‘Fair and Right’ in Sports and in Banking

August 10, 2016

Evansville native, Indiana University student and now Olympic gold medalist Lilly King has grabbed headlines worldwide for her comments describing her Olympic win on Monday as “a victory for clean sport.” Her primary competition in the event, the 100-meter breaststroke, was Russian swimmer Yulia Efimova, who previously had tested positively, twice, for use of performance-enhancing drugs. In fact Efimova was cleared to participate in the Olympics just days prior to Monday’s event. Lilly, who at age 19 shows confidence beyond her years, has stated that she did not believe Efimova should be allowed to compete, given her past offences. Now many are questioning why any known drug cheaters should be allowed into the Olympics.

This question of fairness extends far beyond the sports arena. Bankers, for instance, regularly compete for customers with shadow banking system players who do not have to abide by the same requirements that bankers face. This is not a matter of cheating ‒ the shadow bankers are not officially breaking rules ‒ but instead a question of fairness. Why should shadow banks be allowed to play by an advantaged set of rules? Credit unions, too, enjoy significant regulatory advantages over banks (e.g., no Community Reinvestment Act requirements), plus are exempt from federal and often state taxes. How is that fair and right?

Another example is the Farm Credit System, a quasi-private/public government-sponsored enterprise that pays federal taxes only on a small percentage of its business. Additionally the FCS profits from funding advantages through an implicit federal government guarantee, and it continues to liberalize its lending reach well beyond farming and ranching. How is that fair and right?

There are other examples that I could delve into regarding ATMs, mortgage companies and, more recently, fintech companies. All have regulatory advantages not shared by banks.

Fortunately the banking industry does have its champions, like Lilly King in swimming, who are willing to call out unfair advantages. The Independent Community Bankers of America, American Bankers Association, Indiana Bankers Association and other state bank trade associations ‒ with grassroots support from bankers across the nation ‒ regularly point out to legislators and regulators the inequity of an uneven playing field. Though it can be frustrating to have to continually deliver the same message, the more we speak out, the more our voices are heard.

Back to Lilly King, I applaud her efforts to bring clean competition to sports, and I wish her continued success in pursuit of Olympic medals, earned the fair and right way. My wish for banking is that our continued efforts prevail in bringing parity to competition, ultimately to the benefit of consumers, who deserve the best of products and services delivered in a free market environment. And that would be fair and right for all.

– S. Joe DeHaven

The Scorecard Is Set for 2016 Elections

August 3, 2016

The scorecard is finally set, it seems, for this fall’s elections. This has been a year politically like no other. Starting at the top of the ticket, last week the Democratic National Convention formally elected Hillary Clinton as nominee for president of the United States. History was made, as Ms. Clinton became the first female candidate of a major party for the office of president. She is a former first lady when her husband, Bill Clinton, was president; she later served as a U.S. senator from New York and as secretary of state in the Obama administration. She has selected as her running mate U.S. Sen. Tim Kaine of Virginia, who also is a former Virginia governor. Clinton and Kaine will be pitted this fall against the Republican ticket of Donald Trump and Indiana Gov. Mike Pence. Trump is new to politics, running his first campaign after a successful career in real estate. Pence is a veteran politician who was a U.S. representative before serving in Indiana’s highest office. Whatever your personal leaning ‒ Republican, Democrat, or independent voter ‒ it will, no doubt, be an interesting campaign to watch.

Additionally the U.S. Senate appears to be up for grabs. Currently the Republicans hold a small majority but, since they have more seats on the ballot this year, there is a good chance that the Democrats could end up with a slight majority next year. One key to that outcome is Indiana. Recently, Democratic primary election nominee Baron Hill withdrew his name from consideration so that Evan Bayh, former Indiana governor and U.S. senator, could be selected to replace him. Mr. Bayh will run against current U.S. Rep. Todd Young, who won the Republican nomination for the open U.S. Senate seat. This seat became available when Sen. Dan Coats decided against another election campaign. While this seat previously was regarded as a sure Republican victory, it no longer seems to be. Entrance of the ever-popular Bayh has changed the dynamics completely.

At the state level, Pence had to withdraw from his effort for a second term as governor of Indiana when he accepted Trump’s offer to seek the vice presidency. This development followed, by just a few months, the resignation of Sue Ellspermann as lieutenant governor, who accepted the position of president of Ivy Tech Community College. Her resignation opened the door to long-time GOP insider Eric Holcomb, who was approved by the Indiana Senate to replace Ellspermann as lieutenant governor. Then, when Pence removed himself from the Republican ticket for governor, Holcomb filed to run. Last week the 22 members of the Indiana Republican State Committee met to determine who, among the four candidates who had filed for consideration, should replace Pence on the ballot this fall. They selected Holcomb.

