… And the only point I’d make is that in Europe, you’ve got banks in Europe have loans, something like $1.5 trillion to Eastern Europe. If you don’t solve that problem, you’re just going to have another subprime sort of problem in the global banking system, which is going to be the implosion of East Europe. … – Desmond Lachman
Housing Doom is pleased to present the seventh and final installment of our unauthorized annotated transcript of the American Enterprise Institute’s March 17, 2009 seminar "The Deflating Bubble, Part V: Forecast and Policy Recommendations for the Next Six Months."  This is the Q&A session. The event site has several resources, including both an audio and a video recording of the 2 hour proceedings. There is a brief summary, but as yet no official transcript.
Alex Pollock [1:26:56]: … May I remind you you need to wait for the microphone. Tell us your name and affiliation please, and then ask your question. And we’ll go first to Bert, because the … look at this, the … Karen is right there with the microphone.
Bert Ely: Because she knew I’d ask the first question. Bert Ely, Banking consultant.
This a question, I guess for the entire panel, maybe primarily for Chris and John. We talk about dealing with big institutions, shutting them down. But these are huge complex financial institutions — 10s of thousands, several 100s of thousand employees, … [mic off, several seconds of dead air] … FDIC is ….
Chris Whalen: … going back to my …
Bert Ely: … if I could just add — in doing so without committing economic arson. I mean I realize that we kind of just … shut this thing down …
Chris Whalen: I know … you’re making Larry’s [refers Obama advisor Larry Summers?] …
Alex Pollock: Let — this long question be finished, and then we’ll get your answer.
Bert Ely: … but doing it in a way that minimizes damage to the economy and to the taxpayer.
Chris Whalen: Bert, look. Imagine if criminals, unbeknownst to you, secretly hired a dirty lawyer to put a lien on your house. And then a whole bunch of other people came, and they put a lien on your house, too. So one morning you wake up, and there are 10 collateral liens on your house that have been registered and validated by the court, and they say, "Oh, Bert, you can’t blow these things up, you do that and the whole community’s going to collapse. I’m sorry, you’ve just got to subsidize this."
That’s what the over-the-counter derivatives community is saying to the rest of us. "Oh me, oh my! You can’t do this, you can’t pull the plug. Bad things are going to happen." Well I put it the other way. If we don’t put AIG into receivership and pull the plug on the credit default swaps market for good, which is exactly what that means, then we are in big trouble.
We don’t go back if we make this decision.
Alex Pollock: You don’t mean pull the plug as a metaphor, you mean retrade these contracts.
Chris Whalen: … I mean …
Alex Pollock: … give people a haircut on contracts! …
Chris Whalen: … I mean give it to the Trustee in the Southern District of New York …
Alex Pollock: … and that’s what happens …
Chris Whalen: … and just like Lehman Brothers, exactly. The Lehman liquidation is your model.
Alex Pollock: All right, yes, here, and then I’ll come up here. Then here back …
Raghubir Goyal: Thank-you, sir. Raghubir Goyal from India Globe and Asia Today. Richest nation on the earth, now in a big economic mess. Who do you blame? number one. Number two: China’s minister is meeting Obama in the White House to warn the US, and President Obama is saying that US is still the best place to invest … [mic problems again — off about 10 seconds] [1:30:00]
Alex Pollock: Thank-you. John, do you want to take that?
John Makin: Well, international investors all just say, "Heh, make my day!" [laughter] What are you going to do if you sell treasuries? Where are you going to put the money? In other words, we’re looking for a place to hide, here, folks. And I don’t know what all you have discovered, but as an investor with … with wealth management for our clients and myself, I don’t know where you hide.
You can buy gold, you can buy treasuries and basically, the US economy and the US Treasury are still relatively good bets in this world.
So it’s a matter of alternatives, and the alternatives … Again, if you have $1 trillion to store right now, where do you put it? On the moon? [laughter] You know, you put some into gold and all that stuff, but that’s really the basic issue.
The US offers wealth storage facilities that are not ideal, but they’re better than anybody else offers.
I mean, look at the pricing on Italian debt, in terms of its spread to German debt. The market is betting — and I don’t know what the latest number is — but there’s a significant probability that the European Monetary Union [EMU] will break up. That’s implicit in the pricing of the debt of some of the non-German countries in Europe.
