Sins of Our Fathers (9781571319128) (3 page)

“The same kind of thing can happen in a lending situation. Federal laws designed to ensure equal opportunity can be abused by predators to put a bank at a legal disadvantage and to extort money. So in banking, if you're smart, what do you do? You have to use the law preemptively
in order to keep the advantage and keep the playing field level so those bad actors can't get a foothold to build a case.”

The bankers in the seminar room were riveted. JW's stories conjured up so many aspects of race, law, and economics that seemed fraught with peril—both personal and professional. This was his intent. For a student to learn, you first had to elevate their level of concern, he believed, and then you had to create cognitive dissonance. He did this by playing with their fears and prejudices, and setting them against their hopes.

As he moved back to the center he saw his boss, Frank Jorgenson, sneaking up the steps at the side of the room. Jorgenson was a co-sponsor of the conference this year. After a decade at North Lake, he had gone on to manage the bank chain's entire Greater Minnesota operations, and now people considered him CEO material. Several of the bankers sat up as he climbed the tiers. At fifty-five he had a round face and extremely close-cropped hair. He carried himself with the swaggering, faux-jolly demeanor of a cop, with a big white smile and a toothpick stuck in the corner of his mouth. He had cautious eyes that were constantly sizing people up. He leaned against the wall, his growing belly emerging from his suit coat like a sack of oats. He waved JW on.

“Okay. So a Native customer with decent credit asks why we don't lend more to his people. Almost a threat, but not quite. So the situation is delicate, to say the least.” He watched them think it over. “One false move and you could wind up in a lawsuit. The most important thing for you to do at that moment is what?”

He scanned for hands and took another sip of coffee. It
had the faint flavor of burnt plastic, so he set it down. He checked his watch. He had ten minutes left. A balding banker near the window raised a hand.

“Yessir,” said JW.

“I think your hands are tied.”

“Why?”

“Well, we run from that stuff. Federal law prohibits redlining—”

“And the Community Reinvestment Act requires banks to apply the same lending criteria in all communities,” said another banker in the center. He had a self-important moustache and blow-dried hair.

“If they escalate it to the branch president,” said the first man, “and they can show income and collateral, you gotta approve or you expose the bank to a lawsuit.”

JW nodded and waited for any further objections. This was the point where he would pivot the talk. He glanced up at Jorgenson and saw a twinkle in his eye.

“One word,” he said. He advanced the slide to show a handshake between a white hand and a Native American one.

“Empathy.”

He looked at them, then launched back into his story. “The surest defense against this sort of predator is a hand reached out in friendship. This makes clear that you are not doing what he is accusing you of. And it protects you in court later on.”

He ran through a series of slides illustrating the bank's outreach to the Native community. “We donate to the Indian college fund. We sponsor the Native Night Out against crime on the reservation. We're a sponsor of the reservation high school sports teams. We try to be a good neighbor in the community. That kind of outreach, that empathy, was doubly important in
this guy's case. He had been a banker himself, right here in Minneapolis, before moving back to the reservation. In fact, he probably had more CE credits than most people in this room. And make no mistake, a legally sophisticated opponent is by far the most dangerous. So. Preemptive community outreach. But there was still a question. Why would he accuse us of redlining if he was just trying to get a personal loan? The man must have successfully navigated the line between race and business for years in Minneapolis. He had to know that barking at me like that would set off red flags. So what do you think? Was he trying to entrap us?”

JW paused and scanned the room while they thought. “When you don't know the answer to a question like that,” he said, “and most times you don't, there is still one good defense. More empathy. ‘I really empathize with members of your band,' I told him. ‘How frustrating it must be, dealing with people like Sam Schmeaker, and what can seem like a double standard.' He was disarmed. His whole posture changed. ‘Redlining is illegal,' I told him, ‘and worse, it's wrong. I'm sorry if Sam offended you. For what it's worth,' I said, ‘I do know that was definitely not his intent.' Those last four words are critical under Regulation B of the Equal Credit Opportunity Act. Repeat after me: ‘definitely not our intent.'”

He conducted the audience in the recitation. “Good.”

The slide changed to one showing the phrase. JW looked around the room at his audience. The balding banker by the window was confused.

“So you approved the loan?”

JW shook his head. “No. This is where the risk of the reservation we discussed earlier comes into play. It has nothing to do with him, or with race, okay, so forget all that. What
matters is Regulation B, which says, and I quote, ‘The act and regulation may prohibit a creditor practice that is discriminatory in effect because it has a disproportionately negative impact on a prohibited basis, even though the creditor has no intent to discriminate and the practice appears neutral on its face, unless the creditor practice meets a legitimate business need that cannot reasonably be achieved as well by means that are less disparate in their impact.' Okay? It's the ‘legitimate business need' we are talking about. I'm not trying to discriminate, and I'm not racist. In fact, I help the Native community. I do outreach; I give them money. But my job is to protect my bank's assets. I have a legitimate business need to do that, or I can't continue banking. I can't assume someone can't pay, but I can point to the legal problems inherent in lending on an Indian reservation. So I told him, ‘Your reservation is a domestically dependent sovereign nation, and as such it does not have to recognize certain federal laws with regard to foreclosures.' He immediately objected—”

JW shot up a strident finger, assuming Eagle's role again.

“But I cut him off. ‘Of course I want to help you! We're in the business of making loans, right? Be silly not to. And frankly, we'd be absolutely crazy not to want to do business with a customer with your credit history. But,' I said. ‘I need you to help me.' ‘How can I do that?' he asked. And I said, ‘Very simple. Very easy—'”

JW held his hands open as he reenacted the encounter. His eyes shone. “As a condition of the loan, you sign a waiver that prohibits you and your band from using their sovereign status as a shield to avoid legal disputes filed in United States courts. If you default, we have a right to acquire a portion of tribal land. Can I have Sam prepare that for us?”

