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.

Financial Illiteracy is a Disease

A recent viewpoint article by Laura Fisher in the December 2009 issue of Community Banker Magazine stated that many experts compare increasing financial literacy to decreasing obesity rates.  According to the article, both decreasing obesity and increasing financial literacy have behavioral and educational components and a similar goal: using education to help individuals form good habits and/or change the ones that are destructive and often deep-seated.

I have been teaching youth financial literacy classes for over 15 years.  I have done it on behalf of banks, religious organizations and nonprofits such as Operation Hope.  In all the time I have donated my time to teaching financial literacy it never occurred to me to compare financial illiteracy to a disease.  But after thinking about it, I agree.

Ms. Fisher states that "financial education has become our nation's No. 1 defense against another financial crisis."  While it took two to tango - the misinformed and financially illiterate consumer and the overly aggressive financial institutions - removing one of the two from the equation would have eliminated a lot of the pain and suffering. 

While I do not believe that all the damage would have been avoided, I do believe that a more informed consumer would have prevented many of the side effects from this period of easy credit.  Let me make it very clear that the substantial majority of financial institutions - particularly community banks - were not at fault.  It was a small network of large players - most of which are no longer with us - that created the program.  The rest of us - especially the community banks - are now unfairly guilty by association.  But that is a story and rant for a different day.

So how do we as a nation use financial literacy to defend against another similar crisis?  Whose plate should this sit on?  Elected officials?  Educators?  Nonprofits?  Financial institutions?  All of the above!  Creating a financially literate America will be a very difficult task that will require complete and total collaboration.  It will require a long-term strategy that holds all participants accountable for success.  It must also include all segments of society - from low-income participants to those with silver spoons.  Financial literacy is a learned trait that everyone needs.

Ms. Fisher makes another strong point when she says that "a one-size-fits-all approach is not appropriate for a diverse population with different learning styles."  Some people learn through listening, some through watching, some through doing, and most through a combination.  As such, we need to use different ways to deliver the needed information.

If you follow Pan American Bank you've heard that we recently partnered with a nonprofit called LatinoGraduate.net.  Through this partnership Pan American Bank is providing LatinoGraduate.net with rent-free space to establish a "new media" studio.  Part of LatinoGraduate's mission is to establish an advisory board that will guide the creation of financial literacy curriculum that will be distributed to schools and homes across the Country via the Internet.  As of the date of this blog posting the advisory committee included Pan American Bank as well as financial literacy thought leaders from Texas State University, California State University and the University of Notre Dame as well as others from financial institutions and media companies.

While my team and I will continue to conduct face-to-face training within our community, the delivery of financial literacy training via the Internet provides a second approach which reinforces the lessons of financial literacy. 

Which brings me to the next topic: financial literacy is not a one-and-done activity.  While I applaud educators that allow bankers to visit their schools to provide lessons in financial literacy, they have to do more.  Just as history, math, science and the other subjects span extended periods of time, so too should lessons in financial literacy.  To often I visit schools that do not ask for follow up.

My advice to community-minded individuals is to create a collaborative committee comprised of elected officials, financial institutions, nonprofits, educators and other stakeholders.  The collaborative should work together to create a community-based effort to provide ongoing financial literacy education to the local community.  Begin with the 2006 National Strategy for Financial Literacy.  Leverage the tools provided by the FDIC's Money Smart program.   Work with organizations such as Operation Hope.  Through these efforts we can eliminate the disease that is financial illiteracy.

A Sort Of New Year's Resolution

The posting below was taken from an email sent by me on January 1, 2010, to Bank stakeholders.  I thought I would also share it here since it contains some information worth sharing.

# # #

When I joined Pan American Bank in June, I stated that I wanted to make Pan American Bank THE bank of East Los Angeles. Having been born in Boyle Heights and raised in East L.A., I jumped at the opportunity to come back to East Los with the tools I had acquired working around the country. The bulletpoints above are not new year's resolutions because they will not be accomplished in one year. They are, however, goals that I have established for the Bank to work on. Not by itself, but in collaboration with others in the community. We're a very small bank...but with the right partnerships we can create tremendous change.

I know you are busy and have little time for touchy-feely e-mails such as this. But please indulge me for three minutes as I share what 2010 will bring to East Los Angeles from Pan American Bank's perspective.



1) LatinoGraduate.net: In January, LatinoGraduate.net, a new media nonprofit focused on getting Latino youth into college and keeping them there until graduation, will be moving into Pan American Bank's corporate headquarters. The Bank will be donating a portion of its space to permit LatinoGraduate.net to tape and broadcast its shows. The Bank will host a Open House Celebration on Friday, February 5, 2010, from 6:00 pm to 10:00 pm. RSVP to Tony Ramirez if you did not receive an e-mail invitation.

2) VELA: January brings a second nonprofit to Pan American Bank. VELA, an East Los Angeles-based powerhouse nonprofit, will be operating a technical assistance center from the Bank's headquarters. The program will provide technical assistance to both nonprofits and small businesses. This effort will be a collaboration between not only VELA and Pan American Bank, but many other organizations that will bring essential resources to bear.

