Lately it can be outright dangerous to mention at a cocktail party that you are in banking. Having spent over 15 years as a bank employee or independent contractor to banks, I can say there was a time when people respected bankers. That isn’t the case now, or at least not in my circles.
(Disclosure: I no longer consider myself a banker even though I work with them every day. Since I am a self-employed small business person who provides help to businesses that need to obtain help from banks, I can say I wear the white hat. It is a convenience I enjoy. I can also say that during my banking career, I would have never had to answer yes to any of the questions I pose below.)
The reality is, of the 8,000 or so banks in the
Since it is hard to separate the good guys from the bad ones, I am going to provide a cheat sheet to use when judging if a banker wears a white or black hat.
First, the common definition of a community bank is one with under $1 billion in assets, so a big bank would be any bank with assets over $1 billion. When I think of a community bank, I think of a bank with about 100 employees — which coincidentally corresponds with the common definition of a small business. I think of a community bank as serving a specific geographical area with a very high level of personalized customer service.
Community bankers know their customers and do business with their customers. Most community bank presidents and owners think like small business owners. Many community bank shareholders own small businesses themselves. That is a good thing.
If you come across a banker at your next cocktail party, ask these questions to determine whether you should avoid him or her:
- Did your bank make or originate substantial numbers of sub-prime residential mortgages during the last 10 years?
- Did your bank hand out consumer credit cards like cocaine to less than credit worthy consumers during the last ten years?
- Was your bank so concerned about profits and shareholder return during the last ten years that it made business loans below what you considered a fair market rate, just to earn the business?
- Did your bank make any home equity loans personally to business owners for business reasons? (Many states allow this – It is a very dangerous practice)
- Did your bank ever, even once make a real estate loan at over 100% loan to value without additional hard collateral?
- Does your bank only use FICO credit scores to judge the creditworthiness of business owners instead of carefully reviewing the owner’s entire credit report to make small business loans?
Of those six questions, if the banker answers “yes” to more than half, they wear a black hat. Don’t mingle with him or her at cocktail parties.
A “yes” answer to more than one and less than four means they wear a black hat when they are around bank shareholders and a white hat when they are with customers. Make this banker buy you a drink at the party but don’t be seen in public shaking his or her hand.
If he or she only answered one question with a “yes,” they wear a white hat but need to be sent to a rehabilitation program for two days of sensitivity training. It is okay to be seen with this banker at the cocktail party, just make sure they get their sensitivity training as soon as possible.
A “no” answer to all six questions means the bank he or she works for is doing business the right way and this banker is someone you probably want to do business with. Stay really close to this banker at cocktail parties and make sure you buy him or her two drinks. Chances are that banker works in a small community bank.