UK? Big issue. You want to buy Chinese debt? … ha-ha … [laughter] … you know. So be my guest. Make my day. Go somewhere else, there’s no place else to go.
Alex Pollock: John, in your comments, you said something which both of us agree upon, that a great thing to do — not with $1 trillion but with some money today — would be to capitalize new banks. …
John Makin: … right …
Alex Pollock: … and this is a notion I agree with very much, that we ought to have a national program of encouraging the creation of brand-new banks; banks that aren’t … Yes? Banks aren’t …
Chris Whalen: They already have a moratorium in place, Alex.
Alex Pollock: That’s what I’m saying. Banks that aren’t dragged down. Banks that don’t have anchors on them. Banks that aren’t struggling to get out of the last problems. This is the ideal time, for the good of the country, to start new banks.
You’re lending into wide credit spreads with very high credit standards. This is the time to get this business, and it’s my view that we ought to have a national program to encourange this.
Now as Chris was about to say, the regulators are doing the opposite. They’re stopping the creation of new banks, because they want to force your capital to solve their problem of the old banks. That’s exactly wrong in my view, and there are a couple of interesting historical examples, which I won’t go into, but where the United States created whole new systems of banks in times of crisis. And that’s what we ought to be doing now.
Tom, you want to answer this question on investing? Should people be thinking any place in the mortgage markets? … about the new commitments of funds?
Tom Zimmerman: Well, there’s a lot of assets out there, which I’m reluctant to say buy them now, because I’ve said the same thing 6 months ago, when some of these things were priced at 60, and now they’re priced at 20.
So, at some point these assets, for instance subprime securities that people are trading them … they trade, but the assumption is that like 80 percent of the people default, 80 percent loss severity. So, you know, it’s just like it’s almost the assumption things are getting to the point — and this is like in the stock market. Look at the stock market analysis that — a lot of these securities yield teens or low 20s kind of yield to very, very severe stressed case. But when I say step up to the to the plate — and this is for instance institutional money — you step up and put your money into these kinds of securities, the answer is, yeah, probably make sense, but then, as we’ve discussed here, this is uncharted waters.
So most people are putting their money into treasuries, because that’s [laughs] …
Alex Pollock: … you … yes …
Chris Whalen: Jamie Dimon paid 3 cents on the dollar for WaMu. Always remember that when there’s a horrific loss by somebody selling that asset at 3 cents, Jamie’s going to make money. And one of my in-laws is a loan officer for WaMu. He makes money every time they foreclose, unless they lose more that 97 cents, OK? That’s how you fix the economy. You let people make money. [1:35:00]
Alex Pollock: I have a question that .. I have a question’s been waiting right over here? Karen?
Jonathan Horgan: Jonathan Horgan, Independent Fiduciary Services. This question is primarily for Desmond and Thomas. There’s a bit of a divergence of view on the whole idea of rational defaults versus people staying in their homes and this may be another shoe to drop in the housing crisis. Your guest who is not here today, Nouriel Roubini, who attended the previous four, had viewed this as the next bomb to go off. I’m just wondering if in the course of your analyses if you’ve come up with any sort of way to quantify this potential risk, and how you’d assess it. Thanks.
Chris Whalen: I’d just make a quick comment. I mean, there’s no way to quantify it. I mean there clearly is a changed mood in the country which says that, if you’re underwater in your house, and economically it makes sense to walk, you might as well walk away from it. And this is troubling to me, but it seems to be gaining momentum in terms of people making … having signed a contract to pay certain — pay back a certain amount of money, and then simply saying, "well, it’s turning into more like a commercial real estate venture instead of a traditional home lending process."
Along that line, that is, while we’re on this topic about consumers and how they relate to the economic difficulties they’re in, I saw this article  in Newsweek about a month ago. And I was really astounded. This financial advisor, consumer advisor, who recommeded that people not dip into their saving, but rather what they should do is maximize their debt and their credit cards and then declare backruptcy, because this is the appropriate way to deal with your finances in today’s market place.
This was in a Newsweek magazine, this was the financial editor for consumers. She’s telling them, load up the credit card, because the credit card companies already expect to take a certain amount of losses and they’re charging high fees anyway.
So this philosophy that you can walk away from your debts, it’s gaining momentum, I’ll tell you that. This is a scary situation.
