Exercising the Right to Vote

April 27, 2016

In last week’s blog, I warned that the crazy season of primary elections was landing in Indiana. By now you have been overrun, and likely appalled, by the barrage of negative political advertisements ‒ in your mailbox, on your TV, on the radio, in the newspapers, and streaming over the Internet. The election is still nearly a week away, so the intensity is likely to pick up even more.

For the primary election in Indiana on Tuesday, May 3, there are still multiple candidates running for president of the United States. Unfortunately, though, most people that I talk to are not happy with the pool. The general sentiment is, “With more than 320 million people in the United States, is this the best we can do?”

It currently appears that Bernie Sanders, an independent senator from Vermont, is about to be mathematically eliminated. From a banker’s standpoint, that is a good thing. Sanders, who is running on the Democratic ticket for his presidential aspirations, has lasted far longer than anyone would have thought ‒ perhaps even longer than he expected. What does it say about our country that a 74-year-old, self-proclaimed Socialist is prominent in the conversation? And why is it that he appeals to first-time millennial voters?

Mr. Sanders’ campaign has been based on blaming a single industry for every problem in the world: banking. Why does he not understand that the deployment of capital to businesses, governments and consumers from the banking industry is the backbone of our economy? The Sanders advertisements that I have seen threaten to make the banking business “pay,” and he lists a litany of bad ideas that could be funded by punitive measures against those awful banks. I am baffled.

If he is appealing to millennials, and they agree with his anti-bank rhetoric, how will we win them over as customers in the next few years? I do not see any silver bullets, so there is a laundry list of things that each bank will need to do. One is to tout what banks do individually, as well as industry-wide. I have written often over the years that bankers are too modest about sharing how much they help their various markets. The banking story must be told. Another “to do” item for the industry is to reach out to young, future customers and leaders and ask them what they want from banks. Conversing is one of our strengths, but we need to focus it on young consumers to dispel the Sanders rhetoric.

I suspect that you have figured out that I will not be casting my vote for Bernie Sanders, though I still am not sure who I will vote for. It is serious business, since the president of the United States is the most powerful person on earth. While I wish there were additional choices, I will nonetheless enter the voting booth and make many decisions, one being for president. I hope you, too, will exercise your right to vote, whether on May 3 or in advance. Our country enjoys more freedoms than any nation in the world, largely because of the men and women who have fought to preserve our liberties … including the cherished right to vote.

– S. Joe DeHaven

Elections 2016: Unwholesome Competition

April 20, 2016

The crazy season descends upon Indiana today. Yesterday was the New York state primary, and the next big prize, in terms of presidential delegates, is Indiana. No doubt within the next two weeks we will tire of the barrage of countless negative political advertisements. The primary will be good for our economy, as it is expected to generate well over $10 million in media expenditures in the Indianapolis market alone. I cannot imagine how much more will be spent on hotels and food and advertising on a statewide basis, but it will be substantial.

By May 3 we will all, I hope, either go to our respective polling sites, or will have voted in advance. We vote to select the candidates of our choice, though sometimes our vote is against candidates. Each of us have our own criteria to measure candidates for all of the offices, from the presidency on down. This year it may be difficult to sort through criteria as we prepare to vote ‒ to date I have not seen much substantive discussion of issues in any races. Along with the presidential circus, there are many other important contests to decide this year, including the one for the Republican candidacy for the U.S. Senate seat currently held by Dan Coats. This race pits two outstanding U.S. representatives, Marlin Stutzman and Todd Young, against each other, and observers have noticed considerable mudslinging in their campaigns.

There also are some heated contests for state-level Senate and House seats, primarily on the Republican side. With some exceptions, most of these contests are one-issue ideological challenges, rather than broad-based issues disagreement. While that is not entirely new, it strikes me that it is more prevalent throughout this year’s races than in the past.

At the presidential level, much has been said on the Democrat side about the influence of the top 1 percent of wage earners, what to do with banks, and relative political experience. Little has been said about how to lead our nation, how to direct foreign policy, or how to realistically plan our domestic future. Hillary Clinton has been cast as a serial liar, and Bernie Sanders is an admitted Socialist, which somehow makes him at age 74 the choice of young voters. This is all confusing to me. Then there is the Republican side, where we have Donald Trump and Ted Cruz ‒ both of whom have their share of party detractors ‒ as the leading candidates. Add to the mix John Kasich, who remains in the race despite having no visible chance of getting enough delegates to win. There is conjecture that none of the three will have enough votes to win the nomination on the first ballot of delegates, which could open the final process to anyone. This, too, is confusing to me.

