Invictus: Real Leadership, Real Management

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This week we’ll be exploring the theme that business is inherently personal, and that we’ve forgotten that fact to our detriment.

Last weekend I saw the movie Invictus, Clint Eastwood’s latest, about the early days of Nelson Mandela’s presidency in South Africa. It stars Morgan Freeman (of course) as Mandela, and Matt Damon, as captain of the hapless rugby Springboks, South Africa’s version of the Chicago Cubs.

Mandela knew that the Springboks were as hated by the black population as they were beloved by the Afrikaaner whites. His insight was to see the power of reconciliation that could be achieved if the team were to pull off the equivalent of the 1980 US Olympic hockey team’s victory.

The movie reviews are mostly positive; even the critical ones suggest that Eastwood got the critical story right. And the true story itself is so enormous that it needs no embellishment. For my part, Eastwood has rounded the sharp edges over the years, and increased the role of heart. For me, he has earned the right (since as far back as The Good, the Bad and the Ugly et al) to jerk my heart around pretty much as he wishes.

But this is a business blog, not a movie blog.

The Best Way to Lead, and the Best Way to Manage

We meet Mandela just after he has been elected president, after nearly 30 years in prison. His power lies in the overwhelming respect he merits by forgiving all those who imprisoned him.

In his first meeting with the Matt Damon character, Pinnear, Mandela asks him a question: How do you lead? Pinnear’s answer is clear, and Mandela delightedly agrees with him.

The best way to lead is to lead by example.

Mandela leads by refusing to fire the white former security officers, thus personally demonstrating reconciliation of the highest order on Day One of his administration.

The second question Mandela poses is, what is the best way to manage? And his answer is equally clear.

The best way to manage is through inspiration. And the best way to inspire is to demand of others things they cannot themselves conceive of accomplishing.

As Pinnear’s wife asks him how the meeting went, it dawns on Pinnear that Mandela has just acted on those two questions–by asking him to lead the hapless Springboks to (gasp) the World Cup championship, a goal he himself could hardly conceive of.

Leadership and Management: Whatever Happened to Role-modeling and Inspiration?

It was only 15 years ago that Collins and Poras conceived of BHAGs–Big, Hairy, Audacious Goals.

It was 21 years ago that C.K. Prahalad suggested that Strategic Intent–basically a "stretch" view based on direction, discovery and destiny–should inform strategy.

Warren Bennis has been preaching for many decades now the importance of role-modeling.

Yet what do we have these days?

  • Chuck Prince, former CEO of Citibank, says "As long as the music’s playing, you’ve got to get up and dance." Role-modeling? I don’t think so.
  • The image that remains today from "Shoeless" Joe Jackson’s 1919 conspiracy to fix the World Series is that of a kid saying, "Say it ain’t so, Joe!" In other words, dismay at the betrayal of a role-model. The fallout from today’s flame-out by Tiger Woods is discussed more in terms of brand image than of leadership.
  • The dialogue these days about the financial meltdown is centering on compensation incentives and structural reform. Management by inspiration? Not in evidence lately.

 

The point is not whether scientific management doesn’t have its place; surely it does. But that place has been overdone to the detriment of both leadership and management.

This is not some untested thesis. Mandela accomplished some remarkable things by applying these human principles to an "organization" of some 50 million people, and to problems as intractable as racism. Makes Citibank look like a walk in the park.

Whether you liked the movie or not, Clint Eastwood is channeling a message for our times.

When a Win-Win…Is Not

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Special thanks to Noelle who participated in a Being a Trusted Advisor program Charlie and I led recently. Noelle told a similar story in class that was the inspiration for this post.

I had an experience with US Airways recently that shed light on the difference between what I’ll call a Sears Win-Win* and a Real Win-Win. In short, the difference boils down to incentives.

The Story of an On-Time Departure

It seems that US Airways is placing a lot of emphasis on on-time departures these days.  Works for me! As I was getting settled on a recent flight, I noticed that the flight attendant working my section was particularly smiley and up-beat, urging everyone to get buckled up and ready to go in a most effervescent way.