Alex Pollock: … let me get Desmond …
Desmond Lachman: I think that there is some way to get a quantitative handle on the problem … in the sense that by the end of 2008 something like 1 in 3 households had negative equity. It’s not too difficult to project that if house prices decline by another 15 percent … the numbers can rise even higher. And it does make sense, from a purely economic point of view, for somebody to walk, in the sense that the laws of the land, in most of the States, are no recourse lending. So they can’t come after you for the other assets. So it just doesn’t seem to be that smart to be servicing a $500,000 mortgage if your house is only worth $200,000.
So you know, I think that this is a real problem, and the fact that they didn’t write down part of the mortgage relief program is that you’re not writing down the principal of the loan. You haven’t really addressed that problem.
Alex Pollock: I had just a quick story, then we’re going to come here, … I have a question over here, and then I have one here, and then we’ll go from there.
I had dinner a couple of week ago with the Chief Executive of one of the Danish mortgage banks, and Denmark has an old and very interesting mortgage system, which always gets what’s called "deficiency judgments" against the folded borrowers. That is, whatever your house is worth, if it’s less than the mortgage, that difference is what we call "the deficiency," and they pursue you for your mortgage deficiencies for the rest of your life. So he was telling me that they were still collecting deficiencies from the Danish real estate bust of 1991. And there are still going after people.
Question here … up front here.
John R. Serrapere: Name’s John from Arrow Insights, a research firm.
A lot of people forget that actually stock prices are a leading indicator, a leading indicator in a lot of economic models. I also have a lot of mistrust about models, because I don’t think you can define normalicy. But one of the things I looked at is that last week the S&P 500 was down about 61 percent peak to trough, but a lot of people don’t realize that in the Great Depression it was down 86 percent, that’s 76 percent in real terms. So it’s pricing in something more. But more importantly, if you take the global stock market ex-US, it’s down about 10 percent more than it was during the Great Depression, peak to trough.
So what you have to understand is that my feeling is, it’s pricing in more like a 10 percent contraction, what I call a 19th Century garden style depression, [1:40:00] before we got to redefine it as the Great Depression, which was a 20 percent or more contraction. So my feeling is we don’t have much time, and these tests that they’re going to run on the banks are much more shallow than even anyone realizes. And once we realize that that’s where we’re headed for, maybe be in a "W" fashion, maybe not in an "L" fashion [NOTE: link opens video], that they’ll be a lot of room for maybe even more policy errors. Because that seems to be what we keep making.
And what would the world look like if we had a 10 percent contraction in the economic aggregates. … Anybody? ….
Alex Pollock: Anybody want to try that one?
Chris Whalen: Well, that’s why I asked the question before, I think that’s where we’re headed. You know, last talk we had here, that Alex and I set up, I ended my comments with an allusion to the Nail Salon economy. You don’t need to "do" your nails. You can do them at home. [laughter] And a lot of these service industries that you see in this country, I see them in my town, restaurants, nail salons, day care, all this wonderful stuff, it assumes that there’s someone who can pay for those services.
So I think you’re going to see a long term reduction in GDP simply because it was funded with debt.
Alex Pollock: I had … oh, go ahead … and then we’ll come over …
Desmond Lachman: Yeah, I think, you know, what I’m really disturbed about is that we’ve already seen a very big equity correction globally, as mentioned, yet we haven’t seen much in the way of a policy reaction. The stock markets, even if you think about the Obama Administration, stock market falls by 20 percent — the normal thing is you’d get some sort of policy reaction.
When you look at Europe, you just don’t get any policy reaction to speak of.
Why this is of concern is because a very big decline in the stock market isn’t without consequence for the economy. When it impacts the economy it validates the decline of the stock price and makes it even worse. So the — unless you’re really going to be addressing this through policy action — that’s really why I’m concerned that you have a G20 meeting and all they can get agreement on is to provide additional funding for the IMF, $250 billion, which is neither here nor there. They’re not really addressing the main problem. I’m just worried that there’s no sense of collective purpose, there’s no coordination in the policies, so this thing can drift down further, that you can get new facts developing … [crosstalk]
Alex Pollock: … OK, …
Desmond Lachman: … they probably do get it, but the variety of political constraints that don’t enable them to do what’s needed.