My reflections on all of this are twofold. First, each year more Democrats move further to the left politically to win their primaries, and Republicans move further to the right. In this two-party system of ours, those of us who live in the middle are left unrepresented. Will a third party spring up to represent those of us in the middle? Second, I am thankful that we have the Summer Olympics this year to divert our attention away from politics for two weeks, while we enjoy a more wholesome competition!

– S. Joe DeHaven

Misplaced Incentive for the Credit Union Industry

April 13, 2016

There is a maxim, heard in various derivations, that holds a lot of truth: “You get what you incent.” Companies around the world use this concept to encourage sales of specific products or services. Government at all levels, and in many forms, have used incentives to elicit desired behavior. Unfortunately I believe that governments, in particular, often misuse incentives, or fail to end incentive programs when the perceived goals have been reached.

A case in point is the continued tax exemption enjoyed by the credit union industry. Because credit unions were founded to provide limited financial services to groups of individuals who shared a common bond, the federal government provided a tax exemption so that financial services would be available for such persons, especially those of modest means. Today’s credit unions, though, are hardly recognizable from those formed nearly a century ago. The Credit Union Trends Report from CUNA Mutual Group indicates that, in January, more than 300,000 people joined credit unions, loan balances were up 11 percent from the previous year, and savings balances increased 6 percent. While all categories of credit unions grew, the largest credit unions grew four times faster than the smallest credit unions.

Today there are more than 105 million credit union members in the United States, served by under 6,500 credit unions. The banking industry has about the same number of institutions as there are credit unions, but has not shown the same level of growth in customer base as experienced during the past several years by the credit union industry. Yet with all of that growth, plus exemption from federal and generally state taxes, the credit union industry only earned 0.75 percent return on assets last year, compared to the banking industry’s return on assets of 1.03 percent ‒ and banks pay federal and state taxes throughout the country!

Why, then, does our federal taxation policy continue to incent credit union growth at the expense of bank growth? The answer is a bit hard for bankers to understand. Generally speaking, Democrats want to align with policies that support the “little guy,” and credit unions are perceived to both serve the little guy, and be the little guy within the financial services realm. Despite the findings of study after study that disprove that credit unions continue to serve those of modest means, the perception remains.

Another generality is that Republicans are opposed to raising taxes on any person or entity, and thus they are not willing to institute taxes on the credit union industry. Never mind that Republicans are proponents of a level playing field in business, which obviously does not exist in the financial services industry. As someone who has worked on this skewed issue for decades, it is frustrating to have such systemic opposition to correcting this innate unfairness.

I certainly do not know when this issue will be addressed by Congress, but I do believe that the day will come. In the meantime, I fear, we will continue to get what we incent, which is the abnormal growth of the tax exempt credit union industry, largely at the expense of the tax-paying banking industry.

– S. Joe DeHaven

Repairing the Image of Banking

April 6, 2016

During a recent meeting of the Indiana Bankers Association management team, a question arose regarding whether the image of banks and bankers is still damaged after the fallout of the 2008 financial crisis. If so, should we be leading an effort to repair that image? There were the usual opinions that yes, the image is still damaged, and yes, there should be an effort to restore it. This segued into a discussion about who could lead such an effort, and how it should be approached.

Specific opinions vary from person to person, but my view is as follows: First is that an individual state trying to lead a campaign is probably not cost-rewarding. The banking image devaluation resulted from the fact that the banking industry has never defined banks as insured depositories, yet deposits are what separate banks from other financial firms. Regrettably the national media, in the days following the financial crisis, essentially defined banking as mortgage lenders. Not just mortgage lenders, but any participant in the process of mortgage lending. That could include Realtors, title companies, appraisers, mortgage brokers, investment banks that put together secondary market bonds, and rating agencies. While this list is not comprehensive, it conveys the failure of the banking industry to have accurately defined itself. To amend the flawed definition thrust upon us would require more than the efforts of a single state; it would require a national media campaign. That national campaign would require a consortium of states acting together, or the leadership of a national organization.