In his first act as candidate for the governorship, Holcomb selected Indiana Auditor Suzanne Crouch as his running mate for lieutenant governor. Crouch, who served as a state representative from Evansville prior to her election as auditor, is known as a prolific fundraiser. Fundraising will certainly be high on the to-do list for the Holcomb/Crouch ticket, as they face their Democratic opponents of John Gregg, former speaker of the Indiana House of Representatives, and Rep. Christina Hale. At this point, it appears to be a close race.

I hope this review helps you update your scorecard for this fall’s biggest contests. Never before have there been so many changes so close to an election. It will be an exciting year politically, as we watch to find out who survives the general election this fall.

– S. Joe DeHaven

Two Conventions, World Olympics and an Upcoming Election: Excitement at all Levels

July 27, 2016

Recently in Hoosier Banker magazine, I wrote about leap year excitement this summer with the Republican National Convention, Democratic National Convention and Summer Olympics all taking place within a span of five weeks. The first of those events, the Republican National Convention (RNC), wrapped up last week in Cleveland. One year ago, no one would have guessed the outcome: Donald Trump, a celebrity businessman, is the Republican candidate for president, and Indiana Gov. Mike Pence is his running mate.

Early in the winnowing process, Donald Trump had been dismissed by political pundits as being incapable of receiving the Republican nomination. Though all agreed that Mr. Trump had name recognition, he was an outsider who had never held public office, challenging a field of 15+ experienced politicians. Yet it was his outsider’s perspective and tell-it-like-it-is commentary that appealed to much of the rank-and-file Republican base, and he is now the GOP candidate for president of the United States.

Watching the RNC last week was particularly exciting for Hoosiers, as we witnessed our own Gov. Pence share the spotlight as Trump’s running mate. Pence’s deep political experience, currently as governor and previously as U.S. representative for 14 years, offers counterbalance to Trump’s newcomer status. Additionally Pence’s personality ‒ gracious and thoughtful ‒ is a counterpoint to Trump’s blunter personal style. Yet another interest point for Hoosiers is that Mr. Pence had to withdraw his name from the running for a second term as governor, in order to accept Trump’s offer as running mate. As a result, yesterday the Indiana Republican State Committee selected Indiana Lt. Gov. Eric Holcomb as the new Republican candidate for governor. Congratulations, Mr. Holcomb!

This week, the Democratic National Convention (DNC) is underway. As of today, it is too soon to comment on final outcome or effect on polls, as the event does not conclude until tomorrow. What is certain, though, is that the 2016 DNC represents an historic milestone, with Hillary Clinton standing as the first female candidate for U.S. president named by a major party. Like Trump, Mrs. Clinton has named an experienced politician as her running mate: U.S. Sen. Tim Kaine of Virginia. While Trump’s running mate is a current governor with prior experience in the U.S. Congress, Mr. Kaine is a current U.S. senator who previously served Virginia as governor.

In a little over a week, with both conventions over, we can mercifully immerse ourselves in the spectacle of the Summer Olympics. This global event will, no doubt, have its own set of challenges, heroes and disappointments, but it will be a nice respite from national politics. It also will be a brief respite, because immediately following will come a barrage of political campaigning, on all levels, that will continue and intensify until Election Day on Nov. 8.

– S. Joe DeHaven

Yet More Political Changes in Indiana

July 20, 2016

Last week Indiana was the epicenter of U.S. politics, to a degree that I have never before witnessed. As referenced in the July 13 IBA Desktop blog, early in the week there was much excitement, while Indiana Gov. Mike Pence was being considered for nomination as candidate for vice president on the Republican ticket. That position was offered to him late in the week, and Pence’s acceptance gave Hoosier significance to the Republican ticket for U.S. president and vice president.

Other news last week was that Baron Hill, Democrat nominee for the U.S. Senate seat being vacated by Dan Coats, had dropped out of the race. Speculation swirled that Evan Bayh, former Indiana governor and U.S. senator, would take Hill’s place; confirmation of Bayh’s intent was announced later in the day on July 13. As if that news were not enough to shine a light on Indiana, on Tuesday last week Donald Trump held a fundraiser and delivered a speech in central Indiana. His Indiana visit was unexpectedly extended, when his departure plane experienced mechanical issues. As a result of the schedule change, political dignitaries, including former Speaker of the U.S. House of Representatives Newt Gingrich, flew in to meet Trump for VP running mate conversations, placing Indiana in the middle of every news cycle.

