Saturday, January 23, 2010

Bank, A Four-Letter Word

Sometime around the time I was a sophomore or junior at UCLA I decided that I wanted to pursue a career in banking.  At the time, I envisioned something along the lines of investment banking.  It was around 1988-1989.  I remember sometime afterwards reading about Michael Milken, Drexel Burnham Lambert and a whole lot of chatter about greed, abuse and other related activities.  It was right about that time that I decided I instead wanted to work for a regulatory agency like the SEC or the FDIC.  I graduated at the tail end of the savings and loan debacle and joined the Treasury Department's Office of the Comptroller of the Currency as a bank examiner.



It was during my time with the OCC that I started to get an understanding of the differences between mega banks (those that are today too-big-to-fail) and "true" community banks.  I will forever be thankful to the OCC for giving me the opportunity to experience examinations at the largest banks in the country as well as the smallest.  These opportunities served to shape my career as a community banker.

If you know anything about "real" community banks you know that they are not run by Wall Street types.  You won't find them having a power breakfast with Donald Trump or meeting with Tim Geithner for dinner.  The CEOs of "real" community banks know banking and they know how their banks can and do best serve the local businesses and families within their communities.  The CEOs of "real" community banks know the owner of the local strip mall down the street and its many tenants.  The CEO of "real" community banks greet you at the little league fundraiser or the local Rotary Club or chaperone at the local high school dance.



So you can imagine how sickened I felt when I read the results of the 2009 Edelman Trust Barometer.  The report found that in no country is trust in a more dismal state than in the U.S., where government, business and media are not trusted to do what is right. But more specifically, in the U.S., in just one year the trust in banks among 35-to-64 year olds dropped nearly in half, from 69 percent to only 36 percent.  And the worst part of it is that no matter how much community banks have done to support local businesses and families, all banks have been painted with the same brush that should be specifically reserved for those banks too-big-to-fail.

Last week, in an attempt to escape banking, I picked up a copy of the recent issue of Sports Illustrated (January 25, 2010).  The cover showed my hero Brett Favre on the cover.  Excitedly, I began reading the issue (note: I have an odd habit of reading magazines from the back to the front...don't ask).  Within two minutes, Selena Roberts in "Coming Clean: It's Complicated" starting taking pot shots at bankers in an article that was supposed to talk about baseball, steroids and Mark McGwire ("He must calibrate his words like an artful banker").  Are you kidding me!  Is there no escape!



Banking was once a trusted and respected business. Bankers were the pillars of their local communities.  No longer.  After Congress rewarded mismanagement and bad behavior by banks and financial institutions that are too-big-to-fail by bailing them out with more than a trillion dollars of taxpayer money the public has become outraged.  Unfortunately, most people and the media never had the opportunity I had to work for the OCC.  They don't know that the differences between "real" community banks and too-big-to-fail mega banks are significant.  Night and day significant.  Black and white significant.  Life and death significant.  Right and wrong significant.

One of the biggest challenges for "real" community bankers, then, is to regain public trust and to make clear to the community that all banks are not cut from the same cloth.  "Real" community bankers must build an understanding that community banks provide not only vital financial products and services but also serve social needs.



Directors, CEOs and senior executives of "real" community banks need to show their communities that they are accountable, responsible and good citizens. They need to show appreciation for being able to continue in business thanks to the patronage of the community. And, they need to continue to show how "real" community banks differ from the too-big-to-fail mega banks.

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