The next issue is how to fund such a campaign. Not all segments of the banking industry were affected in the same way by this negative image, thus local and regional banks might choose not to participate in such a campaign. Much like the national politicians whose constituents love their congressman, but believe that Congress itself is broken, customers tend to love their own banks, but view the banking system as unfair. This phenomenon favors those community bankers who are serving a smaller geographical group of customers. Would small-town or regional bankers want to spend money for a national image campaign, when their customer bases are comfortable with their banks, even if critical of the banking industry? My guess is that they would not.

Could all of the state bankers associations collectively fund such an effort? The answer to this question is less clear, because not all states are created equally. Some still have hundreds of banks headquartered within their borders, while others have only a handful. Some have ample financial resources, while others have very little money in reserves. Some have tried image programs before, with mixed results, and some have not. It would be difficult to build the consensus needed for a nationwide image program to emanate from the state associations.

A national bank trade association could lead the effort, but the question is funding. Who would fund such a long and expensive campaign? Even a national association would struggle with getting all segments of the banking industry behind an effort, for the aforementioned reasons. All that is left is allowing the banking industry’s good deeds over many years to build up into an improved image. If and when that happens, I hope the industry will spend the time and money to proactively define what a bank is.

I thank the IBA management team for engaging in enlightening discussion on an issue that is, and will remain, an important topic for many years.

– S. Joe DeHaven

A Millennial Misperception

March 30, 2016

I have been blessed throughout my life with great teeth and still have all 32 of them. Yes, I am that rare person who has all four wisdom teeth. I have had several small surface cavities filled, but not lost a tooth. A couple of weeks ago, I had a new experience—a root canal! While it was not fun, it was not as bad as I imagined. It was a relief to get it fixed, and I will soon have my new cap in place. I am told that I will be as good as new and will not notice any difference. Knowing many people who have had this done, most have told me that it will be fine. Others have experienced problems with the cap being sized correctly and have lost the permanent cap, thus having to go back for a second try. Time will tell what my experience will be.

It is hard for me to believe that a majority of millennials surveyed indicated that they would rather see their dentist than go to a bank. Really? I struggle to understand that result. Banks do not inflict pain on people and, while dentists try to avoid inflicting pain, they sometimes do. The bankers that I know are all leaders in their communities. They are warm, caring people who are in banking out of a desire to help and serve others. They want to help their communities improve, grow and thrive.

I suppose that some of those millennials simply hate dealing with numbers and believe that bankers only deal with numbers. Bankers today deal with problem resolution. When customers tell their banker what their financial issue is, bankers are readily able to offer a variety of solutions. Are bankers simply failing to properly convey their services to customers? I suspect there is a fair share of that failure occurring.

Could it also be that the millennials’ fear of bankers results from the fact that they were coming of age during the recent financial crisis? I expect that this has quite a bit to do with that fear. Bankers certainly made some mistakes during this period, but most of the ill will should have been directed at non-bank entities. The banking industry’s lack of defining what a bank is allowed the national media to determine that definition, which ended up being any organization or individual that made or arranged for a mortgage loan, appraised, serviced a loan, underwrote secondary market bonds, or rated those bonds. Thus, the term bank or banker received blame for any negative action during the crisis.

It is important that bankers do not forget how their image was damaged, and that they all come together to repair that damage. The millennials are the largest generation ever in the United States, outnumbering the baby boomers by many millions. The very future of the banking business lies in our collective success of educating the public about who bankers are and what bankers do. Our ability to recapture our once pristine image will be paramount to our future success.

Just like time will tell whether my crown fits right and is a seamless change, time will tell whether bankers are able to attract millennials to enjoy the many services that they provide.

– S. Joe DeHaven

The Importance of Having an Emergency Response Plan

March 23, 2016

Guest blog by Paul W. Freeman, CAE, IBA Executive Vice President

Sudden cardiac arrest is one of the leading causes of death in the U.S. More than 350,000 people will suffer from sudden cardiac arrest this year. On December 14, 2015, a staff member of the Indiana Bankers Association was added to this number.

