Sunday, April 05, 2009

A 1-Man Toxic-Asset Eater:The Banker Who Said No

While the nation's lenders ran amok during the boom, Andy Beal hoarded his money. Now he's cleaning up--with scant help from Uncle Sam.

Andy Beal, a 56-year-old, poker-playing college dropout, is a one-man toxic-asset eater--without a shred of government assistance. Beal plays his cards patiently.

For three long years, from 2004 to 2007, he virtually stopped making or buying loans. While the credit markets were roaring and lenders were raking in billions, Beal shrank his bank's assets (Beal Bank) because he thought the loans were going to blow up. He cut his staff in half and killed time playing backgammon or racing cars. He took long lunches with friends, carping to them about "stupid loans." His odd behavior puzzled regulators, credit agencies and even his own board. They wondered why he was seemingly shutting the bank down, resisting the huge profits the nation's big banks were making.

Now, while many of those banks struggle to dig out from under a mountain of bad debt, Beal is acquiring assets. He is buying bonds backed by commercial planes, IOUs to power plants in the South, a mortgage on an office building in Ohio, debt backed by a Houston refinery and home loans from Alaska to Florida. In the last 15 months Beal has put $5 billion to work, tripling Beal Bank's assets to $7 billion, while such banks as Citigroup and Morgan Stanley shrink and gobble up billions in taxpayer bailouts.

Beal has barely got a dime from the feds. A self-described "libertarian kind of guy," Beal believes the government helped create the credit crisis. Now he finds it "crazy" that bankers who acted irresponsibly are getting money and he's not. But he wants to exploit their recklessness to amass his own fortune.

"This is the opportunity of my lifetime," says Beal. "We are going to be a $30 billion bank without any help from the government." Not much next to the trillion-dollar balance sheets of the nation's troubled banks, but the lesson here might be revealed in the fact that this billionaire is not playing with other people's money--he owns 100% of the bank and is acting accordingly.



At 4/05/2009 10:48 AM, Anonymous Anonymous said...

Notice also that Beal is from high tax, high regulation, big government Michigan and moved to low tax, low regulation, small government Texas where he made his fortune. This guy in and of himself is a case study of how Michigan runs off productive members of society and Texas attracts them.

At 4/05/2009 3:03 PM, Anonymous Anonymous said...

He also seems like a current day Andrew Mellon. The government is trying to ruin him and he keeps winning.

At 4/05/2009 3:06 PM, Anonymous Anonymous said...

He is not the first one to make money off of bad assets. Other billionaires were made after the RTC liquidated their assets for a song during the 1990 recession.......

At 4/05/2009 8:35 PM, Blogger Colin said...

"As for the cause of this mess, Beal points a finger at the government for giving its imprimatur to just a handful of credit rating agencies, then insisting that money market and pension funds buy only paper with top grades. He also blames government for luring people into debt by backing everything from bank deposits to Fannie and Freddie to student loans."

Seems to me you don't hear a lot about that first part, about the role played by government in making rating agencies such key players in the whole mess.

At 4/05/2009 11:26 PM, Anonymous Bill Conerly said...

It's been known for some time (there was a McKinsey study on the subject) that the firms with the best long-term performance do two things:
1) they enter recessions with less debt than average, and
2) they exit recessions with more debt, after having bought out competitors or made other strategic acquisitions.

Mark, if you'll allow me to toot my own horn, I wrote about that in Businomics, p. 159 (more info at

I don't want to take anything away from Mr. Beal's achievement, but plenty of other businesses should be doing the same thing. Some are.

At 4/06/2009 9:55 AM, Blogger OBloodyHell said...

> The government is trying to ruin him and he keeps winning.

Don't worry, Obama has a plan to stop this relentless advantage-taking of the poor and downtrodden businesses out there.

Won't do those businesses a lick of good, since all the money will go to ACORN and the like, but it'll do a great job of taking down people like Beal who actually think that smart investing and careful use of assets should pay under the Modern Egalitarianism...


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