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gether make up the state’s economy. Are the people Richards described to the committee composites or inventions of staff at the State Treasury or the Richards campaign office? Not exactly. THREE YEARS AGO Jane Pratt and her husband owned three small busi nesses and employed six workers in Austin. Their inventory, travel trailers, campers, and recreational equipment, according to Mrs. Pratt, was financed by a “floor plan,” a lending arrangement by which they paid interest on large inventory items and paid the principal as the items sold. They had, in effect, a line of credit. Since 1972, when they walked into the lobby of the now defunct Bank of Austin, the Pratts had done business that way. Then, two-and-a-half years ago, a loan officer at Bank of Austin required the Pratts to convert their floor plan to a regular monthly note. The change resulted in the Pratts falling behind in their payments and ultimately one note was called. In January of 1989, to meet their financial obligations, the Pratts liquidated their rental inventory, selling 10 travel trailers and closing one of their three businesses. For the Pratts, the loss of credit meant the gradual loss of a business that they had begun building in 1972. A second note was called and more inventory liquidated and their final loan is now in a special collections bank operated by NCNB, the large North Carolina-based bank holding company that acquired the bank where the Pratts had done business. “I couldn’t even find out how much I owed, but I kept paying,” Mrs. Pratt said. The reason her note wasn’t listed on the computer at the branch where she banked was because it had been transferred “to the Commercial Recovery FDIC Bank at Fifth and Congress,” a junk bank operated by NCNB. “I owe $37,000 on that loan. Less than a year ago I owed $50,000. You tell me what I’m doing wrong. And the federal government is paying NCNB to service that loan.” “You know, we never let a person go. We just told them to start looking for work and when they found jobs they left,” Pratt said of her employees. Was her business a dinosaur that was destined to close? Pratt, who now belongs to CURED, \(Citizens United for doesn’t think so. Even when the economy of Austin was in a recession, the businesses made money as long as they had a banker who would work with them. “Even when we didn’t [have the cooperation of a bank] we made money and survived,” Pratt said. The Pratts alone now operate the what remains of their business. They employ no one. Howard Kellsis another CURED member who attended the Austin hearing of the banking committee. He had never missed a payment on a four-year-old $180,000 real estate note on a parcel of land in Northwest Austin, he said. During those four years, Kells moved the property through the city of Austin’s permitting process and obtained approval to build 150 apartment units. In November Greater Texas National Bank, which has been taken over by the FDIC, informed Kells that his note would not be renewed. “The FDIC took over in November,” Kells said. “They are liquidating assets and told me I need to move the loan or pay it off.” They also informed him that the land adjacent to his property was appraised at $6,000 an acre, considerably less than what Kells contends his land is worth. “The FDIC owns the land and they don’t even have it zoned right,” Kells said. He said the FDIC lists the property as approved for single family residences, while the city has it zoned for multifamily a much more lucrative zoning classification. The FDIC error lowers the value of all the property in the area. And, should the FDIC dump their adjacent property, they will further lower the value of the privately held property in the area. “I’m going to have to become a Chapter 11 debtor to get a fair appraisal of my property,” Kells said. In a bankruptcy court, a judge and trustee determine the worth of property to be liquidated. “So I take a loss and I’m out of my profession,” Kells said. The FDIC, recognizing that raw-land notes represent a large percentage of bad loans on bank books across the state, is unloading such notes. But to whom? “The FDIC will sell that note to someone else at a discount but they won’t negotiate with me. They won’t negotiate with the debtor,” Kells said outside the University of Texas lecture hall where the hearings were conducted. “Another bank won’t take the same kind of loan that got other banks in trouble,” Kells said. “I don’t want to be an adversary of the FDIC, I just want to continue to pay on my note and develop my property.” He admitted that his prospects are not good. I S THERE A credit crisis in Texas? Well, in some sectors there evidently is. But not if you want to buy a consumer item, according to Texas Banking Commissioner Ken Littlefield. Banks are liquid and they’re marketing credit cards with which consumers can buy electronic items, most likely manufactured in Japan. The statewide numbers on consumer loans are way up and business loans are down. Perhaps the idea of credit crisis is best understood when held up to the light of the sophisticated formula that John Kenneth Galbraith uses to determine when a recession becomes a depression. “When your neighbor is unemployed, that is a recession. When you’re unemployed, it has become a depression.” Is there a credit crisis in Texas? Ask your neighbor. Can a machine-shop owner get a loan in 1990? Henry B. Gonzalez, whose o .b .s l e T.rv …er JUNE 29, 1990 VOLUME 82, No. 13 FEATURES The View from Below By Brett Campbell 5 A Fine Mess By Erwin McGee 7 A Volatile Neighborhood By Helen Fanick 10 Oil Slicks By James Ridgeway 12 Solomon Ortiz Hits the Beach By Dan Carney 14 Greyhound Bust By Stephen Merelman 1 5 A Tribute to Resistance By Barbara Belejack DEPARTMENTS 17 Editorials 2 Political Intelligence 16 Journal 18 Social Cause Calendar 19 Books and the Culture Two Police Stories By Steven Kellman 20 Afterword The Deal of the Art By Tom McClellan 22 vision is broader than that of most Congressmen, had half an answer for his Republican colleague from Dallas. “That machine shop is a laundry now, Gonzalez said. We’ll buy our machines from abroad. And take in each other’s wash. L.D. THE TEXAS OBSERVER 3