I acknowledged her demeanor as she paused near my row. "We’re working hard for an on-time departure today and it looks like we’re going to make it!" she beamed.

"Wow," I said, a bit taken aback by the commitment and the positivity.

Then she added, "And there’s $50 in it for me if we leave the gate on time!"

(Apparently, US Airways implemented a new program in 2009 where employees below the director level can earn up to $150 per month in incentive pay when they achieve top-three rankings for on-time performance, mishandled baggage reports or customer complaint numbers.)

"Oh," I said.

And then we left on time…and arrived on time.

Why Motives Matter

On the surface, this sure looks like a win-win: I won because we left and arrived on time; the flight attendant won because she got her bonus. The corporate incentive program worked! Or did it?

I say it didn’t. Not really. It clearly achieved a desirable result (me arriving on time). And that result came with–what’s the word I’m looking for–baggage (me feeling like chopped liver). Which is why I call this a Sears Win-Win, not a Real Win-Win. If we look throught the lens of the Trust Equation, my friendly flight attendant’s Self Orientation was sky high. And therein lies the problem: the source of her interest was her own benefit, not mine.

How Do We Make the Ending Happy?

Here are some conclusions I draw from this story:

  • Incentives are great. And they’re not enough
  • When one or more parties in a business transaction leaves that transaction without feeling cared about, it’s a loss, not a win.
  • Motives aren’t only spoken; they’re exuded
  • Real Win-Win’s are motivated by caring, not by numbers.

Which begs the question, how do you incent–and incite–someone to care?

Any answers out there?

*Reference courtesy of Frank Zappa

Blame is Captivity, Responsibility is Freedom

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This week we will be exploring a theme: that business is both scientific and human, but that it has become far too much the former, and far too little the latter. We began it yesterday by pointing out Martin Luther King’s profound focus on relationship to others.

The title of this blogpost is a quote from Phil McGee, who writes his own intensely autobiographical blog, MyTruthSite.com. It’s one of his meatier nuggets, and I had occasion to use it last week.

I met with an acquaintance–Susan–who is in the middle of a large and complex initiative, putting together a consortium of independent players. The group is long on vision and expertise, but short on tactical how-to and make-it-happen ability. That’s where she comes in.

As we talked, she told me of her concerns about roles, timing and execution. We’d had this conversation before. She is probably about 90% right about it all, but has become frustrated with her inability to generate movement. "It’s like pushing on a string," she said, and she’s not wrong. Meanwhile, she was feeling unappreciated, unheard and unhappy.

What Problem Are We Trying to Solve?

But this time, as we talked, another level of the issue became clear to us both. No one was going to do what Susan was suggesting needed doing. No one, that is, except her. In fact, probably no one else could do it–only she had the skills and perspective to make it happen.

We reframed the question from "how to get others to do…" to why she shouldn’t do it herself. I asked her just that: what are you afraid of? She is honest and reasonably self-aware. She reflected just a moment and said, "I guess I’m afraid it might not work, and others would blame me."

"And?" I asked. She answered the question. "I guess there are no guarantees, and someone has to own the risk. And if others blame me–well, if I have involved them along the way, then I guess I can live with that. Blame would be their problem, I don’t need to own it." Case closed.

Blame and Freedom

Susan had been blaming others for the team’s inaction. That had deflected her attention from being responsible for her own contribution. Once she stopped blaming and took responsibility, she freed herself–from the fear of other-imposed guilt. In retrospect, Susan herself held the keys. She and only she could stop the cycle, and could do so just by assuming  her part in the whole drama.

Blame is captivity, responsibility is freedom. Susan freed herself, and she didn’t do it with processes or incentives, rules or regulations. She did it by identifying what she was and was not responsible for. That’s pretty personal stuff.  But as McGee says, most of business is just personal.

Trust and Martin Luther King Day

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Today is Martin Luther King Day, a United States holiday.

