by Max Brantley
The NY Times today features the Fayetteville couple, Robert and Katherine Shoulders, facing foreclosure on loans for their athletic club. D-G also carried an article about them today in the LR edition. In the Times' story, one of the investors who scoops up defaulted loans at a discount has a response to the couple's criticism of "vultures":
[Chicago banker Rick] Mr. Williamson sees it differently. And the government agrees.
As he points out, it isn’t his fault that Mr. Shoulders overextended himself by borrowing $10 million to add the spa, a preschool, tennis courts and other amenities to his once-modest health club. And by moving aggressively to collect on loans like these, Mr. Williamson says, he is playing a crucial role in helping clean up the bad debts that are clogging the economy.
“If you want to fix what is ailing this country, you need to destroy the worthless debt out there,” he said, adding with characteristic candor, “You have to shut down the zombies, liquidate their assets."
And then there's Andrew Beal, who spent $200 million to buy $438 million worth of loans, including some from the failed ANB bank in Arkansas.
Mr. Beal is hardly averse to risk. He is famous for trying (and failing) to build his own space satellite launch company, and for luring some of the world’s best poker players to a series of games, with him as a participant, and betting pots worth $2 million. Mr. Beal, in a telephone interview, said he went to great lengths not to push people out of their businesses, but at times he had no choice.
“Borrowers force us into litigation,” he said. “They don’t want to perform on their loan, they won’t talk to our workout people. What are we supposed to do, send them a vase of roses?”
It's tough in the real world.
“Were we overextended? Yeah, I will not deny it,” Mr. Shoulders said, as he walked through the gym, greeting members by name. “But we have put our heart and soul, and every penny we have earned, into building this place. It is criminal the way we have been treated.”
As Mr. Williamson sees it, a debt is a debt.
“When I grew up, people paid for their mistakes,” he said.