"In late 2006 he sold $74 million of preferred stock although he had
no immediate use for the proceeds. He says he couldn't resist the
"stupidly mispriced" terms--as low as Libor plus 1.7 percentage points
for 30 years. He wanted as much money available when the boom turned to
bust. With the extra money the bank could pay off nearly all its
depositors with capital on hand--nearly unheard of in the history of
Then came a shocker: Amid one of the most reckless
lending sprees in history, regulators focused on the one bank that
refused to play along. Beal's moves confused and worried them, and so
they began to probe him with questions. "What are you doing?" he
recalls them asking. "You're shrinking yet you're raising capital?"
Beal about the scrutiny, "I just didn't fit into any box." One
regulator, the former head of the Texas Savings & Loan Department,
Charles Danny Payne, says, "I was skeptical at first, but I've gained a
lot of confidence over the years," adding that Beal has an "uncanny
ability to sniff out deals."
Next, the credit rating agencies
started pestering him about his dwindling loan portfolio. They never
downgraded him but scolded him for seeming not to have a "sustainable"
business model. This while their colleagues were signing off on $32
billion of bum collateralized debt obligations issued by Merrill Lynch."