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.