Pit Stops on The Road Of Life
MY START WITH SBA
I joined the National
Bank Examiners in June, 1968, fresh out of King’s College with a B. S. in
Accounting. I’d been an avid pinochle player for four years in the dorms and
my slightly-above-average 2.29 GPA reflected that slothfulness. The
“Big 8” accounting firms wanted no part of me but I wasted some of their
recruiters’ time anyway. Ultimately,
I chose a Federal career and it seemed like a wise move at the time.
Retiring at 55 with 30 year’s service, good sick and annual leave, job
security---all that appealed to me.
chose to work out of our Philadelphia office and I readily found the on-the-job
training to be very interesting. However,
upon graduation, I’d lost my draft deferment. By December, “Uncle” wanted
to make cannon fodder of me in Vietnam. I
joined the Navy and, in a tour of a little over two years, never left the East
Coast. I wrecked my back carrying
heavy stuff and the Navy removed a disc from my back on my 24th
birthday, August 17, 1970. It took
eight more months of rehab before they sent me home.
I was discharged on May 4, 1971.
returned to the examiners who had held my position open but I made a fateful
choice. I had tired of the Philly
area and they acceded to my request to transfer to the Wilkes-Barre office.
I took an apartment on New Alexander Street in South Wilkes-Barre and got
back on the job. At this point I
ran into a tide of resentment. I ran into several other young examiners who had managed, in
one way or another, to avoid the draft and stay on the job.
With the extra two years’ experience, they were much more knowledgeable
than I. I’d forgotten a great
deal of what I’d learned in my prior six months of training.
Banks around the area were merging. That meant less work to do around
home and, therefore, more time on the road.
It was clear that I was an impediment.
For every day that I got assigned a job near home they had to go on the
road. When I did go with
them, my presence wasn’t welcome, for I didn’t belong to their “old
boys’ club.” Rather than go out
drinking with them, I’d spend my motel evenings in my room, reading or
took the other examiners a little over a year to execute their plan to get rid
of me. Overtly, they bedeviled me
by ordering all sorts of products to be sent by mail to my apartment. I initially sought out the Postal Inspectors but they
declined to get involved if I couldn’t suggest whose handwriting was on the
order slips. At the same time, the
senior examiners were reporting to HQ that I was dumb, that I spent too much
time talking to the tellers, and that I’d never be a satisfactory full-fledged
examiner. By June of 1972,
they had convinced HQ that I needed a lot of retraining but, before they
could order me back to the “trainee list”, Hurricane Agnes intervened.
I didn’t realize it at the time, but Agnes was the second-best thing
that had happened in my young life—second only to having won the Sordoni
Scholarship to attend King’s.
was, up to that time, the greatest disaster to strike the US, with respect to
both the area it affected and the dollars’ worth of damage inflicted. The U. S. Small Business Administration (SBA), which the
handled Federal Disaster Loan Program, was in a fix. In February, 1972, an
earthen dam belonging to the Pittston Coal Company had collapsed in Buffalo
Creek, WV. In May, Rapid City, SD
suffered extensive flooding. When
Agnes came along in June, SBA simply didn’t have enough disaster troops left
to handle her. The decision was
made to borrow employees from other Federal agencies.
“Who knows a lot about loan making?
Why, bank examiners do !” I was assigned to the Wilkes-Barre SBA
disaster office for a six-week shift.
was assigned to recommend approval on home loans and I took to the job like the
proverbial duck to water. Rather
than the sometimes-boring task of poring over bank records, here I got to meet
with flood victims. I interacted
with them as I screened in their applications and then saw their thankful relief
as they walked out weeks later with their loan proceeds checks.
It was nice to go to the same office every day and not have to go out on
the road for a week at a time. The
overtime was a BIG plus and, with my first couple of paychecks, I ran out and
paid off my student loans. Still
flush with cash, I began my lifelong investing career by buying 100 shares of
PP&L through Bache and Company a block from our office.
four weeks into my planned six-week stint at SBA, I got the call from the
I was to cut short my stay with SBA and return for more training.
I was at a career crossroads. I
dreaded going back to where I was clearly not wanted.
