more worried about would my paycheck bounce and going to see Total Recall at the movie theater.
My banking role was the final operation before a homeowner’s file was sent to our attorney for foreclosure. In many cases, I was ensuring that the bank had the proper paperwork to properly execute the foreclosure. In some cases, I was able to collect all the past due monies owed, plus interest and fees to take someone off the process. With thirty years of hindsight, by the time the homeowner got to me, they were ready to let the house be taken.
You should know that I was incentivized to move homeowners out of my station by either paying their balance or being foreclosed. We talked about this in a prior podcast about incentives. Today I want to talk the collections and foreclosure methods I used to achieve my goals.
The homeowners were more than 150 days past due by the time they got to my desk. As I said, they were already out the door. My first action was to give them a final chance to pay. I called this gentleman who owned a house in Stamford, Connecticut and left a message stating that he owed thousands of dollars, and the house would be put up for foreclosure unless we received payment in full within two weeks. The next morning, I received a call back from the gentleman and he was a nice gentleman. Let’s call him Serge. Serge and I struck up a conversation and he told me about his restaurant in Manhattan, its issues and how he expected to get the money in two weeks.
Two weeks later, there was no payment and I called Serge again. Good news, Serge’s investor was ready to make his commitment and the money should clear in about a week and a half and we would be paid. Well, an extra 10 days didn’t hurt much. Serge just needed a little extra time. I called Serge back after two more weeks. This time Serge started crying. The investor was waiting until the board of health gave the final inspection. It shouldn’t be more than a week.
My magic mirror shows me that you are doing the math two weeks, plus two weeks, plus two weeks, plus one week is almost an extra two months. I was learning quickly that my role was being undermined. On our next phone call, Serge told me that he didn’t have these investor problems when he was running Studio 54. Excuse me? Studio 54 as in Studio 54 noted for its celebrity guest lists, restrictive and subjective entry policies, extravagant events, rampant drug use, and open sexual activity? Yes, that one. Well, that piqued my interest and over the next few months Serge told me tales about different celebrities that would come to party and how he was stashing $100 bills into the ceiling.
It wasn’t until I thought about the $100 bills in the ceiling and concluded, why don’t you use some of those to pay your mortgage? Of course, he was telling me tall tales. My threats of foreclosure were hollow to him, and he enjoyed six months of free living because of my weakness.
I am now going to give you my unscientific, non-peer reviewed, resilient leader theory on Setting deadlines. Are you ready? Got your pencils out? Here’s it is. No Empty Threats. You heard it. No Empty Threats.
The United States Marine Corps has four weapon safety rules. Number two on the list is “Never point a weapon at anything you do not intend to shoot.” The M16 rifle is a dangerous and lethal device, and its use should be clearly intentional. That’s the intent of the safety role. Point your weapon only when you are ready to shoot.
The same advice can be given about ultimatums and deadlines. Failure on both should have consequences. Therefore, we should consider limiting the number of times we issue ultimatums. By drawing a line in the sand we are setting a clear demarcation that if someone chooses to cross the line we will respond with negative consequences. Negotiations have a more positive, profound, and lasting effect on relationships and building trust.
My job had clear expectations – collect money or kick them out. To do my job I needed to draw my weapon regularly. Serge taught me a valuable lesson. If the “or else” in your ultimatum is weak, or you’re weak, people will not respect the choice. I needed to be prepared to fire.
A few months later, I came across a man from Old Lyme, Connecticut. Let’s call him Hank. Hank was none too happy that I was giving him two weeks to pay off his balance before the foreclosure process would start. Hank started swearing that the first person that stepped foot in his yard would be shot without asking questions. By the way, this is decades before the term “active shooter” entered our lexicon. He was making a threat, but it wasn’t directed at me.
Two weeks later, I called Hank and told him that he needed to pay today or I would start the foreclosure process. That’s when he started swearing at me. Verbally attacking me. Calling me MoFo this and MoFo that. Making comments about my family and the like. I tried to keep my cool, but this call really rattled me.
Earlier in the year, our bank acquired Connecticut Bank and Trust and I wondered if Hank was a customer. Sure enough he was. Hank owed us just over $18,000. Lo and behold Hank’s bank account had just under $20,000 in cash. I left my desk and walked over to the transfer department, filled out the appropriate form and submitted my request. The following day, I received notification that Hank’s balance was paid in full, and I smiled. Then, I called Hank. “Hank, I just wanted to thank you for paying your balance in full.” Hank was clearly confused. “Yes, Hank. Your outstanding balance is paid in full. I took the money out of your bank account. You can go down to your branch today to verify.” Hank started garbling some of his words before I said, “Hey Hank, who’s the MoFo now!”
No empty threats. I told him what was coming, and I executed. I am not a particular fan of ultimatums, but in this case I was pretty satisfied with the result.
Friends, I’ve used some salty language on the golf course in my lifetime, but I never heard of most of the ways he wanted to sodomize me after I fleeced his bank account.
Folks, thank you for listening to Swimming in the Flood. Resilient leaders face challenging currents, and it is tough navigating, but with one tack or another we can get there together.