Crunching Consumer Credit

Tuesday Shaun Hayes, who is stepping down as president of Missouri Operations for National City Bank, spoke at an RCGA breakfast. I've known Shaun a bunch of years and he was, as usual, very funny in a self-deprecating way and very insightful. He was also very concerned about the continuing effects of a consumer-based economy.

Shaun grew up in Thayer Missouri, a town of about 2,000 people south of Rolla on Route 63. He told the crowd that he comes from a family of entrepreneurs and attorneys. He started what became Allegiant bank with about $300,000 and several million dollars raised from 82 investors. The bank sold for half-a-billion dollars and assumption of its debt. Yesterday he talked candidly about what he did right and what he did wrong in that business.

He has always been an enthusiastic entrpreneur. It's what you would expect from a guy who earned $20,000 a year while in College running a fireworks stand for six weeks a year, then turned around and loaned the money (at interest) to his fraternity brothers.

But for someone who's made a lot of money he's also always shown deep respect for the people who work for him and those who have less than he has. He's worried about Americans spending more than they make. Shaun's the small town guy who recently told me that the television sets in his house come from unclaimed inventory in his sister's pawn shop in Nashville, which he buys from her for his family and friends (a story he didn't share with the audience Tuesday).

Shaun said that it is unconscionable that even the educated people in the room to whom he was speaking couldn't understand (and wouldn't read if they could) the pages of mumbo jumbo in their mortgage documents. He said that those who were practicing predatory tactics on the undereducated and poor should be prosecuted.

A Congressional staffer who was in the room somewhat antagonistically asked what it was that Shaun would require regulators to put in place. Shaun replied that the basic terms of every loan agreement should be spelled out in plain English on a single sheet of paper.

He said that the shareholders of Fannie Mae and Freddie Mac (not the bondholders) should lose all the value of their stock, and that those institutions should start over.

He stated that at some point in the not-too-distant future the consumer debt that this country has amassed is going to come home to roost when other countries that have fronted the money begin to call in their markers.

There's a great series in The Beacon website on "Facing the Mortgage Crisis" which deals with not only mortgage issues but with the overall consequences of consumerism versus saving.

The series mentions a blog which is worth taking a look at: "I've Paid for this Twice Already." "Paidtwice", is a 30-something married mom of two who writes that she has "a PhD in Genetics that sits in my closet and a 3rd degree blackbelt in taekwondo. What else could you want out of life? Maybe peace of mind. We owe lots of $$ and we’re getting out of debt a penny (or sometimes a dollar) at a time."

Her very-literate blog chronicles the things she is doing to reduce her family's debt, and the sense of empowerment that it provides.