On the other hand, SBA was in the process of approving what would turn
out to be 20,000 home loans in the Wyoming Valley. Surely, they’d have to set
up a servicing office to handle them for the next 30 years.
I spoke to the SBA Branch Manager and pointed out that, as a vet with a
service-connected disability, I had plenty of Civil Service status. I would
certainly qualify for a permanent position.
Pleased with my work to date, he readily agreed to hire me on as a
temporary employee and to speak on my behalf when funding came through for the
permanent office. I called the
examiners’ HQ back and told them bluntly “I AIN’T coming back !! I’m
staying here where I’m wanted !!” I
mailed back my ID card and some other documents and I never heard from them
spent the rest of the summer living with my Dad, for apartments were extremely
hard to find anywhere near the flood zone.
Sometime during that span, my old neighbor Gerry Missal, who had
sheltered me for five days during the flood, came to my rescue again. I ran into him at K-Mart, I think, and he told me about some
new apartments in Wilkes-Barre Township. Their
construction wouldn’t be complete until September but he had put down a
deposit to hold one for him and Sylvia. He
put down another deposit on my behalf and I paid him back the next day at his
was a presidential election year as well as a time for the entire House of
Representatives to stand for election. In
such years, Federal benefits are often extended to make the incumbents look
good. Given the scope of Agnes and
the preceding disasters in the Spring, by July Congress passed and President
Nixon signed what became known as the “Agnes forgiveness clause.”
Loans were made with a 1% interest rate, and best of all, the first
$5,000 did not need to be repaid and were, essentially, grants.
SBA set up two loan processing offices in Wilkes-Barre, both on South
Main Street. Although I knew quite
a bit about business loans from having examined how banks made them, I chose to
work on home loans in the office just a block from Public Square
We loan officers quickly learned SBA’s rules. The purpose of the loans was to restore flood victims back
to, as close as possible, their pre-flood condition, but not better than that.
Loans of less than $10,000 needed no collateral.
In many cases, entire homes or apartments had been washed away and there
was simply no way our loss verifiers could be absolutely sure what had been
lost. The verifiers met with area
contractors and learned the going rates in our area. Rebuilding reconstruction
costs were figured on a so much-per-square-foot basis.
Personal property allowances were set on various bases such as $500 per
person for clothing, $1,000 per room for furniture, etc.
“Agnes forgiveness clause” legislation, as I recall, didn’t spell out
exactly how it was to be interpreted, so SBA came up with its own workable
definition. We decided that it
would be one $5,000 forgiveness per married couple, single person, or business.
If a man lost his home and his proprietorship business, he could get two
separate loans but only one would have the full forgiveness.
A two-person business partnership loan could get $5,000 but such was
considered to be $2,500 for each partner. Each
partner could get another $2,500 forgiven if he happened to also need a home
loan. Corporations did not have the
$5,000 divided amongst its stockholders.
home loans, we were often confronted with considerable calculations for the
forgiveness. We’d encounter a
situation where a parent had died before (sometimes YEARS before the flood) but
the heirs hadn’t then ever actually titled the homestead in just one or two
names. We were charged with making
loans to only the precise owners that owned it as of June 23, 1972 for it was
truly only they who had suffered the loss. It became necessary for sometimes
five siblings to co-sign. In a few
cases, one reluctant sibling would refuse to sign and the property never did get
rebuilt. In the case of the five
signing the loan papers, it was determined that each could be said to be
receiving 1/5 of a forgiveness, or $1,000.
Should that sibling also have damage to their own house, they’d be
afforded another $4,000 forgiveness on their own individual loan.
situation arose a few times: a parent had given their child, as a wedding
present, a lot neighboring the homestead. The
child and their spouse then built a home on that gift lot. Later on, the young couple decided to add a utility shed in
the backyard but found that they didn’t have quite enough room for it on the
gift lot. “No problem”, the
in-law said, “put it across the line on my property.”
That situation worked out fine until Agnes and SBA came along.
We insisted that any money to replace the shed had to be loaned to the
actual June 23, 1972 owner, the in-law. Absent
the real owner’s signature on the note and the accompanying mortgage, SBA
couldn’t take as collateral the shed and the land it sat on.