Much has been written about the holiday, and about King. I won’t attempt to add much, other than to highligh one quote from this complex man.

"Life’s most persistent question is, what are you doing for others?"

If there’s any one thing that predominantly accounts for low trust these days–particularly in business–it is the sense that everyone is in it for himself. This view has even been glorified in business in recent years. An ethicist recently commented to me that he was shocked at the recent bitterness of some in the financial professions. "They don’t even apologize for selfishness anymore," he said; "they feel it’s legitmate."

Trust is by nature a relationship. Part of that relationship is willingness to be of service to others. King’s quote also speaks to relationship: it’s as timely today as it ever was.

That’s what I’ll be thinking about today.

 

 

 

The Vocabulary of Trust on Twitter

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iStock Texting in meetingTrying to define the word “trust” is a bit like defining obscenity. As former Chief Justice Potter Stewart said about the latter, you can’t define it, but you know it when you see it.

My favorite example of this is, “I trust my dog with my life—but not with my ham sandwich.” It’s a joke we all get; but it does wreak havoc with a straightforward definition of the word.

To put it another way, the meaning of the word is contextual.  A dictionary is not a book of symbolic logic; it is an anthropological document. It tracks how real people in the real world use real words.  And the more contextual the word’s meaning, the more we have to rely on straightforward anthropology.

One of the real worlds of today is Twitter land. For about two months now, I have been tracking the use of the word "trust" as it is used in various conversations on twitter. It is interesting to see how the language used by real people and unconscious conversation tracks very neatly with the usages of "trust" identified previously in articles and blog posts on this website.

The Several Meanings of "Trust"

I have suggested elsewhere that we sometimes talk about trusting, and other times we talk about being trusted, or trustworthy. There are other times when we talk about trust per se, meaning the state that exists on both trusting and being trusted are present. Following are some examples of each (typos left in for authenticity).

Examples of trust meaning "trusting"

  • what i learn from @utterperfect : Never trust anyone a 100%. You’ll never know what the people around you are capable off.
  • Posted my favorite butternut squash ravioli recipe. Trust me, it’s worth the effort.
  • Better of with just friends with benefits. Bc I don’t trust no1 anymore!
  • @Antoniogreen Yeah I trust in God & I’m not scared to die, I’m just scared to die in pain you know.
  • damn. people suck. no wonder its hard for me to trust people. Now i can’t tell if there telling the truth or not.
  • i have trust issues
  • Preview: Luke 17:3-4; When I have forgiven I will trust ..
  • Have Rules But Trust People you can’t have a rule for every situation.

Examples of trust meaning “trustworthiness”

  • RT @amlibraries: Top 100 health websites you can trust
  • @craigbutcher @paulums never trust french hosting
  • @NICELOOKNINA girl never trust annnyone who’s nice to everyone.
  • @sydsouthworth The externals work great for storage just don’t trust it only. Use other media as well like DVDs
  • Some trust in silver and some in gold some in chariots and horses but ill put my trust in the LORD for in HIM is safety and security.
  • @Mister_Magister Did I or did I not make you tofu you actually liked? Always trust a foodie 😀
  • Never trust anybody who says ‘trust me.’ Except just this once, of course. – from Steel Beach
  • @BillyTheBrime Trust me, I’m an expert ma’am.
  • And it backs up my view that you should never trust the moral right;)
  • Ok, we’ve had booby-trapped shoes and undies. Which piece of clothing will imperil lives next? I don’t trust cufflinks.
  • "Man made alcohol, God mad marijuana, who do you trust?"

Examples of trust meaning “a state of trust”

  • Talk it out. Come to a compromise. Don’t just keep someone around and then cheat on them. You risk your reputation as a person. No trust.
  • RT @DIJONES82: In my world trust is more important than love.
  • Another thing lacking in the Black American relationship is communication which breeds trust
  • Sugar Mtns 7 brand tenets: Trust, Clarity, Experimental, Intelligent, Remarkable, Consistently Good, Full Flavored.
  • It takes years to earn trust, and just moments to break it.
  • Is trust as important as commitment in marriage? After all, marriage is a covenant, right?

