Dec 04, 2008
New York, New York
December 4, 2008
…award and introduction given by David Longabardi, executive vice president, SourceMedia…
Thank you, David. It’s an honor to be here tonight and to receive this award on behalf of all my teammates at Bank of America. They are the ones whose hard work and dedication has enabled us to persevere in difficult times. Tonight’s honor is theirs.
I’d also like to congratulate the other bankers who are being honored here tonight, including Janie, Mariner and Peyton, who represent the best of our community banks, and Jerry Grundhofer, one of the great bankers of our time. These bankers demonstrate that it is possible to keep one’s head even as others are losing theirs and that sticking to the right business model and sound lending standards is the key to long-term success in this industry. Kudos to all of you.
The banks represented here tonight, and many others across America, have held up well during the recent housing downturn and financial crisis. It would be easy enough for us to commend one another on a job well done, lay all the blame for the current situation on the recently departed, and walk out of here feeling pretty self-satisfied.
But we all know that the reality is more complex and that self-congratulations will not help put our industry back on a path toward sustainable profitability and growth.
The fact is that while some in our industry engaged in egregious lending practices in recent years, all bankers have shifted over the course of several decades toward more aggressive lending practices and looser credit risk standards. Consumers embraced the opportunity to borrow at increasingly attractive terms and rates. And investors, subject to what our former Fed chairman once called “irrational exuberance,” fueled the trend toward more and more leverage.
I would not suggest that we revert to the pre-Depression lending standards of the 1920s. But it is incumbent on all of us – especially those of us whose performance has left us in a strengthened leadership position – to help our industry find a new balance between our desire for economic growth and our need for market stability.
The financial services industry is undergoing a transformation. In the blink of an eye, we’ve seen the demise of the independent investment banking business model on Wall Street, the failure or acquisition of the country’s largest thrifts and mortgage lenders, and the disappearance of the securitization industry for what is now going on a year.
The financial services industry that emerges from this crisis will look much different. Like the “barbell” that many have been predicting for years, it will include a handful of very large, diversified, global banks on one end… and thousands of smaller community banks on the other. Credit markets will feature simpler, more transparent products. And we will be a smaller industry, with fewer overall workers, and claiming a smaller portion of national income and gross national product.
That’s not a bad thing. Financial stocks’ share of the market value of the S&P 500 grew from 8% to 22% over the past 17 years. We weren’t complaining. But it would be fair to say that growth in financial services was overdone. And it wouldn’t hurt to remind ourselves that we play a supporting role in the economy – not a lead role. Financial services, after all, are a means, not an end. Our job is to help the real creators of economic value – people who make things, and people who use them – get together and do business. There should be some humility in that.
As a new financial services industry emerges, it will be shaped by two forces: the free market, through which customers express their preferences… and the regulatory environment, through which our policy leaders exercise their appropriate oversight role.
Legislating in the midst of a crisis, of course, is always difficult. It’s a good thing that we now have a legislative pause, in which the new Administration will have some time to study what has happened and think about potential changes before taking office.
In this environment, our industry must not dig in our heels, and adopt a stance that opposes all regulation. We have a responsibility to work with policy leaders in a spirit of goodwill and shared goals, to help the public understand what really went wrong in our industry and the economy, what continues to work well, and what common sense changes will be beneficial for both economic growth and stability.
To the degree that we can push change through the system, it should always be toward simplification. We must be clear that bankers don’t want less rigorous regulation. We want clear, efficient, effective regulation that supports a strong and stable financial services industry. And we’ll support ideas for reform that move us in that direction.
I appreciate very much the recognition that my bank is receiving tonight. But we all can agree that this is not a time for celebration in our industry. This is a time for hard work, for getting out there in the marketplace and making every good loan we can find, to boost the economy and do our part to restore confidence to the markets. It’s a time for determination in the face of our generation’s greatest economic challenge.
The bankers here with me in this room and many others across the country give me great confidence that we already are taking the right actions to heal our industry. We will continue in this critical work until the present crisis is behind us and we are once again providing a strong financial foundation for a thriving and prosperous American economy.
Thank you.
