Autobiography - The Galindo Group

Ram Galindo THE MAKING OF AN AMERICAN Page 127
Investors walked away on any outstanding and future obligations, making it impossible
to pay real estate debts to banks and S&Ls. As a consequence, S&Ls, most of whom
had been playing a triple role of depository, lender, and investor, couldn’t return the
principal to their depositors. A financial debacle without equal in our history descended
upon the real estate and banking industries. It is my fervent hope that politicians never
forget the unexpected consequences that frequently are attached to what at the time
seems to be good social legislation. And I hope those who read this book, if they are not
aware of this sad chapter in our economic history, will learn and become wary of heavy
government interference in any aspect of our lives.
In keeping with the laws of nature as applied to a capitalist market and in the absence of
protective regulation, no doubt investors will continue to suffer future losses. Perhaps
some day some bright economist may calculate the cumulative cost to society of losses
wrought on investors by our present semi-open capitalistic system and compare them
with the known costs caused by the unintended consequences of government rules and
regulations. My opinion is that Adam Smith’s invisible hand produces lesser losses to
the economy that the Soviet’s Gosplan approach.
Needless to say that, inexorably drawn by the forces buffeting the economy, I lost
heavily in the various limited partnerships I had formed to build student housing at
Spring Heights, as I called my housing project in the University Park subdivision. My
investors lost as well, but I think they understood their loss was caused by actions of
powers above our control, which was a poor consolation because for many it had been
all they had. My lenders foreclosed on the loans, which, as general partner, I had
personally guaranteed. I assumed responsibility for the loans and negotiated terms of
repayment for the deficiencies left after foreclosure with the lenders, and satisfied them
as promised. Almost eight years later, by the second quarter of 1993 I had cleared them
all.
At the time of this debacle, which in Texas lasted from late 1984 to late 1989, I suffered
other real estate losses in various other projects I had been involved in, such as a large
single-family subdivision and a raw land tract. My lenders calculated the extent of my
exposure and I calculated mine, in most cases we came to uncomplicated agreements.
Solving the single-family subdivision problem required lawyers and several years. The
difficulty was that while the federal government mounted the machinery of the
Resolution Trust Corporation to assume the obligations of the disappearing S&Ls not
many settlements took place. The Federal Deposit Insurance Corporation (FDIC)
carried out the bank rescue operation. The lenders themselves didn’t act without
previous clearance from these two supervising entities. Therefore it took many years to
resolve all the disagreements. But I am very proud to say that, although I lost a good
part of my assets, and definitely all my momentum, eventually I paid all my creditors as I
agreed I would do. In later years this conduct was remembered by many bankers who
showed eagerness to do business with me again.
Autobiography.doc 127 of 239