Alex Pollock: I’m going to move on to the next question, which is over here. Karen? Somebody’s been waiting … I think you, sir, yes go ahead …
Mark Lazerson: Mark Lazerson, University of Bologna. For the most part, the discussion here has been rather introspective, focusing on US housing markets, US banks, et cetera. But if we face the fact that we’re probably in a world-wide slump on the level of the 1930s, what — can the United get out of its slump alone, with the — let’s say following the suggestions of Chris Whalen? Or is there a need for something on the level of Bretton Woods to deal with the massive global imbalances, the trade imbalances that in many ways helped cause this huge bubble?
Is there any prospect for that? And can we do it alone?
Alex Pollock: John?
John Makin: Well, I guess my short answer is let’s hope not, but that is collective, global efforts to coordinate responses to this crisis are needed, but so far the record hasn’t been very encouraging, and I will say there are two exceptions there. The Bank of England two weeks ago began an experiment which in terms of buying government securities, they were heavily criticized, but they have managed to push rates down on those securities, and I think in a sense lower interest rates. So it’s a step in the right direction. The Swiss National Bank last week indicated that they would be buying foreign currency, partly because of the large stock of Swiss Franc denominated loans in Eastern Europe, and to push the appreciation of the Swiss Franc sharply increases the burden of those loans.
So part of the problem we have is, of course, Switzerland is a place where the banks are too big to save, because the banks are very large relative to Switzerland.
So we’re starting to see some response. I think the central banks need collectively to set a price level target and move aggressively to purchase government securities. Obviously the currency route is not open to large economies because, let’s face it, [1:45:00] everybody can’t devalue their currency. We don’t have the option that we had in 1933, where the US was able to dramatically devalue its currency and reflate by raising the dollar price of gold. That’s not open to us.
So, yes, we need a global collective solution. Before we get there I think the ECB is going to have to wake up and realize that we have a serious problem. From what I hear them saying so far, they don’t get it. The Japanese seem to be frozen in the headlights, and the Chinese response has been to encourage more production by state-owned enterprises. We do not [laughs] need more production right now. We need more demand.
So, yes, we need it, and the record is not really encouraging — remember Bretton Woods was about the world monetary system, not necessarily about rescuing the world from a global depression.
So that I hope it happens. The G20 is the current forum, and so far we haven’t seen anything very decisive there, but I acknowledge the need. I’m not that optimistic. Certainly a necessary condition for the world economy not to slip further into depression, because that’s 10 percent top-to-bottom production, would be for the US to recover.
Alex Pollock: I’m going to … all right, something quick.
Desmond Lachman: Just something very quick. Your point, I think, is really very valid. And the only point I’d make is that in Europe, you’ve got banks in Europe have loans, something like $1.5 trillion to Eastern Europe. If you don’t solve that problem, you’re just going to have another subprime sort of problem in the global banking system, which is going to be the implosion of East Europe. So I don’t see how the United States can get out of its mess, if you’re getting Germany not reflating its economy.
Alex Pollock: OK, I have a question over here that’s been waiting … please? And then we’re going to come here I’ll get one back here and then one all the way in the back.
Cha Chen(ph): Cha Chen, freelance correspondent. I have a comment and one question. You talk about create a new bank. I don’t think we need to create a new bank. There are lots of banks. They are good, because they are doing a right thing. So how about we expand them and let them … [dead air — bad mic again] and is it … and more … -illion dollar.
Now what would be the consequence? Now who going to take care those money really worth nothing? Thank-you.
Alex Pollock: What is the consequence of all of this indebtedness?
Chris Whalen: First, to buying banks, we have two clients who are in the process of getting registered with the various regulators so that we can buy banks. But they won’t let you charter de novo now. There is a de facto moratorium in place by the FDIC. So to you point, yes, we have no choice but to work with the existing stock of banks, because they won’t charter a new institution.
I think the real issue we face, going back to your other question quickly, is the US is the consumer, and everybody else is the manufacturer. They’re willing to take our paper money. As Milton Friedman illustrated so beautifully, that’s the system. We have to come up with something that is more stable than that.
As Freeman Dyson once said about DNA, "We’ve learned how to replicate, but can we deal with metabolism." So that’s what I would say to you.
John Makin: You know, on the debt side, remember US debt, the GDP is about 45 percent of GDP. GDP is — so its around $5 trillion. If it goes to $7 trillion, it goes to 50, if it goes to $8 trillion it goes to 60 or 70. Japan’s current stock of debt to GDP is about 125 percent, and the yield on the 10 year note in Japan is 128 basis points.
