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A Margaret Thatcher Quote for the Future of Banking

By Matt Koppenheffer - Apr 8, 2013 at 9:45PM

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We know we're against a lot in banking, but what are we for?

Sadly, Britain's former Prime Minister, Margaret Thatcher passed away Monday morning. In remembrance of the "Iron Lady," The Wall Street Journal ran a collection of some of Thatcher's most notable quotes.

One quote jumped out at me in particular:

You don't win by just being against things, you only win by being for things and making your message perfectly clear.

As somebody who covers the banking and financial services sector, it struck me that this is painfully applicable right now in both the U.S. and worldwide. We hear an awful lot about the many things that various stakeholders are against when it comes to finance, but we hear far less about what anyone is for.

What should we be for in banking? Here are a few ideas.

1. Transparency
Take a moment to open up a bank's annual report circa 2000 or 2003. Now crack open one from 2012. 

Banks haven't gotten radically more complex over that time. Thanks to the financial crisis and demands from both the government and shareholders, they've simply started sharing more about their businesses. 

This makes for more required reading -- Bank of America's annual report now clocks in at nearly 300 pages -- but it provides a lot of additional useful information for investors. I'm for more transparency in banks.

2. Conservative management
What set Wells Fargo and US Bancorp apart from, say, Citigroup when the financial crisis hit? I'd argue it had a lot to do with management. 

At the very top of both Wells and USB there are conservative bankers and leaders who are managing the banks for the long term. They're less interested in maximizing earnings today if that means putting the entire organization at risk.

That contrasts with Chuck Prince, the then-CEO at Citi, who deftly conveyed the polar opposite of that manage-for-the-long-term, conservative approach when he quipped:

As long as the music is playing, you've got to get up and dance... We're still dancing.

I'm for conservative managers in banking who manage for the long term.

3. Making loans that will be paid back
There was no shortage of lending idiocy that we could point to in the pre-crisis days, but Wachovia -- since gobbled up by Wells Fargo -- and its "Pick-A-Pay" product could easily be one of the poster children for dumb lending practices. 

The "Pick-A-Pay" mortgage allowed customers to choose how much they wanted to pay each month. They might pay an amount that would look consistent with a standard mortgage. Or they might just pay interest. Or they might say, "I've got my eye on a new four-wheeler, so paying my mortgage can wait," and pay an amount less than the interest alone, racking up negative amortization on their loan.

That it was expected that widely offered loans of this sort would be dutifully paid back seems silly today. If only it had seemed as silly to more people then. 

Bottom line: I'm for banks making measured, reasonable loans that will be repaid.

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