Monthly Archives: October 2011

Change in regulators coming in Minnesota

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Kevin Murphy, Minnesota Deputy Commissioner of Commerce in the Financial Institutions Department, is retiring at 13 years in the job. His last day at the office will be Dec. 6.

The State of Minnesota has listed the job opening and is taking resumes through Nov. 9. Here is the listing.

I find it amusing that the listing says the job is from 8 a.m to 4:30 p.m. Monday through Friday. It’s really a 24/7 job and, furthermore, the indicated salary doesn’t sufficiently reflect the responsibility of this job. I’ll miss Murphy, whose calm and steady demeanor is perfect for the chief regulator of state banks and credit unions.

Murphy began the job on June 1, 1998, after Jim Miller had resigned six months earlier after 30 years on the job. Murphy is a former assistant regional director for the FDIC. He also had been a consultant for a bank compensation firm and for an accounting firm.

When Murphy was hired, more than 300 people applied for the job. It will be interesting to see how many apply this time. Murphy worked under four governors — two Republicans, an Independent and a Democrat. The state’s chief bank regulator is a tricky job, where you have to balance the interests of the consumers with the bankers. There is also important interaction with the FDIC regarding bank closings. My observation is that Murphy struck a good balance.

It’s always good to keep state money local

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This is a nice move by Minnesota Gov. Mark Dayton. The governor announced he will deposit $100 million to $200 million in state investment funds in community banks throughout the state. Banks suffering financial difficulty will not be eligible for the money.

Minnesota bankers have long advocated that state money should be depositeed locally instead of being invested in places like New York or China. The debate in the past has always been that the state investment managers have an obligation to go after higher yield, so that typically led them out of state. Now with all investment and deposit options paying so little, it is easier for the Governor to require more of the money stay local.

The strange thing is why he designated only $100 million to $200 million. This article notes the state has $1 billion to work with.

Regardless, the move at this point is largely symbolic. Banks don’t lack for deposits. The issue is loan demand. It is kind of like the Small Business Lending Fund, which turned out to be a big flop. Treasury made $30 billion available to banks, but limited to the highest rated banks. Only a small fraction of the money was ever distributed. The banks that really could have used the money were not eligible for it. Same thing here in Minnesota with the Governor’s program — the banks that really need the money probably don’t quality.

Nonetheless, I think it is always a good idea for the state to keep its money in local institutions. Money deposited in Minnesota banks helps Minnesotans, and I think most people in the state like that.

ABA leaders encourage industry at annual meeting

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Steve Wilson, chairman and CEO of the LCNB National Bank in Lebanon, Ohio, closed out his year as chairman of the American Bankers Association yesterday when the association elected new officers for 2011-12. Albert C. Kelly, Jr., president and CEO of SpiritBank in Bristow, Okla., was elected the new chairman. Wilson urged his colleagues to be proud they are bankers and he urged them to share their stories with media, elected officials and members of their community.

“Make sure the community knows what your employees and directors do for your community,” he said during his speech at Monday’s general session of the ABA’s annual convention, which was conducted Sunday, Monday and Tuesday in San Antonio, Texas. Wilson lamented that the industry’s reputation has taken a serious hit. He said a recent poll, however, shows public confidence in the industry is rising from an historic low point. “The task now is to continue to move the needle,” he said. “The stronger our reputation at home, the better our reputation is in Washington and in the state Capitols.”

Wilson highlighted a “tool kit” created by ABA to help bankers generate positive publicity for their bank and the industry. Initially available only to members, ABA has made the tool kit available to all bankers regardless of whether they are a member of ABA. “This is that important,” Wilson said.

Kelly addressed the convention Tuesday. He also said bankers need to tell their story. He said many people don’t understand the role of community banking. He said they need to communicate that the crushing weight of regulation is stifling employment and the economy. “The Wall Street reform bill is the Main Street Destruction Act,” he said. “We need to cut back on regulations, which are killing us.”

“We are the bankers in the largest economy in the world; it is up to us to explain how this economy was made,” Kelly said.

Kelly urged bankers to engage in dialogue with regulators, saying: “We need to be respectful and enthusiastic, and we need to ask the same of the regulators. We need to save banks, not close them.”

Saying “We are stewards of the industry,” Kelly said unity is important. “Don’t denigrate your fellow bankers. If you denigrate one banker you denigrate the entire industry.”

Kelly said bankers have to make their own future. “There is nobody coming [who will make it better for us]. It’s just us. We are the ones who need to go out and make a difference. It’s up to us.”

Hall-of-Famer with some words of wisdom

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United Bankers Bank of Bloomington, Minn., hosted its customers Thursday and Friday to a two-day celebration, featuring dinner, educational presentations, and a luncheon speech featuring Hall of Fame baseball player Bert Blyleven.

Blyleven shared several baseball stories, but also offered encouragement using B-A-S-E-B-A-L-L as an acronym.  He said:

B stands for Believe. “You have to believe in what you are doing,” he said.

A stands for attitude. Blyleven said he is a big believer in the power of positive thinking.

S stands for sacrifice. “You have to sacrifice to get some things. In the end, you will be rewarded,” he said.

E stands for enthusiasm. He said your enthusiasm has the ability to raise everyone’s energy level.

B stands for behavior. “Those around you will feed on your behavior,” he said. In other words, you set the tone for your team — will it promote success of something less?

A stands for action. “Be proud of what you are doing,” he advised.

L stands for leader. “Be a leader, not a follower,” he urged.

L stands for love. “Love what you are doing and love your family,” he counseled.