Without warning or prior medical diagnosis, our colleague experienced ventricular fibrillation, the most serious cardiac rhythm disturbance. With “v-fib,” the heart’s electrical activity becomes disordered. The heart’s lower chambers contract in a rapid, unsynchronized way. The ventricles “fibrillate” rather than beat. The heart pumps little or no blood. Collapse and sudden cardiac arrest follow.

The IBA has had an emergency response plan for many years. It is a “lovely” document that tells everyone where the fire extinguishers and first aid kits are located. It tells where to go in case of a tornado or fire. On this day, it was worthless.

For us, this experience has reinforced several key principles of emergency preparedness:

  • Have a plan. During an emergency, it is not the time to be asking questions.
  • Communicate the plan. Not knowing about the plan is tantamount to not having a plan.
  • Practice the plan. During an emergency, it is not the time to be reading the table of contents.
  • Review and update the plan. Employees turn over, technology changes, and best practices change.

An automated external defibrillator (AED) is the only effective treatment for restoring a regular heart rhythm during sudden cardiac arrest and is an easy-to-operate tool for someone with no medical background. Working through the Red Cross, the IBA has now purchased an automated external defibrillator and is in the process of scheduling AED and CPR training for all staff members. This training will provide us with techniques and information that can help us save a life.

Our story does have a happy ending. EMTs were already on a call across the street from our office, and responded in under four minutes. They were able to save our friend who is now back at work on a restricted schedule during rehabilitation. Our own “Christmas miracle.”

Do you have an emergency response plan at your organization?

Published, with permission, from the March 16 blog of the Indiana Society of Association Executives.

A Good Year for Banking at the Indiana Statehouse

March 16, 2016

Guest blog by Amber R. Van Til, IBA Executive Vice President

The 2016 Indiana General Assembly came to a close early this year, concluding all proceedings late in the evening last Thursday, well ahead of the March 14 deadline. It was an excellent year for Indiana banking, and your Indiana Bankers Association Government Relations Team will be sharing a detailed analysis of banking-related bills in coming weeks. However two bills ‒ SB 183 and SB 372 ‒ were particularly impactful in addressing delicate foreclosure issues.

SB 183, Real Property Offenses (formerly known as the Foreclosure Mischief bill), brings to fruition legislation that the IBA has been interested in seeing enacted for the past several years. Essentially the bill provides that a person who knowingly or intentionally damages, permanently removes an object from, or defaces residential or commercial property that is the subject of a foreclosure action commits a Class B misdemeanor. The penalty increases to a Class A misdemeanor if the damage caused is between $750 and $50,000, and to a Level 6 felony if the damage caused is $50,000 or more. A defense is established through this bill if the damage, removal or defacement was the result of repair, renovation, replacement or maintenance performed in good faith. Additionally SB 183 includes language that better enables law enforcement to remove squatters from vacant and abandoned properties. This legislation passed unanimously in both the Indiana House and Senate. It now awaits signature from the governor and is to be effective July 1.

SB 372, Deficiency Judgments and Foreclosed Property, addresses the fix on deficiency judgments related to the TRID* form. Specifically SB 372 provides that the following statutes are not intended to provide the owner of real estate subject to the issuance of process under a judgment or decree of foreclosure any protection or defense against a deficiency judgment for purposes of the borrower protections from liability that must be disclosed on a specified form required by amendments to a federal rule concerning mortgage disclosures: (1) the statutes governing the payoff of, and short sales involving: (a) first-lien mortgage transactions, and (b) consumer credit sales and consumer loans under the Uniform Consumer Credit Code; and (2) the statute allowing the owner of real estate subject to the issuance of process under a judgment or decree of foreclosure to waive, with the consent of the judgment holder, the time limitations that would otherwise apply to the issuance of process with respect to the judgment or decree of foreclosure. This bill passed unanimously in the Indiana Senate and received near-unanimous support in the House. The bill awaits signature from the governor and will be effective upon passage.

The IBA extends special thanks to Sen. Rodric Bray, Martinsville, for carrying both bills as Senate sponsor, and to Rep. John Price, Greenwood, and Rep. Thomas Washburne, Evansville, who served as House sponsors of SB 183 and SB 372, respectively. Additionally we thank the full legislative body of the Indiana General Assembly for overwhelming support of these important pieces of legislation.

*TILA-RESPA Integrated Disclosure


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