My Big, Fat Greek Financial Crisis

Appeared in Pioneer Press newspapers

May 15, 2010

Now I know how Greece feels.  I hope I won’t be learning how Lehman Bros. felt, as well.

In my first column I mentioned our great good fortune in obtaining the farm at a seeming bargain price due to the state of the real estate market. Of course, we suffered a similar effect at the other end of our move, with the Glenview house we needed to sell dropping a whole lot of its bubble “value,” as well. But we were coming out ahead of the game.

Seems we did that victory dance a bit shy of the end zone.  To mix my metaphors, it’s turning out this sword has two edges, after all.  Let’s see if I can combine these, so my English teachers’ work will not have been entirely in vain:  while doing my victory dance short of the end zone, I tripped and fell on my double-edged sword.  There, that’s better.

There is, of course, a long, sad tradition of farmers being done in by the big, bad bank – but generally not before they’d ever actually gotten around to farming.  And, to be fair to my banker, a perfectly decent guy who’s trying to help us get our job done, the bank is only half the problem – though more than enough of one, in and of itself.

The problem with the bank is the broad one at the base of the global financial crisis:  the collapse of the U.S. housing market. And, because no one was cautious enough before, everyone’s being excessively cautious now.

Body Blow Number 1:  the bank’s rules changed midstream.  The good news is the bank is one of the few still doing construction lending.  The bad news is that when we started the process, their standard was to lend up to 80 percent of the property’s assessed value; midway through the process the bank changed its standard and moved the bar down to 70 percent, requiring us to put in that much more up front. 

We managed that hurdle and thought we were in the clear.  Till Body Blow Number 2:  The Appraisaling.  On the one hand, the market has crashed and keeps going lower, taking once-inflated valuations down below where they should have been in the first place.  On the other, lenders’ appraisals are going super conservative, so A (the amount we paid for the farm) + B (the investment we planned to add to it) no longer equals C, but C-minus-a-pile. So, we’re now short about 25 percent on the funding side.

Within a few hours of learning this from the banker, we received Body Blow Number 3:  The Spiraling.  Our builder had the final bid ready . . . and it was about 25 percent higher than the preliminary bid . . . which was about 50 percent higher than the original budget.  So, at the same time the financing went down, the cost went up.

This would be that proverbial spot between a rock and hard place that you’ve heard so much about.

So, time for some creative thinking.  How to get the financing we need to do the job?  I’ve consulted with the International Monetary Fund and come up with the following options:

• Create my own currency, then devalue it.

• I am now a foundation. Your donations welcome.

• TARP me, Tim Geithner!

• Those kids don’t need to go to college:  they’ve got good jobs waiting right here on the farm.

• Ponzi scheme, anyone?

• Finance it with my series of “Body Blow” novels, films and action figures -- sort of a “Death Wish” series in which the aggrieved home owner wreaks vengeance on mortgage lenders and the building trades.

Last column I was searching for a Middle-Aged-Farmer Man to tell me what to do with this land.  Looks like I need a Middle-Aged-Bail-out Man first.