The mysterious banker who saved Western banks

E.R. RAMACHANDRAN writes: The meeting of the finance minsiters of G-7 with the CEOs of banks started off on a somber note with each FM wailing about how global finance had brought them to the brink of doom.

Ticker trails of nose-diving shares were flashing around the room spreading gloom. Haunting images of The Great Depression and mass suicides too were flashing in most minds in the room.

When they met after lunch, they had a surprise.

Instead of the routine lament they had a specialist who held out solution for the problem. The chairman’s intro was brief. The specialist was here at G-7’s request to suggest a sure-fire solution. He will take questions straightaway and work out solutions during the interactive session.

“Sir, I am Kenneth Lewis from Bank of America. How will you save our bank?”

“Simple. Change your name to ‘State Bank of America’. In fact I want all of you to change your name to ‘State Bank of England’, ‘State Bank of Japan’ etc. This will solve most of your problems.”

“What about smaller banks like ours, ‘Bank of Holland’ that are not in the same league as big ones. What should we do?” That was Garth Deur, the bank’s CEO.

“I was coming to that. ‘Bank of Holland’ should become, ‘Cooperative Bank of Holland’. Bank of Stratford-on –Avon can become ‘Cooperative Bank of ‘Stratford-on-Avon’ and so on. Loan applicants to these banks have to get recommendations from tahsildars or local MLAs when they apply for a loan. I will explain in detail when we reach that topic.”

“How do we select subprime clients before we give the loan, sir?’  Jamie Dimon from ‘State Bank of England’ queried.

“You won’t need to use that term any more. All are simply clients.  Your clients will have to fill this preliminary application in triplicate before being considered for grant of loan. Here, please distribute the cyclostyled forms all the way. Hope you all have the 9-page application form in front of you. The applicant will have to fill his full name, his father’s full name, place and date of birth of both. The address should be the village, hobli, taluk and district in that order. Hope you are with me so far?”

“Y-e-s.”

“Then, the applicant will have to give a brief description of his business, enterprise etc. using additional sheets wherever necessary. Copies of approvals from electricity boards, water supply departments, local municipal corporation and excise/sales tax departments have to be attached with the application. Future contingencies would need to be mentioned. For example, even if he is planning software exports now, he has to file approval from pollution control board, as what if he expands his business later to manufacture polystyrene material or naphtha? Better to be careful than be sorry later on. Any questions so far?”

“None. But when do we give him his loan?” asked Josef Akerman, CEO of Deutsche State Bank from Berlin.

“We don’t give him loan yet. He will send in a 21-page detailed application form with photocopies of all supportive documents, 3 copies of passport photograph (black & white) with signatures from two guarantors. Next, the loan department will call him for detailed discussions. Here he has to show he has 1:3, loan: loan repaying capacity, which makes him eligible for grant of loan.”

“What happens after that?”, asked an impatient US treasury secretary Henry Paulson Jr. whose utterances and moves are now watched with deeply furrowed eyebrows and his notes face thick red-pencil scrutiny.

“If he passes this test, we put him in fast track for loan dispersal after our officers visit the site, study the demand pattern etc. Fast track cases loans are given within 6 months, for others it may take a bit longer, 2 to 3 years,” concluded the expert.

“Could you give us some tips on operational aspects, sir’, asked the president and CEO of the Royal Bank of Canada, Gordon Nixon.

“Just a few. Ask loan applicants to send letters of recommendation of Senators, MPs so they could get on to fast track. Couple of times in a week, switch off electricity and computers and encourage manual Ledgers. This will help slow down the process but also save on electricity bills. Allow ‘Pen Down’ and ‘Go Slow’ strikes and coffee breaks to corner restaurants which build up teamwork. All these things help economy in the long run.”

At the end of the session there was a 3-minute standing ovation for the turnaround specialist.

The proposal of Finance Ministers was put to vote at G-7 Heads of Government the following week at Paris which was approved unanimously.

The next day the Wall Street Journal on page 24, column # 3 carried this ad:

“The ‘State Bank of America’ (SBA) invites applications for disbursal of loans from individuals, prospective Small Scale and Medium Scale companies. Preliminary applications for availing the loan which has to be submitted in triplicate are available in SBA offices around the country. Along with the Application form they have to send a processing fee of postal order of $99.50 within three days from the date of this advertisement”.

Other state banks and co-operative banks in France, England and Germany followed suit the next day.

The identity of the expert who ultimately revolutionized banking in western countries that brought the pink back to the cheeks of the banks, and black to their bottomlines, was not revealed to the international media.

Also read: How Indians would have saved Lehman Brothers