Saturday, March 14, 2009


Here is an interesting and somewhat entertaining short NY Times article on a guy who flies around the country tracking down planes that banks are foreclosing on. It gives an inside look at what banks are doing with just one class of loans.

I have a story about how it works from the other side. A number of years ago I advised a private equity investor who had two planes. I asked him how many people from his firm used the planes. He answered that only he used the planes. So I asked, "Why do you need two planes?" To which he replied, "Sometimes, one of the planes is in for maintenance. So I need a backup plane."

A couple of weeks later I called the bank that leased the planes to my client. "Jim, it is Mike. I have some good news and bad news for you." Jim replied, "Give me the good news first. I am swamped by bad news."

"The good news is that we are voluntarily returning your two planes." Jim happily replied, "That is great! What could the bad news possible be?"

"Well, the Falcon 100 is at Morristown Airport ready to go. But the Hawker 1000, well, to tell the truth, I don't really understand the science behind how planes fly."

"Mike what does that have to do with the Hawker?" I replied, "Well Jim, the Hawker fuselage is in Delaware, but the engines are in Kansas City. And I am pretty sure they need to be together. Oh, and the bank owes $110,000 for the engines and past maintenance bills. I gotta go."

This is playing out everyday at banks throughout the world in every asset class; homes, planes, yachts, commercial real estate, companies etc.

Cheers, Mike

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