banking

Business

The

dilemma

By David North

The president of the Chamber of Commerce and local bankers are mates, right?

They all want to boost business, lower taxes, and, when need be, fight off the labour unions. If they have any dif ferences, they settle them quietly, right?

Wrong. That’s not the way it is in American Samoa. Prominent business man George Wray, president of the local Chamber of Commerce, is waging a very public war with the Bank of Hawaii.

Wray, once owner of the now inop erative South Pacific International Airways, is upset by what he regards as the shabby treatment of American Samoans by the big Honolulu-based financial institution.

Wray’s complaint is that BoH happily takes deposits from the Samoans, but rarely makes loans to them, preferring to export the deposits to the much more prosperous Hawaiian islands, where it has an active lending business.

Wray, more confrontational than some of his colleagues on the chamber’s board of directors, persuaded a number of them to co-sign his letter to the bank.

The exchange was printed in full and at great length in the Samoa News.

Using an approach more like that of an investigative reporter than a cham ber official, Wray wrote: “Consider the situation of a young man, 24 years old, five years on a job, who wants $3OOO to build an inside bathroom for his family. Everywhere else in the Bank of Hawaii community

he would have grown up exposed to the availability of BoH’s home improve ment loan offerings everyday in news papers, magazines and TV “But not in American Samoa ... He would not have experienced a single marketing effort of any kind by the Bank of Hawaii to communicate ... that the Bank of Hawaii makes home improve ment loans, or any loans.

“Consider that this young man had heard by word of mouth that BoH can make a home improvement loan. He goes to the bank’s office in Pago Pago.

He opens the door and is faced with a large lobby and an airline-counter array of teller windows. There is no sign any where that the bank makes loans. There is no indication of where he is to go, to whom he is to see about a loan ...

“The young man has to be lucky enough to find someone to tell him to go outside the bank building and ascend the outside steps to a second-storey mall area where the bank has a small office for loans.”

Wray then went on to contrast the obscurity of the bank’s loan operation in Samoa with its heavily promoted lending activities in the Hawaiian islands. “There appears to be a mind set ... that the bank somehow does not have to accommodate and treat the peo ple here like a regular community served by the bank in Hawaii and other areas.”

The bank, of course, disagreed and pointed out it does have a lending pro gramme for homeowners and argued its ability to make loans to individuals in Samoa was hampered by massive loans

it has made to the perpetually broke ter ritorial government.

Wray, a lawyer, was tangling with another lawyer, Joseph T. Kiefer, vice president and general counsel for the bank. The two had apparently met decades earlier. From the correspon dence it was clear both were trying to establish a public record prior to fur ther action by a mainland bank regula tory agency, the Federal Deposit Insurance Corporation. That agency had been requested by Wray to look into a series of charges that BoH was mistreat ing people in American Samoa.

One of the matters in dispute has a broader, regional significance: how do First World banking arrangements, such as mortgages on a house, mesh with tra ditional concepts of non-alienation of that land?

In American Samoa, as in some other islands, families are prohibited from sell ing their land to outsiders. This is a problem, according to the bank. How will it foreclose on a house for non-pay ment of the loan if it is barred by law from owning land under the house?

In most First World countries this is no problem - if the loan is not paid ulti mately the bank goes to court, secures a ruling and takes over the house which it usually sells to someone else.

The bank’s lawyer, Kiefer, raised this issue, saying, “We believe that there is a very rational basis to conclude that members of the family of the borrower would be the only potential purchasers at any foreclosure sale. This is not a situ ation which would give any lender comfort, that a foreclosure of a mort gage might ultimately lead to insuffi cient funds to repay its debt.”

What he did not add is that a main land banker might suspect the family would close ranks and make no bids on the property in question, forcing the bank to lose its entire investment.

Kiefer went on to say that since BoH bought the Bank of American Samoa from Wells Fargo (the California bank) in 1969, it has made $lO million in mortgage loans.

Wray replied that the $lO million was a drop in the Samoan housing mar ket, and that most of these loans had been made many years earlier.

When the FIDC examiners appear on the scene to settle these and other ques tions they will be facing some issues, such as the matter of land tenure, which will be new to them.

It will be interesting to see if the feds side with the bank or with the angry Chamber of Commerce. ■