"I Couldn't Get A Loan For My Small Business, As the Bank Determined I Had No Job"

Kyle Curtis

On March 30th, overflow crowds in both Senate and House hearing rooms listened to testimony in support of State Treasurer Ted Wheeler’s proposed “ virtual” state bank. The purpose of this proposed bank is to ensure that wealth and revenue generated within Oregon is then cycled throughout the state, put into the hands of entrepreneurs and small business owners who would then invest these funds into their businesses. These investments would then, in turn, create jobs for our beleaguered state. These investments and job creation efforts would be less likely to occur if the funds were distributed to US Bank or Wells Fargo, or other large corporate banks who- due to their inherent conservative, risk-adverse nature- would prefer to sit on record-setting profits instead of pumping these dollars back into our country’s economy, resulting in the current state of entrenched long-term unemployment at a time of record levels of prosperity ever seen on Wall Street.

The proposed state bank- based on a successful similar model in North Dakota- would be quite instrumental in tackling the concern of joblessness in Oregon. This might explain why an announcement was made at the beginning of the hearing that there was a lot of testimony lined up in support of this bill, and no testimony lined up in opposition. The crowd applauded this bit of news.

I expected the hearing to be standard boiler-plate discussion of the facts and figures regarding the benefits of a state bank. A half-hour into the hearing, however, a piece of testimony was given that veered far from the standard issue discussion and hammered home the need for an Oregon state bank. I was listening to the hearing at home, multi-tasking as I was doing other work. As such, the background details provided by the woman speaking were filtered into my subconsciousness. But when I heard her state, “Our business was denied a loan by the bank because they determined we had no job” I could no longer listen to her testimony with less than full attention. This comment caused me to do a double take- a rare thing to do when listening to streaming audio. Perhaps the female speaker knew that such a “Huh?" moment would occur to those listening in the House hearing chambers as well as the Internet as she repeated her comment a second time, prefacing it by stating “Let me be clear…” After hearing this statement a second time, I removed my headphones and simply had to laugh. The idea that small business owners would be denied loans because they supposedly "didn’t have jobs" was simply a clear indictment of our present irrational banking system. I needed to find out who this woman is and have her provide a more detailed explanation of her story.

“I gotta say I wish my story wasn’t so good,” joked Andrea Malmberg, cattle rancher and owner of Beyond Organic Beef, or BOB. Based out of Union, BOB is a multi-pronged cattle ranch, supplying custom-ordered beef cuts that are exempt from USDA processing standards. The closest federal processing unit is three hours away, and though BOB doesn’t use it, they do sell cattle to other ranchers that do go ahead and send them to the USDA processor. BOB’s cattle ranch has been in ownership of the family of Malmberg’s husband for generations though not always in Oregon, having relocated from Wyoming a few years ago. BOB now operates on two different sites in eastern Oregon, spanning 700 acres.

With such background details, one would imagine it should be fairly cut and dried for the Malmbergs to get a loan for their beef cattle business. As Andrea explained it, they had a loan on their ranch that they wanted to re-finance. The Malmbergs decided to take out a mortgage on their house, as it was within Union’s urban growth boundary and contained no farm area. The Malmbergs had their house appraised, and were set to get a mortgage with a much lower interest rate, which they would then turn around and pay off the loan on their ranch. And with the extra money, hire a marketing expert for their organic beef business. You know- do the whole "job creation" thing everyone is so concerned about!

Although one would think it would be cut and dried to get a new mortgage, complications arose. “The underwriters couldn’t understand anything,” said Andrea. “They kept calling our accountant and attorney, asking for more details.” The underwriters were interested in her husband’s 1099 form and also in Andrea’s decision to quit her job for Oregon Rural Action to take a position with the Savory Institute where- although she was earning nearly three times as much- she was hired on as a contract employee. Ultimately, the bank determined that despite being co-owners of Behind Organic Beef, neither Andrea nor her husband actually had a job. “According to the bank,” said Andrea. “We were just two unemployed Oregonians, trying to get by.”

What about their custom-order organic beef business? Certainly BOB provided assets that could be used as collateral against a refinanced mortgage? “That’s just it,” said Andrea. “The bank never requested any paperwork regarding revenue or sales. They never asked for a balance sheet or a profit-loss statement. They only asked for pay stubs, W-2 forms, and tax returns, and then made a determination passed on those. Basically, the only conclusion I can make is that nobody who works in agriculture can get a mortgage in this state!”

“Doesn’t Andrea have a great story?” asks Steve Hughes, the state director of the Working Families Party. “Wait, perhaps let me re-phrase that. By ‘great story’ I mean that Andrea’s story is a demonstrative story of what is at hand regarding our family farmers and ranchers who are unable, in this current climate, to get credit from the large banks. Credit has dried up and these small businesses simply can’t get lending. The stories such as Andrea’s and those faced by other small farmers and ranchers demand prominent attention, as they demonstrate the need for a state bank and they need to be prevented from getting lost in the legislative shuffle!”

Although the original idea proposed state bank was modeled on the Bank of North Dakota- the only state bank in the country, working as a funding resource with other financial institutions- the proposal has sense been modified to become a “virtual” state bank. “This is an outcome of the legislative process,” explains Hughes, “when a conclusion is sought that everyone can agree with. The “virtual” state bank proposal is Ted Wheeler’s effort to create a state bank that would not have a retail presence and offer no competition to commercial banking. The countervailing forces against the proposed state bank are a powerful group, but the opposition to the state bank idea is softening.” Indeed, to provide an example of this softening opposition, Andrea mentioned that at the March 30th morning Senate hearing on this issue, the Oregon Banker’s Association were the only ones testifying against the proposed state bank. By that afternoon’s House hearings, according to Andrea, the Association had “changed their tune” and testified in support of a “virtual” state bank.

"An Oregon State Bank, virtual or otherwise, would greatly strengthen the ability of our community banks and credit unions to make loans to Oregon farms and businesses,” said Barbara Dudley, the co-chair of the Oregon Working Families Party who is helping spearhead the effort to establish the state bank. “A strong local banking sector is essential to building a strong local economy.”

An upcoming work session has been announced for SB 889, the Senate’s version of the “virtual state bank” scheduled for Monday, April 18, at 1 pm in hearing room B. The Senate General Government, Consumer, and Small Business Protection Committee, chaired by Chip Shields, will hold further hearings on this proposed legislation. If you are interested in this subject, come to Salem and make your presence known, and quite possibly help get this legislation voted on and passed to the House for consideration.

By doing so, Andrea Malmberg would be one step closer to secure a refinanced mortgage and be able to invest in and expand Beyond Organic Beef, creating at least one more new job.

By Kyle Curtis April 12, 2011