.floatimg-left-hort { float:left; } .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 12px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 12px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 12px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;}
What we have here is a credit crisis, and so what we need to do is find ways to get the money flowing again. Fortunately, financial expert Chris Slusher came to town with some fresh ideas for lending and borrowing. Unfortunately, he didn’t have much good news to go with them.

“The financial markets are extremely pessimistic,” said Slusher, the managing director and head of derivatives for The PrivateBank. “They’re pricing in a ‘lost decade’ scenario.” A flat yield curve and a decided lack of interest in high-yield bonds tell him that insiders are expecting slow growth and numerous defaults for the next 10 years.

The PrivateBank is part of Private Bancorp Inc., which got an injection of talent and energy in 2007. That’s when Bank of America acquired LaSalle Bank and started laying off employees, leading a number of LaSalle’s top managers to take jobs at Private Bancorp Inc. Now, while Bank of America tries not to choke on its Merrill Lynch purchase, The PrivateBank enjoys calling itself “the fastest-growing bank in America,” having doubled its assets in 2008.

You remember 2008. That was the year banking made the Navy SEALs look like a low-stress career choice.

The PrivateBank has a modest presence at 4601 Westown Parkway in West Des Moines, and Slusher drove over from Chicago to address a small group at the Des Moines Golf and Country Club.

He’s an interest-rate guy, and the numbers tell him that money experts are looking at the future through gloom-colored glasses.

Slusher believes we have made progress since the disturbing days of last autumn. “A couple of months ago, we were on the precipice,” he said. “We have pulled back.”

He contends it was the Lehman Bros. Holdings Inc. bankruptcy that pushed us so close to the edge that our toes were in mid-air. “I think if it got a do-over, the government would change its response” to Lehman’s woes, Slusher said. “It caused a seizing up like we’ve never seen.”

Although the landscape is improving, everything indicates massive government debt will be hitting the markets for the next few years, and “the challenge is, there’s not an obvious buyer for that debt,” Slusher noted. Interest rates might rise.

As he outlined the dark path that led us into the current crisis, Slusher noted that regional bank portfolios came to include higher-risk assets, including lots of real estate. In 1985, loans for construction, commercial real estate and homes made up about 25 percent of FDIC-insured commercial banks’ portfolios. In 2007, such loans accounted for more than half of those portfolios.

The financial industry relied too much on past performance as a predictor of the future, Slusher said, even though every mutual fund prospectus warns against just that kind of thinking.

Having waded through all of the bad stuff, Slusher talked about “interest rate risk management strategies.”

“Swap,” “cap” and “collar” strategies offer borrowers different ways to protect themselves against rising interest rates. He said a record number of PrivateBank clients entered into interest rate swaps in December.

If you do borrow money and put it into your business, be prepared to wait for the results. Slusher predicted negative growth for the national economy through the middle of 2009 and forecast an 8 percent unemployment rate by then.

However, he did predict that banks will come out of this fiasco stronger and wiser.

Greater Des Moines has held up relatively well, and confidence seems to have remained fairly strong. But when Slusher offered the audience his definitions of “recession” and “depression” and then asked for a vote, the raised hands called this a depression.

Wow, he said, “you’re more pessimistic than the Chicago home builders association.”