What Meaning do Trust Measures Assume?

When you think about trust patterns or read statistics about trust, ask yourself: what meaning is being measured?

• Is it the trustworthiness of someone or some institution? (Typical question: how much do you trust banks to do the right thing?)
• Is it the ability of someone to trust? (Typical question: do you think people are generally trustworthy?)
• Is it the state of trust in general? (Typical question: Is this a high-trust environment around here?)

Are you measuring changes over time (longitudinal)? Or are you thinking of contrasting levels (used car dealers vs. lawyers vs. nurses)?

Patterns of Trust on Twitter

I have not yet systematically analyzed the data, but I can make a couple of generalizations.

  • The word "trust" gets used very frequently; at 11PM (US EST) on a weeknight, about 100 tweets every 7 minutes employ the English word “trust.”
  • On Twitter, as compared to business, the meaning “trusting” is probably more common, and the meaning “trustworthiness” is probably less common.
  • The most common usage is probably the imperative “trust me,” closely followed by the imperative “don’t trust ___.”
  • There is an emerging meaning: the word by itself, as in “it’ll all work out: trust,” or “keep the faith, baby: trust.” It has a combined sense of “trust me” and “don’t worry.”

 

Making a Referral By Transferring Trust

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I provide a lot of referrals to clients and colleagues and have built my own business development and executive coaching business through referrals from others to me. What makes those referrals so powerful?

Here’s an example of a referral I made. A few years ago, in my in-house legal role, I had a working relationship with a lawyer I liked and trusted. I introduced that lawyer to a colleague in another company who I thought could benefit from working with this lawyer as well. As a result of my introduction, the colleague retained the lawyer, and that relationship is still going strong after several years.

The Trust Transfer Process

Referring someone we know to another person we know happens all the time. On the personal side, think blind dates or babysitters or doctors. It’s part of the networking process. What makes it work? Something I call “Transferred Trust.” The Trust Equation gives us the formula to enhance our own trustworthiness. But what happens when we make or receive a referral? How do we transfer that trust to another, and if we’re on the receiving end, for what do we look or listen?

Here are the steps from my example, simplified:

  1. I trust a lawyer.
  2. I have a colleague who trusts me.
  3. My colleague needs a lawyer.
  4. I describe the lawyer I trust to my colleague, and shared why I trusted him and made the referral.
  5. My colleague trusts the lawyer I trust, enough to engage him based on my introduction.

Trust Transfer and the Trust Equation

Let’s dissect this referral in terms of the Trust Equation (from The Trusted Advisor by Charles H. Green, David H. Maister, and Robert M. Galford, Free Press, 2000):

Trustworthiness = Credibility + Reliability + Intimacy
Self-Orientation

The quality and degree of trust transferred will directly depend on:

  • The depth of the referrer’s trustworthiness
  • The trustworthiness factors shared with the person receiving the referral

If I shared that the lawyer always got back to me quickly, I transferred reliability. If I gave an example of how the lawyer showed that he cared more about doing the right thing for me as his client than getting more work for himself, I transferred that he had low self orientation. If I described something the lawyer did that helped my company save money and time, I transferred credibility.

And while it’s up to the referrer to transfer trustworthiness, it’s up to the person referred to retain that trustworthiness through his/her own interactions.

How Transparency Works with Referrals

Be careful. You put your own trustworthiness on the line when you transfer trust. How often do we get referrals with transferred trust and are disappointed? If you think there is a good match, but you don’t know much about the person you are referring, be sure to be transparent. It’s ok to say “I know this person to be honest and forthright, and she’s really smart but I’ve never worked with her, so you’ll probably want to talk to her yourself.”

This models transparency, together with low self-orientation, while transferring some intimacy (safety) and some general credibility.

Try this out yourself in a business or social setting. Think of how you refer doctors or contractors, business colleagues and professionals. Pay attention to both referrals shared with you, and to those you give. And practice transferring trust.