JW strolled across the seminar room as they contemplated the legal maneuver he had just described.

Jorgenson watched from his place against the wall. JW knew that this is what Jorgenson had invited him to the conference to do. He had told JW he would make sure that every president and vice president from every Capitol Bank Holdings branch in Greater Minnesota was in this room. Jorgenson couldn't say these things himself, not in his position, but he wanted JW's methods to become wider practice as the chain expanded its holdings in communities near casinos. Reducing the downside was absolutely essential to his expansion plan. And improving the performance of the Greater Minnesota banks overall was the key to his campaign to be named CEO when the Old Man retired. It stood to reason that such a development would also be very good for his old protégé, JW.

“Typically,” JW went on, “the Native customer will reject this condition for legal or, more often, emotional reasons. As you can understand. These structural legal conflicts are a sad part of our country's legacy, something none of us should be satisfied with. We have simply got to do better. But tribes are domestically dependent sovereign nations. They own reservation land collectively, not as individuals, and as bankers it's neither your fault that it is this way nor your responsibility to fix it. You can't change the legal system or the very unfortunate history of the United States when it comes to the treatment of Native Americans. You are required to work within it, and you have a legitimate business need to protect your customers' assets to the best of your ability. Now, I'll look for an answer from a brave soul.” JW faced the audience, his hands in his pockets.

“Is this redlining? Is it a crime?”

His shirt was a brilliant white, his tie a lavender slash.
He was almost done, and on time. Just a few minutes left for them to understand, his lessons slipping into their thinking, their mental scales tilting. Finally the balding banker replied in a voice that was barely audible.

“No,” he said. “It isn't.”

His look admitted the truth of this, but nevertheless he seemed defeated by it. JW saw Jorgenson make a note in his cell phone as he watched the man's reticence. Jorgenson viewed anyone who wasn't adamantly in support as a bitter enemy, and someone to purge. It was his one major weakness.

JW gave a slow, gentle nod.

“No. The gentleman is right. He is absolutely correct. This is not redlining. This is business. You have left the choice up to the customer. Remember, this is the free market. You are using an inherent conflict in federal law to protect your assets, which you are obligated to do as a fiduciary. And, incidentally, any choice the customer makes, you win. You can protect your bank, which is your depositors' funds, your community's funds, and you can make money. You have reduced your exposure to risk, and hung onto your casino deposits.”

The room was silent. A tone sounded and a female announcer's voice came on over the room's speakers.

“This concludes our afternoon breakout sessions,” she said. “Please join us for a wine and cheese reception in the Pocahontas Room.”

For a moment, the bankers remained in their chairs, mulling ethics, profits, and legality. It was, as JW had said, a new era. The buzzword at the conference was aggregation, which meant cobbling many small victories together into larger portfolio gains. It's what the big boys were doing, and it required intelligence and agility at the margins—the very qualities JW was talking about. The law was no longer a simple
set of boundaries to the playing field; it was sports equipment to be used in the game. Community bankers needed to get more aggressive or they were going to get eaten for lunch. They had to remember their role. They weren't legislators or social workers. They weren't there to right the greater wrongs of society. They were bankers. And as the plenary speaker had said in the morning keynote, “If you're not at the table, you're on the menu.”

Jorgenson shifted off the wall. He drew his hands from his pockets and started to clap. The bankers glanced over at him and then joined in. He walked down the steps along the wall as the applause continued. The bankers gathered up their briefcases and swag bags and began to mill out.

“John White,” he said, stepping up to the table, “you are a strategic genius.”

JW smiled wryly and coiled his power cord. “I guess that's why you made me branch president.”

Jorgenson laughed. “Guilty as charged. You got time for a Grain Belt?”

JW looked at the clock and winced. “I told Carol I'd be home for dinner. It's a four-hour drive. Can I take a rain check?”

He saw a cloud pass briefly across Jorgenson's face, then it was gone. Jorgenson smiled and nodded. “Yeah, sure. How is that beauty queen?”

“Oh, you know Carol. Always into something.”

The two of them walked out onto the mezzanine, where conference-goers were congregating in small groups or speaking with industry reps at display tables along the walls. Like royals, they strolled toward the glass balcony and rode the escalator to the vast atrium below.

They shook hands at the bottom, and then JW pushed
his way out into the afternoon sun. It was bright and hot, and as he turned he could still see Jorgenson, a ghost beyond the glare of the plate glass, standing there watching, with a hand in his pocket. For an instant, his expression seemed almost malevolent, but then the glare shifted and Jorgenson smiled and waved. JW waved back and stepped across Nicollet Mall, heading toward his parking ramp.

2

Jorgenson's expression stayed with JW as his dirty white Caprice made its way north and west into a purple-orange sunset. He had left the interstate just before Duluth and taken a four-lane, divided artery that angled off into the north country. After an hour it lost its median and came together, squeezing its way into a small town and finally ending at a flashing red light. JW turned onto a narrow, two-lane capillary that shot out past a Cenex station and a Dairy Queen (three people in line at the small yellow window—a handful of kids romping on a red picnic table—a girl crying over a dropped cone on the sidewalk, long light in her blonde curls) and then he was out into the rolling farm fields and sudden bluffs of Minnesota's Iron Range.

The region's iron and taconite mines had sprouted dozens of little towns full of Finns, Croats, Cornish, and Italians—all of them stout, resilient people who could cheerfully survive decades stooped in tunnels moiling with pickaxes, so long as they had beers and pasties and the love of friends and good women. An hour ahead, in one of those range towns with its little Victorian houses covered in asbestos shakes, his wife Carol and their thirteen-year-old daughter Julie were waiting for him.