So again, it’s a matter of people’s expectations about inflation and alternative assets. And I feel I have to announce here — you saw me fiddling with my blackberry — I just bought Treasury 10-year notes at 3 percent. [laughter] …
Voice: … There’s confidence for you …
Alex Pollock: So there’s a call. Question? Right here.
Nick Smyth: My name is Nick. I’m from Harvard Law School.
And I want to ask Mr. Zimmerman and Mr. Whalen about backruptcy. Because you both mentioned it, but in different contexts. Mr. Zimmerman, you talked about the Senate bill that’s going to modify, or potentially allow judges to modify [1:50:00] the value of home mortgages under Chapter 13. And the way you talked about it, it sounded like you don’t support it. You said, there’s a little controversy about breaking contracts. And you said investors would get screwed.
And I just wanted to point out that investors get a lot more screwed if there’s a foreclosure, because it destroys 40 to 50 percent of the home’s value, whereas a modification, even if you reduce the interest without reducing the principal — or if you do reduce the principal, as your colleague pointed out — that may actually … will be significantly better than a foreclosure. Which is the worst of all —
Alex Pollock: We’re going to have to come to the question here.
Nick Smyth: … yes, so the question is about why you think that we can have bankruptcy for Chapter 11 for AIG, but you see it as an unfair breaking of a contract for a homeowner. I just … I don’t get why we should have bankruptcy for corporations, but not for individuals.
Alex Pollock: Tom, do you want to … [brief mic skip] … there?
Tom Zimmerman: Yeah, first of all, that first comment that’s it’s always better to modify a loan and take out — reduce the principal on the amount rather than wait for a foreclosure. I hear that all the time. But we talked to servicers, people who run these banks. For some reason they don’t do that.
So now the implication then is these bankers don’t know what they are doing, they’re stupid. And I’ve heard that many, many times. I’ve heard it for the last two years. Why don’t these guys modify these loans and lower these loan rates instead of waiting for foreclosure?
The idea … the problem is that you don’t know who’s going to go into foreclosure ahead of time. You don’t know which one of these guys is going to make it or not. You want to try to keep him cash-flowing, from a business point of view, until the last — you don’t want to write it down right away, that’s the last thing you want to do, not the first thing.
But I hear that all the time. The problem is that if a banker … if I were a bank, and I knew that this person that I’m going to lend $500,000 to is going to — if he decides to be … not take care of his finances and goes into a bankruptcy court, and a judge can cram that down to $200,000, or some number, some strange number, I’m going to very more … be much more concerned about his credit, I’m going to charge him more, and much more concerned about who I lend money to.
So it’s pretty simple. If you give the homeowner a way out, the bank’s going to charge more for that process.
Alex Pollock: … Chris? …
Chris Whalen: If that legislation is passed, you will never have a securitization market in this country again. The other issue you have to understand is that most loans, you cannot legally get control of them so you can modify them.
I have a loan that was originated by Bank of New York. It was bought by Lehman Brothers. It was sold into a securitization. I know where it is. I know where it is. I can’t get to it, though.
Lehman cannot modify my loan. I’ve already asked them. They can’t. It’s legally impossible, so this is a — it’s an absolute illusion that comes out of a city where every day is Halloween … [laughter] … All right? That you can modify existing State Law contracts. You can refinance them, but remember you have an agency structure here. If you were the banker, and I was your borrower, and you were servicing the loan, then yes, we could do it. But not in a disaggregated agency.
Alex Pollock: We can’t … we can’t … Any rejoinders we’ll have to do informally afterwards. Bob Long back here.
Bob Long: Bob Long, a principal of Ariba Asset Management.
To ask — Have you tried to put numbers on bank earnings — if you use cash flow accounting … [more dead air] …
Chris Whalen: Well, I think I would have 1,000 banks rated F instead of 2,000. I can tell you that the skew in terms of return on equity degradation in the entire population is bigger than charge-offs. It’s much bigger than charge-offs. That will not be the case through this year.
Charge-offs will catch up, and the mark-to-market will go away, especially after whatever’s going to be announced. But that’s sad, because a lot of my bankers are getting ready to write these assets up. I mean we just went through all this pain and suffering — they’re going to take the fun away from us? Yeah, I think the number … to your question, is large, it’s very large. And you know, I actually asked my partner to screen out all the banks that have below average charge-off activity, but have big negative signs on their ROE.