Wall Street, We Have a (Simple) Problem

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Let’s keep it simple.

The first step toward dealing with a problem is admitting you have a problem.

I try to stay away from politics in this blog. But I know something about business, trust and society. And when issues of business trust arise, they need to be written about. 

The fact that some might view this as “political” is a deplorable bit of collateral damage brought about in great part by those who have abused business and trust in the first place.

So much has been written about the problem with our financial sector that it’s easy to become numbed. So let’s keep it very, very simple.

Does the financial sector “get it?” Never mind the suggestion of the President of the United States that they don’t. How about financial eminence grise Paul Volcker?

Here’s what Volcker had to say about excessive compensation at a high level bankers’ conference:

“Has there been one financial leader to say this is really excessive? Wake up, gentlemen. Your response, I can only say, has been inadequate.”

Translation: too many don’t get it. 

Again, let’s keep it simple. The financial sector has grown, grown and grown in recent years. First, some perspective on profit and compensation growth from the IMF’s former chief economist:

From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

Then, some perspective on the financial sector as a percentage of GDP from Nobel-prize-winning economist Paul Krugman: 

Even during the “go-go years,” the bull market of the 1960s, finance and insurance together accounted for less than 4 percent of G.D.P. The relative unimportance of finance was reflected in the list of stocks making up the Dow Jones Industrial Average, which until 1982 contained not a single financial company…

On the eve of the current crisis, finance and insurance accounted for 8 percent of G.D.P., more than twice their share in the 1960s. By early last year, the Dow contained five financial companies — giants like A.I.G., Citigroup and Bank of America.

Some say these data don’t account for the relative importance and innovation created by the financial sector. 

Here’s what Paul Volcker had to say about such claims:

[Volcker] said that financial services in the United States had increased its share of value added from 2 per cent to 6.5 per cent, but he asked: “Is that a reflection of your financial innovation, or just a reflection of what you’re paid?”

[a clearly irritated Mr Volcker said that] the biggest innovation in the industry over the past 20 years had been the cash machine…“I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth — one shred of evidence.”

Let’s keep it simple. Forget the mind-numbing details of what Warren Buffet called “financial weapons of mass destruction.”  There are some simple facts we need to remember.

This is a legitimate social question: not just a business question, and surely not just a political question. The financial sector has gotten too big. It pays itself too much. There are plenty of fine people in the industry, and I’ve had the privilege of working with many; but on balance, perhaps not enough.

Too much of the sector is built and managed on the basis of financial returns only, and on the short-term rather than the long-term. It is not—on balance—an industry being run for the betterment of society. The social benefits of globalized, digitized, productized, market-driven structures have been overwhelmed by the social costs of illiquidity (aka credit freeze), risk protection (aka bailout), opportunity cost (aka our best and brightest designing nano-second trading models) and social misery (aka unemployment).

A critical sector of the economy has become–on balance–systemically untrustworthy, and therefore unworthy of being trusted. Sellers’ needs are vastly over-emphasized relative to customers’ needs. On balance, the sector has come to equate ethical behavior with the absence of legally prohibited activity, and to do so unconsciously.

Society has a right to demand that its business sector conduct itself in ways that are constructive for society as a whole, not just for shareholders and management. That right supersedes any “right” of corporate entities and their management to do what they want according to some gross misreading of Adam Smith. 

Let’s keep it simple. Wall Street, we have a (simple) problem.

January Carnival of Trust is Up

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The Carnival of Trust this month is ably hosted by Jon Ingham, world traveler HR capital expert who hosts the blog Social Advantage from his perch in the UK.  And Jon has produced a delightful Carnival for you.

Jon has done the heavy lifting for you, so you can read highly concentrated doses of the best (that is, from Jon’s perspective) of the last month’s postings broadly related to trust.  Jon’s perspective inevitably colors the choices, which is exactly what we want from Carnival of Trust hosts; his viewpoint is that of human relationships.