We ran into in-laws who were elderly, wanted nothing to do with a loan,
and refused to sign. We’d offer a
reasonable compromise: “Look, we
HAVE to have you on the loan but there’s nothing saying you can’t have the
children on there as co-makers. You
can work a deal with them; you join in but they will have to make the
payments.” I saw even that
compromise turned down more than once. The
result was that the shed didn’t get replaced with SBA funds.
Our best advice was “Next time, deed over to them a sliver of land on
which to place their shed.”
a flood victim myself, I was entitled to apply for an SBA loan and I did so.
I was totally honest about it and spent considerable time figuring out
what to claim. My apartment
building still stood, so the loss verifier would have no problem seeing that my
second-floor apartment had seen only a foot of water.
I applied for and received $500. I
properly recused myself from working on my own loan and another loan officer
processed it. I did get a look at
my file and was amused at the loss verifier’s report.
He had been totally stumped at my minimal $500 claim.
Apparently, all the second-floor neighbors in other buildings in the
complex had lost, you guessed it, $5,000 !!
Golly, just the same amount as the maximum forgiveness !!
I was the only one who had told the truth.
most flood victims, I had initially gone to a “one-stop” center to apply for
whatever benefits were available. The Salvation Army was handing out clothing
vouchers and the Red Cross had cleaning supplies but I didn’t need those.
I had signed up only with HUD for help with housing.
HUD eventually set up massive trailer parks around the area. In the
alternative, they would pay something like 75% of the rent if one were lucky
enough to find an apartment. Since
I had found one with the help of my neighbor, Gerry Missal, I would just send in
my rent receipt and get back a HUD check. I
felt a little guilty about taking this help.
Here I was, fully employed, with the overtime bringing in more money than
I’d made pre-flood. HUD, however,
asked no questions about income. Their
sole criterion was that if you were a flood victim, you were eligible.
I shrugged, said “What the heck ?”, and took the money.
In December, I got a call from HUD: they had a trailer for me !! A
crooked person would have accepted the trailer and rented it out for a profit
while, at the same time, taking the rent-reimbursement checks.
Ever the honest government employee, I told them how they were already
aiding me and I turned down the trailer.
work as a Loan Officer (L\O) involved chiefly reviewing loan applications and
the loss verifier’s reports, applying the forgiveness factor, calculating the
loans terms, and then passing them on to my supervisor for final approval.
With a 30-year maturity available and a 1% interest rate , we declined
very few applications. When we did, it was usually because the loss could not be
verified. Applicants had listed a
contact phone number at the place where they’d ended up living post-flood.
Sometimes an owner-occupied dwelling had washed away and the loss
verifier met no neighbors who could confirm the applicant’s residency.
In that case, we L\O’s would make the call.
Generally, the applicant would bring in a copy of their deed to prove
ownership and the loan would then be approved.
were more frequent on renter applications for, life being what it is, renters
move more often than homeowners do. Often
the loss verifier could find no neighbors who knew the applicant.
In these cases, residency was proven with either a copy of their lease or
a sworn statement from the landlord whose deed we had seen.
From time to time, a denied applicant couldn’t be reached by phone and
got a denial letter instead. They
would come storming into our office looking for someone to chew on.
For whatever reason, be it my even temperament (LOL) or good looks, I was
designated as the “Reconsideration Loan Officer” to handle them.
They would calm down when I explained that all they needed was an
affidavit from their landlord and they’d leave.
They usually returned with one in a day or two.
time, I began to notice that quite a few denied renters all had lived at one
particular address in South Wilkes-Barre. I
didn’t know the place and, offhandedly, remarked to my supervisor that it must
have been quite a large apartment complex like the one where I had lived.
I became somewhat familiar with the landlord’s name, Tattersall, and I
think I may have met him once when he brought in his deed.
His notarized statements were boilerplate “I hereby certify that XXX
rented from me at ________.” The
sameness wasn’t unusual in that his entire complex must have been wiped out.
staff consisted of just two SBA permanent personnel (the branch manager and the
lead attorney), many temporary L\O’s and loss verifiers with prior disaster
experience, and a hoard of local hires like myself.
