The photo at the left is of a five inch high stack of unsolicited (junk) mail credit card solicitations accumulated since the start of this summer. This is not all the junk mail I have received; the stack pictured represents ONLY bank credit card solicitations, primarily from Chase and Citi banks.

Pictured next to the pile of credit card junk mail is a coffee mug gift from our former mortgage company, Washington Federal Savings and Loan. Not to be confused with Washington Mutual Bank which was the largest bank failure in US history in 2008 and eventually taken over by JP Morgan Chase, the much smaller Washington Federal Savings and Loan has completely survived the financial mortgage breakdown of 2008 and continues to prosper during these tough financial times. They haven’t taken a cent of government stimulus buyout or been acquired by another company; to my knowledge they are not hemorrhaging under the cloud of excessive home foreclosure nor have I heard of them laying of a single employee. Why?

A bit of personal history first – During the first half of my professional career I worked in banking. My entry level job with the bank was repossessing cars from people who couldn’t make their car payments. The idea behind that training path was to ensure that future loan officers had intimate knowledge of what a bad loan was… so as not to make any themselves.

Later one of the first loans I ever made was to a couple who had previously declared bankruptcy. Each morning the branch manager would review the loans made by his officers the previous day. When he saw the loan decision I had made he sternly asked me to justify my decision. I explained that even though this couple had had their loans forgiven in bankruptcy, once back on their feet, the repaid their debts even though they were no longer required to. The sense of ethic this customer had shown convinced me they were a worth risk; my branch manager accepted my decision.

Back in those days interest rates were controlled by Federal and State regulations. There were “usury” laws on the books; it was illegal to charge excessive amounts of interest, fees or penalties. If you bought a car from a car dealership, you needed 20% of your own cash down for bank financing. A mortgage loan on a home required 10% down unless it was a federally guaranteed loan; 20% if it was not owner-occupied. There were strict debt-to-income and loan-to-income ratios in which a loan applicant needed to fall within for the loan to be approved.

Savings and Loans (like Washington Federal) carried mortgage loans on their own books as long-term investments. Banks such as my employer sold their mortgages on the “secondary market” at a discount for funds which they could turn around and lend out commercially for shorter term at higher interest rates. The system worked, and more importantly, it was stable.

But after I left the banking industry, the whole financial industry changed radically. “Whatever the free ‘market’ would bear” became the new rule. Usury laws were scrapped; credit card rates soared to amounts that “Loan Sharks” previously extorted from hapless debtors. Banks dropped completely out of car lending as the car companies (GMAC, General Motors Acceptance Corporation, Toyota Credit, etc.) could provide new car financing for 0% down over five years. Mortgage brokering took off as brokers, hungry for lucrative commissions, helped unqualified borrowers “fudge” their applications to make them appear that they qualified. Housing prices soared as demand from a new class of borrowers flooded onto the market. People were “flipping” houses, buying and reselling them for a profit a mere month or two later. It was the Wild West of Finance – the rule was that there were no rules.

Washington Federal Savings and Loan still makes loans the “old fashioned” way. They recently gave my wife and I each a lovely coffee mug as a thank-you gift for the half-dozen or so now paid off loans we have had with them over the years. If we ever need another loan or another mug, we know exactly where we are going to go.

The other day there were only four items received in our mail box; two pre-approved credit card solicitations from Chase Bank, two each for my wife and me. I added them to the recycle pile pictured above. I am going to keep adding to the pile until the November 2012 election.