Ed Hale's attempt to save 1st Mariner Bank might or might not work. But you ought to be impressed by the former trucker's dedication as he doubles down on what in recent years has been a disastrous bet.
As bankers everywhere unfurl the golden parachutes of incompetence, Hale may be the only CEO in America trying to bail out his bank with his own money.
1st Mariner never got the government welfare lavished on other lenders from the Troubled Asset Relief Program, or TARP. Instead it's getting the Heroic Attempt to Limit Extinction.
In a two-stage move, Hale is exchanging $2 million in cash for new 1st Mariner stock, putting the bank a couple of notches further away from seizure by federal regulators. If the struggling banking company recovers, the investment will pay off big. But if 1st Mariner fails, Hale will have poured good money after terrible.
Four years ago, the 1st Mariner stake he had then was worth $28 million. Now it fetches less than one-tenth that. If the bank doesn't come up with millions in new capital within months - including Hale's and a lot more - it could be curtains.
Decades ago, an executive devoting personal funds to rescue the company he founded might have been unremarkable. That's what entrepreneurs are supposed to do. It's their pride, their name on the corner office, their fans owning the stock. What better way to show public shareholders you believe in a turnaround than by making the same wager you ask of them?
If Hale meant a fraction of what he told Baltimore over the years - "We built this bank for you" and "locally owned and committed to your community" - of course he'd sink part of his diminished fortune into fixing it.
But this kind of performance - money and mouth with the same message - isn't in the CEO handbook these days.
Nowadays, running a public company often means playing with other people's dough as long as you can, getting your golf-pal directors to reward you for failure and walking away with a bundle when the whole thing blows up. Mimicking leadership is fine as long as it doesn't cost you any money.
Hale could have gone through the motions, collected his $522,000 salary all these months and finally surrendered the keys to the property like so many of the homeowners he lent money to.
Or he could have waited to commit the $2 million until he saw how 1st Mariner's impending stock offering works out.
Hale, however, has already done the deal, buying $20 million in face value of what's essentially 1st Mariner debt at 10 cents on the dollar for conversion into common shares. The transaction won't give the banking company any new cash, but by wiping out liabilities it improves the capital ratios scrutinized by regulators.
In a small, indirect way, Hale is making it up to long-suffering shareholders by repaying some of the money lost to stupid mortgage lending under his watch. He's also trying to send a positive signal to people thinking about buying the shares to be offered in coming weeks.
The bank is trying to raise between $10 million and $20 million from public investors to rebuild its capital cushion against possible further loan losses.
Like all financial companies, 1st Mariner is benefiting from the Federal Reserve's ultra-low short-term interest rates, which reduce its costs. But through the end of 2009, the bank was still writing off soured loans and booking losses, although these were much smaller than in previous quarters.
The most painful losses, the ones associated with 1st Mariner's ill-starred foray into mortgage lending in Northern Virginia at the height of the bubble, are behind it. The stock has recovered from a low of 50 cents to close at $1.43 on Tuesday. However, the bank still needs Maryland's economy to stabilize and turn around. Further deterioration in commercial real estate, especially, is a risk.
Hale is optimistic. But then he's been optimistic for four years - catastrophically so.
"I've been saying this since it hit the fan in 2006: We felt like things are getting better," he said yesterday.
Now, however, he has $2 million saying the same thing.
Maybe that means this time it's different.