It wasn’t unusual for us locals to spot applications from people we
knew. Lew Thomas was a fellow
local hire about 6 years older than me. I’d heard of him, Doc Thomas’
son from Lake Silkworth but, otherwise, didn’t know him at all.
Lew worked in our Unsecured Closing section where no legal documents like
mortgages were needed. Borrowers
needed only to sign a Note and walk out with their check.
Lew was somewhat handicapped (he limped severely) and seemed to have a
drinking problem that was evident on his breath.
I didn’t have much confidence in his professionalism and doubted that
he even asked for identification from borrowers.
I had worked a few days in Unsecured Closing when they were shorthanded
and had found several men coming in with girlfriends who’d forge the man’s
wife’s name on the Note. I took
Lew to be no more than an less-than-reliable oaf that SBA had hired under some
“Help the Handicapped” mandate.
retrospect, had I not been so overworked, I WOULD have smelled a rat when Lew
would saunter by my desk and ask about applications I was working on. “Oh, I know that guy”, he’d say, “give the poor
fellow a break.” Lew knew how
much we could allow under the various categories of personal property and would
cajole me to permit the maximum even when the items made little sense.
I would just shoo him away with a “I’ll do whatever is legal” and
then would proceed normally. I
failed to notice that a great majority of applications in which he expressed an
interest were denials from Tattersall’s property in South Wilkes-Barre.
the Fall of 1973, Lew’s scheme became evident when I testified in Federal
Court in Scranton. He’d been in
cahoots with Tattersall. At a Lake Silkworth bar, Lew would gather assorted
low-life cronies who hadn’t been touched by Agnes and help them fill out
fraudulent loan applications. All
supposedly had rented from Tattersall and their losses pretty much mirrored the
allowable amounts. Every claim was
for the maximum $5,000 forgiveness—crooks couldn’t be bothered with repaying
an actual loan. A few slipped
through the cracks and got approved on the first go-‘round by L\O’s other
than me. The ones that got denied
were quickly supported by Tattersall’s false affidavits. I imagine that, when
the scheme was revealed, the FBI probably investigated ME as well, for ‘twas I
who approved the former denials !!!! If they did, I never got wind of it and
only found out when I got a subpoena to testify in a criminal case.
crooked schemes go, Lew’s wasn’t too shabby in the planning but it failed
miserably in the execution. The crony would sign the Note, Lew would hand him
the check, and they would walk together into a bank branch in the same building
as our office. A teller had figured
that Lew, who’d she’d seen many times on his way to the coffee shop, was an
SBA employee. She took notice that
the borrower would cash his $5,000 check at her window and then hand some of it
to Lew on their way out !! What she
saw was him getting his 10% cut of the action.
She told her Branch Manager, he told the SBA Branch Manager, and the FBI
swooped in. The results of one
trial will be reported in my next chapter.
loan-making lasted through the Winter of 1972-73 and gradually slacked off.
Local temp hires were being let go as the work petered out but I survived
until the last. I like to think it was because I’d done such a good job but
I also owed quite a bit to the Branch Manager who’d hired me as a temp.
He, after all, realized that I had given up a career position to stay
with SBA. In early May, 1973, he
actually seemed kind of embarrassed to tell me that the funding for the
permanent loan-servicing office wasn’t coming through as quickly as planned
and that he had to let me go. I was ahead of the game to the extent that I had, over the
past eleven months, amassed quite a tidy sum from all the overtime but, still,
where would I go from here? I moped
about for only about a day when a brilliant idea hit me.
“Aren’t they having floods along the Mississippi now?”, I asked the
Branch Manager. “Maybe I could go
out there and do the same job I’ve been doing here.” He got on the phone with his Central Office and soon got back
to me. “Yep”, he announced,
“can you report to Springfield, Illinois in a few days ?” So began the next phase of my SBA career.
See my next chapter, which is titled “Disaster Bum.”
Ronald E. Hontz
33 Whitcraft Lane
cell phone (717) 309-1402