HedgeLender has benefited greatly from the financial meltdown on Wall Street. How could that possibly be? Are we not a company that depends on healthy stocks to guarantee our lending products? Yes, but a company that is otherwise healthy at the mercy of market behaving in an irrational manner is a perfectly good stock my our measure.

We are not a hedge fund, and are completely untied to the credit system. Your credit rating means nothing to us. Your stocks are your only qualifier for whether or not we can underwrite a stock HedgeLoan, and whether they have dropped 10% or 40% in the last month is not likely to make much difference. You'll still likely to get at least one nonrecourse, no-margin-call loan offer backed by your stocks from our company.

But lately it has been more than that. A lot more, it turns out.

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Borrowers come to us who never really considered a HedgeLoan before. "Not invented here" was the feeling, or "Why should I bother when I can draw on my line of credit." Having always thought their bank credit lines would be there, their real estate projects or company purchases, etc. were based on the assumption that credit would be plentiful. They often had stocks, but with their stocks falling dramatically in recent weeks, they couldn't bring themselves to sell at such a loss.

they've started to take a hard cold look at HedgeLoan now. Our loan programs gives them up to 85% - even 90% for strong stocks - of today's value in a loan that they can walk away from if they they need to default, owing nothing but the collateral stocks regardless of how low in price they may have fallen, and no negative credit reporting. These individuals get to remain beneficial owners of their securities while they enjoy the use of their cash during the loan term. They are making a bet that as the economy regains strength, their collateral stocks will rise in value too, allowing them to ask the lender to sell enough shares to pay off the loan and recoup the upside profits as stocks or cash. 

When the news came over the airwaves that Lehman Brothers, the venerable, forever titan of Wall Street, was going bankrupt and was in the process being sold off, we at HedgeLender recognized that the financial landscape had changed far more rapidly than anyone could have dreamed. Coming on the heels of the surreal takeover of Freddie Mac and Fannie Mae, the twin pillars of the American mortgage system, a new day was dawning, and with it was coming unforeseen new opportunties for private placement hedged portfolio stock loans such as those we offered.

 Conventional credit markets had dried up. Our phones at HedgeLender lit up.

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Back in Washington, scapegoating had already begun. There couldn't be worse timing than to have a Wall Street correction held hostage by election-year politics, but that was precisely what was happening, and the candidates were simply fueling the fire, making matters worse as their goal of undermining their opponent superseded any desire to say the hard things the American people needed to hear. The first scapegoats, not surprisingly, were the easy pickings -- the "fat cats" as Barack Obama called them, and later McCain -- at places like Lehman and Freddie, those "detestable con men with the golden parachutes" who supposedly got us into this mess.

Which was untrue, a cheap shot. Though bad decisions may have been made, there never was even circumstantial evidence of fraud. Blaming the titans of Wall Street is like blaming the guy who bought your Rolex watch from the yard sale your kid put together. It is facetious to say the least. These "despicable fat cats", after all, were the ones who trusted Fannie Mae and Freddie Mac, and helped keep the loans to low income minorities flowing - loans that were part of a policy pushed firmly by a Democrat-majority Congress and accepted passively to by the Republican administration (all unwilling to be accused of "insensitivity" to those less fortunate in an election year). When the very Congress that encouraged lending to unqualified homeowners held hearings to tar-and-feather financial executives who were instrumental in making those policies possible, the irony is inescapable.

This is not to say there have been no excesses on Wall Street and of course no one is defending golden parachutes or obscene salaries for execs who failed to see the shakiness of this system of subprime-mortgage-backed securities. But they are not the true guilty parties. They guilt begins on a much broader scale with the wrongful assumption that if you simply extend a loan to an individual to buy a home, they will create better neighborhoods and have more of a stake in their families and communities and therefore leapfrog to a more optimistic and better life. It may have worked that way with the tiny minority who did pay their subprime loans on time. It did not for the majority.

No one can quibble with the goals, however. No one can deny what a source of hope it was when hard-working lower-income/class people who deserved a break got a home of their own. The goal, the desire to do this, is not the issue here. It was a good goal. It still is.

It is the means that were at fault. Our society, through the representatives we elected, encouraged what most see quasi-governmental organizations like Fannie Mae and Freddie Mac to back these loans. Our Congressional leaders pushed, then blessed the practice -- particularly Democrats. Barney Frank, the Democrat Senator now leading the charge against supposed excess on Wall Street was instrumental in letting the two mortgage giants off the hook when they had the chance to review the crumbling subprime loan situation over a year before they were taken over. He declared them fundamentally sound. He ahd his colleagues with the help of a few Republicans did nothing when they had the chance and the first evidence of shakiness was coming in. Despite the fact that Congress had by their neglect in effect put a "stamp of approval" on the practice, we let them divert blame and place it on the Lehman Brothers and the Merrill Lynch's of the world who had  bought up the securities created from the grouped mortgages Mr. Frank and his colleagues had said was so essential to keeping the programs moving.

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The crisis will work itself out, there can be no doubt. It would have been resolved painfully but naturally by the free-market economy had there been no intervention. if we had been more patient, if our tolerance of pain had been greater, with the exception of some targeted assistance for renegotiation of mortgage, added insurance, and better regulation, it would have resolved itself on its own. Resolution will move along more speedily now with the new government infusions, but there will be some entities allowed to survive that do not deserve to, which will be drags on the economy, artificial life support for no good economic reason.

But overall, even with the infusion, it will be a stronger, sounder world financial system at the end of the day and a more vigorous America.

In the meantime, business couldn't be better at HedgeLender, and should the powers-that-be find it impossible to make the right decisions and avoid excessive fiddling with the economy, we'll be happy to remain a great cash liquidity alternative.

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