Some of the goodies he’s served up for you include:

  • The emerging Trust Economy;
  • Whether it’s ethical to tweet workshop content;
  • Should you give trust, or should others earn it;
  • Three easy steps to losing trust.

And more.  All with Jon’s trenchant commentary.

Go ahead, treat yourself to some fine reading at the Carnival of Trust.  It’ll lower your cholesterol. (Well, it’ll do your heart good anyway).

Thanks again to Jon Ingham for hosting.

 

 

Grounded Corporate Culture vs. Up In The Air Management

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Over the holiday weekend we gorged on movies; Sherlock Holmes, Broken Embraces, a few others. One that got decidedly mixed reviews was Up In the Air. Personally, I liked it. The New Yorker explains it very well.

But you don’t have to agree with me for us to use the metaphor. George Clooney plays a globe-trotting firer-for-hire; an outsider hired by management to terminate people at arm’s length. (Never mind such jobs basically don’t exist, this is Hollywood). 

On a dozen levels, the movie deals with the issue of intimacy in business. Firing people by proxy; quitting a job by texting; romance in the friendly skies—or is it romance? And throughout it all, can we tell the difference?

Intimacy in Business

Also over the weekend, I had a cuppa with a client, a partner at a large global professional services firm. Call him Ishmael.

We talked about his business and mine, mine consisting in part of selling to his. Like many large firms, his has cut back virtually 100% on internal travel. 

Ishmael: A global business of collegial professionals can exist for a year without mixing with your partners. Maybe even a little longer. But at some point it begins to exact a toll. We’ve been webinared to death.   Worse, we only have two-dimensional, sensory-deprived images of each other. 

There’s only so much you can do to maintain a connection without the physical, breathing presence of each other. Avatars and holograms and con-calls don’t do it. Cultures don’t live by cloud-computing alone. To make a firm, you’ve got to drink beer together, play golf together, smell each other, laugh and cry in the same room at the same time. 

Is that a real poncho, or is that a Sears poncho? (Frank Zappa)

Up in the Air Management

What I liked about the movie was that the Clooney character actually does have the ability to be real: he shows it in a scene where he cuts through the cynical hatred of a terminated employee (the talented J.K. Simmons) to jarringly put him back in touch with his youthful dreams. And yet Clooney’s character is so practiced in the Plastic Ways that he ultimately can’t recognize when he’s lost touch with that ability.

The best movies are metaphors for life. There’s fodder enough here to rail against the twittering, ADD-ridden, thumb-dancing toys that threaten to reduce our attention to a tiny screen. But that’s not all.

Those new technologies are also metaphors in addition to being virtual reality centers. They are metaphors for other forms of anti-intimacy management tools–blind auctions; outsourcing; management by process; modular design; over-use of legal agreements; online employment search.

There’s nothing wrong per se with any of these tools. But taken uncritically, and at too great a strength, you end up with Clooney in the skies, aiming at what you think is real, but which ends up being just a pale reflection.  

…like a Sale sign in the window; you go in, and find it is only the sign that is for sale. (Soren Kierkegaard)

And You Thought The Purpose of a Bank Was to Make Loans?

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I’m no economist or banker, so I occasionally labor under the delusion that banks are supposed to lend money to credit-worthy people. Of course, they diluted the definition of "credit-worthy" a few years back. That ruined their liquidity. Then the Feds stepped in with the Troubled Asset Relief Program.

Silly me, I had also thought TARP was partly aimed at restoring banks’ ability to lend money again.

Read the following (real) tale of woe from a qualified would-be borrower–let’s call her Jane–and ask yourself why Wells-Fargo would be so hesitant to lend.

For a clue, look to the end of Jane’s tale.
———

Jane’s Tale: If I Can’t Get a Mortgage, Who Can?

Last spring my sister and I decided to build an addition onto our vacation home in Northern Minnesota. Given today’s economic climate, we knew it wouldn’t be a cakewalk but we had no idea what a nightmare lay ahead.