And I’m probably going to have that number next week.
Alex Pollock: Question in the front row. I’m sorry, but this will be the last question, and we’re welcome for more questions afterwards in the informal session right up here. Karen?
Steven Lee: OK, I have two questions now. [1:55:00] …
Alex Pollock: … will you tell us who you are please …
Steven Lee: One is the "who" question which you ask …
Alex Pollock: … could you tell us who you are, please? [laughs] …[laughter]
Steven Lee: I’m Steven Lee from Global Client Consulting.
The first question is the "who" question which you asked about Jesse Jones. I’d like to get an opinion from the panel. The second question is, given the policy errors they’re already running, and this and … the situation is unlikely to change drastically in the next couple of weeks or months. What is the scenario like 6 months down the road. Just to be short answers, I think this is something that would be helpful. For us to kind of understand the scenario 6 months down the road.
Alex Pollock: Anybody want to try those? John?
John Makin: My own guess is that 6 months down the road we will be very concerned about falling prices, and we will be scrambling to try to stop that problem, because it will be intensifying the problem of debts and nominal contracts. And we will be surprised at how quickly it happens. And we will be thereby surprised at how quickly the unemployment rate continues to rise as real wages go up rapidly.
Alex Pollock: Chris? We’ll go down the panel here.
Chris Whalen: I think we’re going to see a UK-style cabinet reshuffle by June. I’ve been saying publically that I think Mr. Geithner is going to have to be replaced. And I think you’re going to see others.
I mean, look at the description that Alex made of Jesse Jones. These are the kinds of people we need. John Kovacik(ph), Jamie Dimon for Secretary of the Treasury? Credible, adult people who can get up and command respect? Look, I’ve got nothing against him. I think he’s in the wrong department. He should be at the State Department. [laughter]
He is a classic diplomat. He has the demeanor, everything else.
Alex Pollock: Tom?
Tom Zimmerman: Yeah, I think the Administration will suffer some setbacks by then and hopefully concentrate and focus on what the real problem is.
Alex Pollock: Desmond?
Desmond Lachman: I’m pretty much in agreement. I think that by 6 month’s time we’ll be talking about the need for a 2nd stimulus package. That things aren’t really working. And I’d just keep an eye on what’s going on in Europe.
Alex Pollock: Six months from now I can firmly predict we will have our conference: Deflating Bubble Roman Numeral VI. [laughter] And we hope that we’ll see you all there, [applause] and …
John Makin: … but the price of admission will not be zero [laughter]
Alex Pollock: For those of you that didn’t get your questions answered, the panel will be glad to speak informally, and let’s again show our appreciation to the speakers. [applause] [1:57:58]
Notes and References: "The Deflating Bubble, Part V: Forecast and Policy Recommendations for the Next Six Months", AEI Event Homepage, March 17, 2009. : "The Case for Walking Away — Normally I’d say suck it up, cut spending and repay your debt. But not if you’re going broke.", by Jane Bryant Quinn, Newsweek, January 12, 2009. : "Future Alternatives of Work Reflected in the Past: Putting-Out Production in Modena", by Mark Lazerson, in Explorations in Economic Sociology, ed. Richard Swedberg. Russell Sage Foundation, 1993. pp 413-429. [What Professor Lazerson is describing in this chapter sounds weirdly like what I’m doing creating this transcript.] : "Failed Banks Dot Georgia’s Vista: How a Risk-Regulation Imbalance Drove Many Insolvencies — With More Likely", by Damian Paletta and Dan Fitzpatrick, Wall Street Journal, June 10, 2009.
: "Mr. Smyth and Mr. Ruby Go to Washington", by Lia Oppedisano, Harvard Law School Bulletin. [Nick Smyth is a reasonably likely match — not Harvard Law’s Nick Brown; voice didn’t seem to match 😉 ]
In Alpharetta, an Atlanta suburb that was home to three banks that failed since September 2007, longtime banker D.R. Grimes recently tried to start a new bank. He said he raised $20.5 million, but his attorney was told by the FDIC’s Georgia office that it didn’t have the authority to grant any new charters. He sent the money back to investors.
"It is very frustrating to follow the rules and do everything you are supposed to do and just be ignored," Mr. Grimes said. State and federal regulators said they don’t have a moratorium on new banks in Georgia but are giving applications close scrutiny.