( – promoted by Colorado Pols)
This past Saturday, Sen. Scott Renfroe (SD-13), spoke up during a meeting in which Congresswoman Betsy Markey (CO-04) and Senators Udall and Bennet brought together all the players in the continuing crisis surrounding the failure of New Frontier Bank.
Sen. Renfroe first acknowledged that he was a shareholder in the bank, and that his father was on the board of directors. He then, however, went on to tell the panel, that if they “didn’t do something now, that this area is not going to succeed.”
Essentially, the government, that he and his friends (Sen. Schultheis, Gardner, Lundberg, Brophy, Penry, et al) rail against, has to step in and save northern Colorado from the mess that he and his father helped create. …More below the fold.
Call me crazy, but the biggest problems at New Frontier Bank seems to have been the over-leveraging (ratios of capital to loans of 1:30 or greater), and the industry-wide practice of making sub-prime loans. But not according to Sen. Renfroe, when I asked him during the meeting.
After he spoke, I caught him at the back of the room and asked him, “did you just tell us that government was the solution?” He chucked and said that he guess he had. I followed up and asked him from whom we were being saved. “Aren’t we saving ourselves from you and your father?”
Oddly, he answered quickly and fairly well (rehearsed?) that the problem came because the loans we fine, until new regulations came into place. As I understood his answer, it was not over-leveraging or bad loans, but the reining in of over-leveraged banks. Essentially, the FDIC and overzealous regulators caused the failure.
This kind of thinking is amazing, especially in light of the fact that around $1.2B of loanable money has just evaporated from N. Colorado borrowers. There just isn’t any capital to base loans on. The net effect of this is going to be that nearly $700M of loans are going to be called in, most of which cannot be re-issued, either because no area banks have the available dollars to loan, or because the loans were sub-prime. The effect on Northern and Eastern Colorado is going to be disasterous.
Now, I’m not one to wish business failure on anyone. But, had many of the folks who are going to fail in the next weeks or months, failed over the past decade, rather than being propped up by sub-prime loans and shady practices at NFB, then we would not be looking at a massive swath of the economy collapsing simultaneously, and sending ripples through the entire economy.
The practices of NFB may have been standards for the industry since 1999 or 2000, but NFB and its Directors seem to have taken the practices to an extreme, and the northern Colorado economy is going to pay a high price for it. And folks like Sen. Scott Renfroe, who helped rack up the bill, get standing ovations (and support from GOP Candidates) asking the government to save us. Unreal!