Plus Ca Change

Hid Your Own Easter Eggs

Here are two quotes from recent client interactions:

You know my name.  I came to this country when I was nine years old, I am a very successful business man, and my net worth is greater than a hundred million dollars.  I am insulted that you would suggest that I cannot service my loan.

Biden says I don’t have to pay.  The governor says I don’t have to pay.  Get a judge here.  He will say I don’t have to pay.

The first is a customer of a close acquaintance who works at a bank that lends money to people with balance sheets bigger than many countries’.  This client had borrowed money against commercial property in Florida.  The loan was not in default (the property is in an excellent location in a ritzy neighborhood in a well-known city in south Florida), but commercial property has generally had a hard time lately.   The bank had decided to do some due diligence. The terms of the loan required that the client pay for periodic appraisals; the client had refused to pay for the appraisal.  The second is Tin Hat Guy, who lives in my park in northern New York.  He is short two months’ lot rent.  He spends all his time on the computer and has convinced himself that the eviction moratorium is a rent holiday.  My acquaintance’ response to her client’s puffery was to say, “I know that you can make payments on your loan.  I am concerned that you might choose not to make payments on your loan.  Your objection to the appraisal fee, which is, after all, trivial, has set off alarm bells with our risk managers.  You need to work with me to help make them comfortable.”  My response to Tin Hat Guy was, “Did you read Breyers’ dissent in Chrysafis?  Even he says landlords retain the right to payment, although a moratorium removes the remedy of eviction”.

Either of these guys could easily be the other, mutatis mutandis.  A tenant who bloviates about how he knows how to lay pavement or install siding better than anyone else and who is insulted when you remind him, on the fifteenth, that lot rent is due on the first because he is, after all, you-know-who?  Check.  A financial advisor who ducks work and spins wacko conspiracy theories about the gold standard and Weimar-era inflation?  Check, check.  A pit trader who can shout but not read?  A real estate agent who can’t read a balance sheet but who is right all the time because he has been in the business for forty years?  A managing partner who sits in his office all day and does – well, nobody really knows what, but everyone is afraid to ask?  We have all seen them.

When I got into the mobile home park business, my Wall Street friends salivated.  They understand numbers, and they liked what I told them about cap rates and cash-on-cash returns.  But my lawyer friends said, “Ick”, and made jokes about tornadoes and guys with one tooth.  I think that that is because lawyers – big firm lawyers, at least – are rule-followers.  They think that if you ace all the courses and say please-and-thank-you enough, you will get the gold watch in the sky.  They don’t have time for people who do not draw within the lines.  Traders and bankers don’t have that sense of right and wrong.  My lawyer friends’ responses pissed me off.  It’s not just that statements that mobile home park residents are ontologically stupid are both untrue and confuse luck with virtue; it is that they implicitly deny that there is an equal dispersion of idiots, unpleasant people and honest people everywhere.  Trading floor, manufactured home community, inner reaches of the lucky sperm club; wherever you go, the ratio of morons and crooks to decent people will remain constant.  Their surface characteristics adapt to the local habitat, but the deep structure is the same.  In one biosphere, they will stiff you for an appraisal fee and try to wiggle out of the terms of a multimillion-dollar loan.  In the other, they will milk an eviction moratorium like a frog rescued from a Chinese supermarket.  You can’t shoot them or wave a magic wand and make them disappear.  They are a brute fact; you have to do business with them.  And that holds true regardless of whether you work at the whitest of white-shoe institutions or in the humblest of manufactured housing communities.