Our family has owned lakefront property on Lake Superior since 1971. It’s prime vacation area with large million-dollar+ homes built on either side. Our parents deeded us the property 20 years ago, mortgage already paid off. After our mother died last year, we decided to build an addition. We hired an architect and a contractor with a long and credible reputation and a crew ready for work. We looked for a bank that would provide a construction loan for $250,000, for conversion to a mortgage when construction was completed. We went with Wells Fargo in Duluth. Their banker told us a loan was possible, but we’d need to open a business account first. My sister deposited $30,000.

Two weeks later, I was in the bank’s mortgage department armed with my loan application and identification; 2007 and 2008 tax returns; pay stubs; bank statements; property tax and home insurance records on this and my primary residence. He soon persuaded us to quit claim the LLC. I would become the sole applicant for the loan because I was an “ideal customer.”

Here’s my profile:

  • My income is in the top 10% of U.S. households; I’ve been a senior executive for ten years with an international NGO;
  • I own a car and home in the NYC area and paid off my mortgage in 2001;
  • I have one child in college and another who has graduated and is self-supporting;
  • I have two credit cards which I pay in full every month, my credit score is 775;
  • I have liquid assets worth more than the value of the loan; my retirement account is substantial but not lavish after the 2009 freefall;
  • The title search is clear and the appraisal of the lakefront property is $520,000.

The bank then required me to close the business account and open a personal account. I transferred the $30,000 and added $5,000 for good measure. I requested and got written permission for an “early start” on the construction because we needed to get the foundation poured before the Minnesota winter set in. For the next two months I endured slow torture at the hands of Wells Fargo and their big, bad “underwriter.” They peppered me with dozens of demands for information and ridiculous questions (Q:“Where did the $30,000 deposit come from?” A: “From the Wells Fargo business account you required me to open and then close.”). I was asked to fax my driver’s license four more times and to disclose the terms of liquidating my 403B.

When I was asked to explain why I made a late payment on my VISA bill in February of 2002 (7 ½ years ago!) I blew my top. For seven long weeks I was told that if I just met a few more conditions we could go to closing. These requests came from various Wells Fargo offices around the country – and were often redundant. When I asked to speak with the underwriter directly I was ignored.

Meanwhile, we were continuing to pay cash to our contractor so that our beautiful house could go up before winter. I reminded the banker that every delay in closing meant that I would be borrowing less money and they would earn less interest. Did they want to make a deal or not? We set a closing date of October 16. Ten days before, I had a conference call with the mortgage banker in Duluth and the Senior Relationship Manager in Minneapolis. I reminded them that I was flying out to Minnesota so they needed to tell me exactly what I should bring with me for the closing. The answer was “only your driver’s license.”

On October 15, hours before I was to board my flight for the scheduled closing, I was presented with several more conditions that had to be met (Q: “Could I explain the large deposits made into my Citibank account in the last month?” A: “You’ve seen my paystubs; that is my income.”) and then “we should be able to close in five days.” The banker’s e-mail said, “I imagine having been run through the gauntlet…that it is doubly frustrating to have to provide so much detail when you are clearly the kind of borrower any bank should love to have.”

At that point I realized I was never going to get a loan from the mortgage giant Wells Fargo, nor are they seeking ideal customers who pay their loans. Happily, our architect is talented and trustworthy and our contractor is honest and hard-working. Those business relationships have been highly professional and free of impediments. We can finance our second home without paying Wells Fargo $50,000 for the privilege of lending us money. But IF I CAN’T GET A MORTGAGE, WHO CAN?

No wonder we have a credit crisis in this country!

 

———

 

Wonder why Wells-Fargo was so unwilling to lend, and unwilling to talk about it? Here’s a clue.

It was announced a couple days ago that Wells Fargo bought its way out of TARP, including its restrictions on executive pay, etc. To get there, as I understand it, they had to restore their loan-to-capital ratio. One way to do that is raise more capital; another is to make fewer loans.

Draw your own conclusions, and share them here.