Starbucks and small business lending

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This very interesting column ran in the New York Times earlier this week. Howard Schultz, the chairman and CEO of Starbucks, is trying to make credit available to small businesses. Starbucks will encourage customers to donate to a fund that will be funneled to Community Development Financial Institutions, which will, in turn, make loans. The Starbucks Foundation is kicking off the effort with a $5 million donation.

Schultz comments that banks either can’t or won’t make loans. Undoubtedly, some of that is true, depending on where you are in the country. I do wonder, however, what a CDFI can do that a community bank can’t do? In the Twin Cities, University Bank is a CDFI and I am fairly confident they are making all the loans they can. I don’t believe the problem is a lack of access to capital.

While a lack of access to capital certainly makes it harder for the small business owner, it doesn’t stop them in their tracks. Lots of small business owners use credit cards to get access to smaller amounts of cash if they really need it. Access to that kind of credit remains wide open.

If businesses aren’t growing, I think it is probably more the result of uncertainty. A business owner has a very difficult time planning one or two years into the future at this time. We don’t know what the health care cost burden is going to be, what the tax situation is going to be, or what new programs might be launched that would make it smarter to hire in six months rather than right now. Timing is everything in business. Entrepreneurs take risks, but not uncalculated risks. They need to be able to see 12 or 24 months into the future with some clarity. If you don’t know whether your journey is going to be uphill or on level ground, most hikers will pack a light load just to be sure. Employers aren’t hiring because they just aren’t sure.

I applaud Mr. Schultz. I am impressed by people who identify problems and then do something to solve it. Perhaps his program will make a difference. It certainly will raise awareness. But it will be interesting to see in a year or so how many businesses have actually tapped into this credit and what they have done with it.

Events support financial literacy

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There are a couple of big events happening in the arena of financial literacy education. The first took place Oct. 14 at Lambeau Field in Green Bay, Wis. The Governor’s Council on Financial Literacy hosted its first state summit on financial literacy. Nearly 200 educators and financial experts participated.

Presenters came from the Federal Reserve Bank of Chicago, the Wisconsin Department of Financial Institutions, several colleges and from business. This article offers a little more detail.

The other big event takes place Thursday evening at the Federal Reserve Bank of Minneapolis. It’s called EconFest 2011 and it will commemorate the 50th anniversary of the Minnesota Council on Economic Education. MCEE was founded as a non-profit organization at the University of Minnesota that prepares teachers to teach economic concepts. When I worked at the Minnesota Bankers Association 21 years ago, I remember being involved with the worthy group.

MCEE has developed a network of centers to deliver financial education. It also works through several other college campuses. In addition to supporting teachers, the organization sponsors quiz-bowl-like competitions for high schoolers called the Personal Financial Decathlon and the Economics Challenge. Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, praises the organization in this essay, appearing in the September edition of the Fed Bank’s magazine. For more on MCEE, visit its webs site by clicking here.

Groups differ over regulatory regime

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I was wondering how long it would take Cam Fine to respond to this essay by ABA’s Frank Keating. ICBA’s Fine just posted this over at Finer Points, so it took about a week. Maybe Fine was on vacation.

Keating argues that regulatory mandates based on size are misguided, while Fine believes smaller banks are distinct from larger banks and should get rules tailored to them. 

ICBA has long advocated for a two-tiered regulatory system, and there have been a few comments out of the FDIC which led me to believe the regulators may actually be considering the idea. But if the industry is not unified on this point, then prospects for any change are doubtful.   

Of course, there are a number of distinctions made in existing law separating the largest banks from the smaller ones — Dodd-Frank puts significant new regulatory requirements on the SIFIs; there have been big and small bank distinctions in CRA and HMDA and other laws for years. Keating argues the distinctions don’t work very well. True, although most bankers in smaller institutions will say they are suffocating under regulatory paperwork while the larger players are generally able to find the resources to manage the burden.

ABA and ICBA disagreed sharply throughout the Dodd-Frank debate. Since the July 21, 2010 signing ceremony at the White House — which ICBA attended and ABA avoided — I thought the associations made peace, but perhaps I judged too quickly.

Characteristics of top performers

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Edward A. Krei of the Baker Group was the opening speaker Tuesday morning at the Bank Holding Company Association Fall Seminar. His wide-ranging hour-long presentation covered a number of issues. Here are the seven things he said high-performing banks do better than their competitors:

  1. Clearly define their markets and listen to their customers
  2. Think, plan and act with a long-term focus
  3. Build effective processes
  4. Understand their “bets”
  5. Invest in employees and in organization structure that promotes accountability
  6. They “Ask for the business”
  7. Resist complacency and the status quo — they embrace and manage change with a sense of urgency.

He also shared these 12 attributes of high performance bankers:

  1. Comfortable in a “fluid” organization – they are multi-skilled and cross-trained.
  2. Listen well — to customers and co-workers.
  3. Think of themselves as a business — ask “why would someone want to do business with me? How easy am I to do business with?”
  4. Know why their job is important to the success of their bank.
  5. Understand the features and benefits of their bank’s products and have confidence that they can offer the best solutions to customers’ needs — they “ask for the business.”
  6. Comfortable working in a very competitive, changing industry — they want to continue to learn.
  7. Never miss an opportunity to say “thank you” to customers.
  8. Never miss an opportunity to say “good job” to co-workers. (Sincere recognition goes a long way.)
  9. Regularly ask “how am I doing?” and expect objective feedback. They strive for excellence — to be the best at what they do.
  10. Know that supervisors must treat employees the way they expect employees to treat customers.
  11. Frequently celebrate victories with co-workers.
  12. Feel like winners and act like owners — have an attitude of pride in themselves and the bank. Do the right thing even when no one is watching.

Look for coverage of the BHCA Fall Seminar in the Oct. 15 edition of NorthWestern Financial Review magazine.