The events surrounding Gov. Pence’s move to the vice president candidacy set off a series of movements within Indiana politics. Pence had to drop out of the race for governor in order to enter the race for vice president this fall. Several individuals have expressed interest in replacing Gov. Pence on the Republican ballot for governor for the next four years, with three emerging as likely contenders: recently appointed Lt. Gov. Eric Holcomb, U.S. Rep. Susan Brooks and U.S. Rep. Todd Rokita. Other individuals could still seek the nomination, if not already on the ballot for another office.

The winner for Republican nominee for governor will be determined by a process that must be completed within 30 days of Pence’s removal from the ticket. The 22 members from across the state who make up the Indiana Republican State Committee are scheduled to meet on July 26 to make a selection. Whomever the committee chooses as the Republican nominee will change Indiana’s gubernatorial race significantly. To date, Democrat candidate John Gregg’s campaign has focused on Pence’s record. Since none of the contenders is tied to Pence’s record, Gregg will have to pivot his campaign in a new direction.

Though I am sure your scorecard is pretty marked up by now, more action may be forthcoming, as others toss their hats into the ring for an open House seat, should Brooks or Rokita be the nominee selected by the Central Committee. Thus Indiana may remain in the political spotlight a little longer. Regardless, 2016 is proving to be an exceptionally exciting year for Indiana politics!

– S. Joe DeHaven

Political Changes in Indiana

July 13, 2016

It’s been an interesting week politically in Indiana, with national ramifications. On Monday the news came out that Baron Hill, Democratic candidate for the U.S. Senate seat being vacated by Dan Coats, would drop out, to be replaced by Evan Bayh. Bayh is a past Indiana governor for eight years, past U.S. senator for 12 years, and the son of Birch Bayh, longtime former U.S. senator.

The significance of this change in candidates for this coveted seat in the Senate cannot be overstated. Until this bombshell news hit, Republican candidate Todd Young, who has been serving admirably as a member of the U.S. House of Representatives for the past six years, was heavily favored to defeat Mr. Hill. Now that Mr. Bayh ‒ a darling of Indiana voters ‒ is in the race, political insiders everywhere have changed this race from likely Republican to toss up.

Fortunately both Todd Young and Evan Bayh have been receptive to and supportive of banking issues. Young currently serves on the powerful House Ways and Means Committee and has been particularly helpful on issues related to taxation. Bayh previously served on the Senate Committee on Banking, Housing, & Urban Affairs when he represented Indiana in the Senate. Though he did vote for the Dodd-Frank Act, he was very supportive of many other issues related to banking.

Monday’s news was big, and we may be hearing more big news shortly. There is speculation that Donald Trump, presumptive Republican candidate for president, will be announcing as soon as tomorrow his choice for vice presidential running mate. Indiana Gov. Mike Pence is a strong contender; if named, Pence would have to drop out of the race for another four years as governor. Whether you are a Republican or Democrat, Trump supporter or critic, it should make all Hoosiers proud to have one of our own on a ticket for vice president of the United States.

Of course Mr. Trump may name someone else as his running mate, or may wait until next week’s Republican National Convention to make an announcement. A decision to wait would essentially be a decision to name someone other than Gov. Pence, because Pence has a deadline of July 15 to withdraw his name from the gubernatorial race. One way or another, we’ll know where we stand by week’s end. And whatever the outcome of this and other big news items, your Indiana Bankers Association will continue to work with you and for you on behalf of the industry.

– S. Joe DeHaven

Loyalty Versus Satisfaction: Different as Cats and Dogs

July 6, 2016

For the past 10 years, I have had the privilege of participating in the Central States Conference of State Bankers Associations. Each summer, leaders from 18 state bank trade associations ‒ presidents and CEOs, chairmen and vice chairmen ‒ gather to deliberate about the issues facing their respective organizations. This cross-fertilization of senior staff and volunteer leadership across state lines has proven to be an effective way to enhance our collective knowledge and influence. Last week the 2016 version of this gathering took place in Lake Geneva, Wisconsin, under the capable leadership of Rose Oswald Poels, president and CEO of the Wisconsin Bankers Association.

Ms. Poels scheduled several notable speakers, but one in particular stood out for me. James Kane, a researcher and author, spoke on an issue that I had never before focused on. He and other experts have spent the past 30 years studying the differences between loyalty and satisfaction. I am paraphrasing, of course, but generally loyalty ‒ in customers, family and friends, employees, etc. ‒ has distinct characteristics that both cause it and result from it. Loyalty is what every business aspires to achieve in its customer base. Often, however, we confuse loyalty with satisfaction. Satisfied customers will stay with you, but only as long as you continue to satisfy them with service, products and innovation. Loyal customers will remain through practically anything and will even talk about their loyalty, thus becoming salesmen to some extent.

