Emma: My question is about rail. Can we afford this project, particularly in this current economy?

Don Horner: I had the privilege of chairing a committee for Business Roundtable to look at this subject when the heated debate was going on, and just before...we all voted for rail. I think the short answer is yes. I've been with the bank for over 30 years and pretty conservative when it comes to looking at numbers. I think it's a combination of things. One, we took the revenue numbers that were given and frankly we discounted those.

Jeanne Mariani-Belding: The city's numbers?

Horner: Yes, I think they were a bit optimistic. Because they had a growth curve that we didn't foresee and this was about 18 months ago. And we're pretty well where we thought the numbers would be now, about $150 (million)-$160 million a year (with) the 0.5 GET. So the revenue side is OK.

We are the largest construction lender in the state and this is really a question of concrete and these things. You can imagine given the economic realities is there's not a lot of demand. The technology prices are going down, the equipment prices are going down, the raw material costs are going down, the margins for the contractors and sub contractors is going down.

Mariani-Belding: Labor?

Don Horner: Not so much the labor cost and they shouldn't go down. The carpenters and concrete people are still entitled to a fair wage. It's just the margins, some of the profit margins are being squeezed to death. What people don't understand is this system is designed to be a 16-year full payout. So it's just like a 15-year mortgage. So at the end of 15 years, this is fully paid off. By adding, if you had to, one or two more years on the back end, you'd be able to also offset any of those savings. Additionally, it looks like the federal government is gonna kick in more money than what was budgeted. Quite a bit more from what I'm hearing from various certain places.

Mariani-Belding: Where are you getting that information?

Horner: From our delegation. Our delegation has been extremely supportive. I mean we are so blessed to have the delegation we have in Washington.

Tyler Eng: Why should businesses support rail, particularly those not on the route?

Horner: That's a very fair question. Why should somebody in Hawaii Kai or the Windward side support rail? I think rail is good for Hawaii in general. The gridlock we are experiencing on the west side is not sustainable. That's where are growth is. I mean the same question could be asked why should we build H-3? Why should we widen Kalanianaole Highway? Why did we widen that road all the way to Hawaii Kai? So I think it's the west side's turn. The west side has not ever been endowed with a lot of infrastructure, historically. So, I think it's good that we start on the west side. That's where the growth population is, that's where the people that come in to Waikíkí to work. So I think most of the Business Roundtable came out in full support of rail for very pragmatic reasons.

Ikaika: Do you support the bailouts and the stimulus packages? People in Washington seem to forget that this is taxpayers' money. Even worse, as a financial strategy, printing money to solve the problem seems wrong ethically and strategically. Do you agree?

Horner: Number one, Ikaika, I do agree with you personally. Obviously, it's a complex issue. I think in general, the "bailout" with taxpayers' money should be a very, very rare event. It should not be taken lightly, it should not be policy. Have we gone too far? Probably, in my opinion. I understand why, but the more basic issue is a lot of these problems came from Wall Street. And Wall Street is designed that way. I don't know why people think otherwise. I worked on Wall Street before I was a banker. Wall Street is a place of risk and return. It's a place where you can make a lot of money and you can lose a lot of money. But if the government prevents you from losing money then all of a sudden the economics start to change and the taxpayer covers the sins of folks who were greedy. There's investment banking and Main Street banking. I'm a Main Street banker, I'm not a Wall Street banker. I'm not smart enough to be a Wall Street banker. I don't understand all those fancy things. That's why we are not in trouble. We do things pretty simple. We loan money to people who can pay us back. That's the reason I love Hawaii because most of the people in Hawaii pay you back. There's a very moral code here that's prevented some of the problems that have (occurred) in other places. My point is that there is a balance that in certain situations in order to stabilize the economy certainly you had to do some of the things that was done.

Jim: Lending has certainly changed over the last two years. Have you had to make changes to your scoring models? And what impact has that had on both volume and delinquency?

Horner: Good question. I've been a banker at First Hawaiian bank for 30 years and I've been a lender for 30 years. The guy that taught me credit spent 40 years in the bank. Forty years when he taught me credit. So I know it's been 70 years this way. I've done a lot of research on Mr. Bishop. I can honestly tell you that we have changed not one thing as far as the way we lend money. Not credit scores, no underwriting changes, nothing. The economy shouldn't drive the way you lend money. As I said earlier, it's a pretty simple formula. We look for people who have character, that if they get in trouble they'll try to pay you back, and they have the capacity to pay you back. You get in trouble if you try to adjust your standards to the market as it changes because people don't know what your standards are. We are very, very consistent.