3) Institute for Nonprofit Leadership: Pan American Bank, VELA and the Riordan Volunteer Leadership Development Program will launch in September 2010 the Institute for Nonprofit Leadership. The Institute for Nonprofit Leadership will train young professionals from eastern Los Angeles County on how to serve as leaders of nonprofits, with a focus on serving on nonprofits located in eastern Los Angeles County. The Riordan program has been extremely successful with participants from downtown and the westside and will now collaborate with Pan American Bank and VELA to roll out a similar program at the Bank's corporate headquarters in East Los Angeles.

4) Financial Services Advisory Council of East Los Angeles: In January the Bank will kick of its Financial Services Advisory Council of East Los Angeles ("FSAC-ELA"). The role of the FSAC-ELA will be to bring together local stakeholders to develop strategies that address the shortcomings cited in the FDIC's recent Survey of Unbanked and Underbanked Households. As the only bank headquartered in East Los Angeles, Pan American Bank is taking a leadership role in working with the offices of elected officials, nonprofits and residents, to bring mainstream banking services to as many East Los Angeles households as possible. The FSAC-ELA will be comprised of representatives from throughout the East Los Angeles community.

5) UCLA School of Urban Planning: At the end of this email is an e-mail to me from Raul Lugo. Raul is a graduate student in the UCLA School of Urban Planning. Raul will graduate in June. He and a team of classmates have formed a company that will be attacking some of the issues we face in East Los Angeles. Raul and his associates will bring to East Los Angeles energy, enthusiasm and a new set of eyes. When I was fresh out of UCLA someone took a chance on me and provided me with the mentorship that helped me succeed in my professional career. I hope to do the same. But more than that, I encourage you to read his email and engage him in thought provoking discussion. Only through such discussion will issues and challenges surface and get worked out. If the Bank has any shot at achieving the goals above, it will only come through collaboration.

There is much more in the works but I'll save that for another day. While 2009 was a challenging year for banks, it also provided tremendous opportunities. As a bank we have a lot of work ahead of us. Just the daily challenge of bringing in new deposits and making new loans is enough to fill our plates. But Pan American Bank is not just any bank. It has a mission that is unique and a story that needs to be told if we are to be THE BANK OF EAST LOS ANGELES.

Before I conclude, I would like to publicly congratulate the team at Pan American Bank. In 2009, the Bank did not foreclose on a single borrower and in 2008 it had only one foreclosure. While the Bank did modify some loans, the Bank's goal was to do everything possible to keep our customers in their homes. We don't know what 2010 will bring but we look to have similar successes this time next year.

Best wishes to you all in 2010. On behalf of the employees, shareholders and customers of Pan American Bank, Thank You for your continued support. May all of our goals be achieved this year so that we can look back on this year with a smile.

Jesse Torres
President and CEO
Pan American Bank
3626 East First Street
Los Angeles, CA 90063
(323) 264-3310
(323) 264-8057 fax

"The mission of Pan American Bank is to transform and empower Latino communities through banking relationships built on trust, service, respect, communication, and guidance."

---------- Forwarded message ----------

From: raul lugo
Date: Thu, Dec 31, 2009 at 8:14 PM
Subject: New Year Resolution
To: jtorres@panamericanbank.us

Jesse,

We will create a movement with inventive and diverse approaches to the rebuilding of our community. This will be done through targeted investments, which will need to be meticulously and assertively planned for success due to the present scarcity of resources. Our efforts are aimed to creatively effect change in East Los Angeles. These investments will be made in a broad range of areas such as housing, small business formation and development, and economic development at large.

Investors look first for the formal investment targets due to their familiarity. The traditional channels offer a formal infrastructure friendly to business that simply does not exist in the inner cities of America. As a result, these communities suffer from diminished services and struggling institutions. Private investment in these communities often comes from the people who live there themselves. These entrepreneurial ventures emerge as a result of necessity due to the lack of support and disinterest from mainstream investment. The goal is to identify many investment targets with a strong potential for profits. We need to create a new paradigm of profitable, sound and constructive investments outside of traditional channels. We need strong leaders who have decided that they will take the chance with us and place their valuable investment in this energetic community.

We are currently learning the limits of government involvement. California faces bankruptcy amidst the worst budget crisis, and public funds are simply insufficient to meet the needs of the population. The aid and subsidies that trickles down through a complicated bureaucratic process is proving to be ineffective. This means our team will have to shift the level of sophistication and inventiveness to be the group that seeks investments for the community of East Los Angeles.

The business sector is an integral partner in the economic development of East Los Angeles. As grants and donations diminish in economic downturns like the one we are experiencing, agencies that seek to fill gaps in services need to tap into their entrepreneurial capabilities to survive. Financial institutions are of particular importance because they need to broaden their perspective on the types of investments they are willing to consider. Promoting small business creation, we can create sound and profitable deals, even with people who have little or no education about conventional business establishments. In this process, we will need to inform the population about the importance of civic participation to build transparency, and trust through dialogue between different community stakeholders that would have otherwise never exchanged ideas with one another. We will harness a conscious smart growth movement in East Los Angeles to make the United States free enterprise system responsive to the needs of the community by building a resilient and sustainable network to support new enterprises.

Happy new year, let's make it a good one.

Raul