The clearest analogy from Mr. Kane was in comparing loyalty versus satisfaction to cats and dogs. Having owned both, I could relate. Clearly, dogs are loyal. When you get home from work, a dog will rush to the door to welcome you and shower you with unconditional love. Cats, on the other hand, are at best satisfied. They seem to know you are home, but they will not meet you at the door, unless they want something. Cats intuit that they have a relationship with you and will give you just enough attention to keep that relationship going.

Your customers fit into these camps, too. You have loyal customers who love your products and services. Chances are that they know you or someone in your company, and likely there are personal connections with them. These loyal customers love you so much that they freely talk about your company, and why it is the best. By contrast, satisfied customers may be frequent purchasers of your products or services ‒ perhaps they even buy exclusively from you ‒ but they will only continue to buy from you as long as you keep them satisfied. There is no personal connection. They remain your customers until someone else offers better, cheaper or more convenient products or services.

How can an organization turn satisfied customers into loyal customers? The studies that Kane cited show that personal connection is the trigger. I am oversimplifying, but connections have to do in part with how our brains are wired. What can a company do to relate to and form connections with customers? Do marketing efforts focus entirely on product features, or do they invite personal connections? It’s a fine line, but it could make all of the difference regarding customer loyalty.

I appreciate Rose for bringing forth James Kane to share his unique and important insights into developing customer loyalty. Just as you work hard to make your customers loyal to your institution, the Indiana Bankers Association strives to give you, our valued members, reason to connect with us. Please let us know anytime what we can do to keep you satisfied and earn your loyalty.

– S. Joe DeHaven

Fallout From Brexit

June 29, 2016

Last week we witnessed history being made, as the United Kingdom voted in a referendum to leave the European Union. The origins of the EU date back to post-World War II, when six European nations, not including the U.K., formed the European Coal and Steel Community. In 1957 this coalition was reformed as the European Economic Community, a.k.a. Common Market ‒ still without the United Kingdom. It was not until 1973 that the U.K. joined the European Economic Community, which in 1993 would be refashioned as the European Union.

Made of up of 28 European nations, the EU is structurally similar to the United States, in that both organizations consist of individual entities (nations in the EU; states in the USA), each with separate identities and laws, but jointly subscribing to centralized governmental rule. One of the visible signs of the EU was the implementation on Jan. 1, 1999, of the euro. This standardized currency is subscribed to by 19 EU-member countries; the U.K. was one of eight EU members that chose not to adopt the euro.

Why did U.K. voters elect last week to leave the EU? Probably the biggest reason centers on immigration from war-ravaged North African and Middle Eastern countries. In 2015 alone, 630,000 foreign nationals migrated to the U.K. Many theorize that the stateside version of this immigration issue is much of the root cause of the popularity of Donald Trump in the United States.

What will be the results of the United Kingdom’s exit of the EU? The true answer is that no one knows for sure. There is no precedent upon which to base a reasoned response, thus what is left is only opinion, or at best an educated guess. Many speculate that this is the beginning of the end for the EU. As soon as the vote was in, other European leaders were indicating that perhaps referendum votes should be held in their countries, too. Meantime world leaders are trying to soothe frayed nerves by noting that the U.K.’s departure will take a couple of years to complete, providing time for economies to adjust.

However, financial devastation has already occurred, with stock markets throughout the world being down significantly the day after the vote, with no quick relief in sight. When will stocks rebound? Will this be similar to the recent economic crisis, which took years to recover from?

German Chancellor Angela Merkel called for a meeting with some of the other EU leaders on Monday to discuss how to fix problems with the EU. Should these leaders successfully identify and fix issues causing the unrest that led the U.K. to vote to leave, perhaps they can hold the remaining members together. Perhaps they could even persuade the U.K. to hold another referendum to rejoin, or at least to make the withdrawal as seamless as possible.

As for banks in the United States, the immediate effect was felt by the large international institutions, which suffered losses in their stock prices. Bankers, like stock market investors, favor certainty, not surprises. The big uncertainty now is whether the European economic problems resulting from Brexit will reach the United States. If so, how will the effects be manifested, and how long will they last? Much like the financial crisis in 2008, no one knows what the long-term effects, if any, will be.

Last week’s vote was an impactful event that may change how the world does business in coming years. Nevertheless, let us not lose sight of the fact that, prior to 1993, there technically was no EU, and even its predecessor organizations are relative blips on the historic timeline of Europe. Let us also remember that our banks remain strong and solvent, ready as always to lead us to financial stability.

– S. Joe DeHaven

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