This recession, which I believe, led to the defeat of President Bush in 1992, was extended when the banks pulled $70 billion in loans from corporations. Capital to loans ratios at many banks had dropped to dangerous levels and their management feared takeover by federal regulators and forced sale of the banks. The banks’ recourse of choice was to reduce loads to improve the capital ration. They tried to target recalling loans to companies they thought had the assets to pay, because closing down a company that couldn’t pay resulted in writing off a bad loan. This is what reduced the capital in the first place. WG was an obvious target. An out-of-town workout hatchet man came to see us. He disregarded our written proposal on how we could reduce the loan in an orderly way and insisted on calling the loan immediately. I said, “Our attorney is on vacation for a week and we won’t do anything before consulting him.” The banker replied, “I am not interested in what you and your attorney want to do about bankruptcy.” Lynn Morrison said, “We need to talk with him about a lenders liability suit, not bankruptcy.” After 30 seconds, the banker said, “Let me see that proposal of yours again.” We proceeded per our proposal.
Eighteen months later, natural gas price futures increased and Belden & Blake doubled their offer for the Morges Gas System to $1 million. The increased Columbia transportation rates had decreased the value of the system to WG, so we accepted the offer and paid off the balance of the bank debt. We now had no cash for working capital. WG borrowed $400,000 from the Bank of Magnolia on John Jr.’s and Lynn’s signatures. Also, I made a loan of $100,000 and Lynn $50,000 to WG.