A Moment in Bank History: Luck Can Help!
Managing Loans in a Down Market
Gene Ret writes:
It was July 1990. Iraq invaded Kuwait, causing oil prices to plummet. The Dow Jones Industrials dropped 18 percent in three months, starting a recession that lasted almost a year.
I was Division Executive of Broker Dealer Operations supporting the Wall Street Lending Group. The whipsaw market fluctuations required that we develop a strategy to ensure that our loans were completely collateralized.
This required that we make intra-day margin calls when required. Since value pricing of each security supporting loans was performed nightly, we decided to assess the intra-day need for additional collateral by decreasing the collateral value supporting loans by the percentage decrease of the Dow and request additional collateral as needed. This caused considerable angst in the Broker Dealer community that we were serving.
Jointly with the Wall Street Lending Group, we began meeting with the Brokers to explain our need to properly credit risk management the loan portfolios. At one particular meeting with one of our largest accounts, I noticed pinned to the wall a list of all the credit/lending lines that Broker had with all of its banks and the outstanding loan balances. This information was invaluable in assessing the total credit worthiness and our desired risk exposure for the client.
I feverishly wrote down all the data. The Wall Street Lending Executive Demetri Comnas was thrilled and surprised that we were able to obtain this information. Right place – right time.
A New Series
Do you have a story about something you did at Chase (or Chemical, Manufacturers Hanover or the other heritage banks) that helped change the way business was -- and is -- done? Do you want that bit of bank history preserved? Contact Andrea Axelrod at news@chasealum.org.
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