As I was preparing to travel to Chicago earlier this week to speak at the American Bankers Association (ABA) annual conference as their luncheon keynote the following day, I heard of a series of explosive news stories describing pickets and picketers that had succeeded in disrupting the banker conference on the day prior. But even as I preparing to board my flight to Chicago for the conference, I found myself more outwardly confused-than inwardly concerned.
As founder of an organization that has served more than one million low-wealth individuals in 69 urban, under-served communities across America, I completely understand, empathize, and in some ways even side with the frustrations of the assembled picketers, as they represent the frustrations and latent anger of millions of misled and otherwise deeply pained consumers, presently dealing with a great deal of very real economic pain in their lives; from imploding predatory mortgages, to ballooning credit cards, to stories of bailouts for bankers. Consumers who don't believe they have a voice. I get that, and I feel their pain, every day. Our Mortgage HOPE Crisis Hotline (888-388-HOPE) has amended, modified or restructured more than $250 million in mortgages, and fielded more than 75,000 consumer calls since 2008. Our services are free to anyone who calls us. All this said, I believe the picketers were picketing the wrong group. Let me explain.
One press release representing the picketers concerns noted emphatically, "…banks (need to) end their over-reliance on greed and profits and commit to using their taxpayer bailouts and backstops to help America's economy recover." 100% Agreed, and I have even written about these abuses, referencing them as examples of greed, short-termism and laziness, and leading by fear, in my bestselling book LOVE LEADERSHIP: The New Way to Lead in a Fear-Based World, as well as in my writings for the Huffington Post. The only problem here is that 99% of the members of the ABA, the group picketed on the day prior, are community bankers that "received no federal bailout funds." In fact, I would imagine that many members of the ABA are actually pretty angry themselves, inasmuch as community bankers not thought to be "too big to fail," they were basically left out of any substantive first round federal support from TARP, or any other federal so-called bailout program for banks. The decision was made early on that community bankers did not represent systemic risk, and would basically have to fend for themselves. I hear that my friends at Treasury may be relooking at the important role that community banks play in the marketplace, and this would be a good thing if it happened. Back to the story.
Another conference protestor angrily noted, "If we don't stop these foreclosures we're not going to have a country left." Once again, they were essentially right, and I agree, but most of these disastrous, predatory mortgage products were cooked up somewhere on Wall Street, not Mayberry Street, and subsequently sold on your and my street, by mostly under-regulated and unregulated mortgage companies, financial firms, and some of the worst offenders of all, mortgage brokers. As I said in an Economist interview on financial literacy and the growing mortgage crisis last year, "it is harder to be a pimp on a street corner in Harlem than a mortgage broker anywhere, because at least a pimp needs references."
Yes, we are angry, and frustrated, and rightly so, but in so many instances we are pointing that anger and frustration in the wrong direction, and getting nothing for it. Worse still, we are not channeling those painful emotions into productive passions that ultimately get us pointed in the right direction as a country, and moving again. I have always said that "passion is emotion made intelligent, and properly focused."
Getting us moving again will require, amongst other things, bankers making loans again; bankers like the community bankers attending the ABA conference. We have lost our story line as a country, and we need to get it back.
Here are the facts.
Most of the members of the ABA are small town community bankers, with approximately $150 million in bank assets or less, and around 300-400 employees. Take the word "bank" from their name, and this is also a basic description of an averaged-sized small business in America, which is also the heart beat of America, and the source of most of the country's jobs (and not a description of the so-called financial fat-cats that drew down billion dollar paydays, all the while fleecing hard working Americans who lacked financial sophistication).
Let's face it people, we really don't understand money, maybe worse so when we are angry.
We don't differentiate IndyMac (a not so good former subprime lender) from Freddie Mac or Fannie Mae (both publicly chartered, quasi-public financial institution with an honorable mandate to insure housing finance reaches the "least of these God's children," even if in recent years they veered horribly off track), but there is a big difference.
We don't differentiate Countrywide (a horribly bad, greed-centered mortgage player) from Nationwide (a great insurance company), but there is a difference.
And we don't differentiate responsible subprime lending from the predatory lending practices that have put so many Americans in a bad place, but there is a big difference.
I keep telling all of my passionate and committed (and necessary) advocacy friends, "stop demonizing all mortgage subprime lending." I continued, "…responsible subprime mortgage lending has done more to lift poor people out of poverty than anything else over the past 50 years. The problem is predatory subprime lending, greed-based subprime lending, fraud-based subprime lending, and massive levels of borrower financial illiteracy. People, including middle class people, that 'asked what's the payment, and not what's the interest rate,' and you never ask what the payment is when there is an interest rate attached."
If we keep on like this, banks and other mainstream lenders might just do precisely what we ask, and stop making less than prime loans, and then we are all truly toast. I don't know about you, but I don't have many of my friends with a perfect 800 credit score. Hello.
We shouldn't be picketing those folks at the ABA convention not only because they were not the principal offenders in this crisis, but frankly, because in the short and mid-term many of them, along with my credit unions friends, may become our last, best hope at reasonable mainstream credit and capital access. In some cases and communities today, they are the only institutions still making loans.
Ghettoized financial services represented a $10 billion (a year) industry two years ago, and was roughly equal to the amount made on mergers and acquisition fees on Wall Street. If we are not careful, this example of bad capitalism could easily morph into a $100 billion industry, because now middle class folks cannot seem to get a loan, and mainstream financial players have all backed up to something north of "sub-prime."
To quote my friend and Operation HOPE member Richard Hartnack, vice chairman of US Bank, "John, this crisis has three phases;
(1) Help those in the financial soup to get out, without rewarding speculators, investors, those who simply 'bought too much house,' fraud and providers of capital.
(2) Insure that credit continues to flow on some reasonable basis to individuals with less than an 800 credit score, and finally;
(3) make sure a crisis like this never happens again."
Rick Hartnack is right on point.
Picketing and protesting is as uniquely American as apple pie and bar-b-que, and play an important role in our democracy, but we have to also figure out is what we for, and not simply what we are against. We must define for ourselves what good capitalism looks like, and then we need to defend that. We have to get out story line back.
Part of that story line includes encouraging those ABA bankers to re-double their efforts, and to return to their core roots of passionate, relationship-based community banking; effectively taking some measureable risk of banking not just on collateral, but on the personal character and big ideas of local entrepreneurs, in small towns and big cities clear across this great country. We need to spark a new generation of young entrepreneurs and self-employment projects in this country, because corporate jobs are not going to save us. Entrepreneurship is where the jobs are going to come from. It is where they have always come from.
Finally, yes, we desperately need a rewrite of our consumer protections framework, and the Obama Administration and my friends and colleagues in the U.S. Treasury Department have some good ideas about how to do it, particularly their focus on regulating the under-regulated and unregulated sectors of our economy, as well as tightening up on the abuses within the traditional sector.
That said, legislation and regulation, no matter how well conceived, intentioned or intended, are simply not going to solve this problem alone. America is financially illiterate, and with a $14 trillion economy, the largest in the world today and 70% driven by the consumer, that is simply not smart fiscal planning.
What we can do.
Let's picket with our pens, asking Congress to pass comprehensive silver rights legislation requiring all children, K-12, or even K-college for that matter, to be required to take a well designed course in financial literacy, and in so doing teach an entirely new generation the "language of money."
Let's challenge the ABA and its members to do more; taking up financial literacy as their newest, highest, most serious priority, and in so doing, mobilizing tens of thousands of their employees to serve as role models, and to teach financial literacy in local schools, non-profits, houses of faith, and wherever else we find kids.
Community bankers and big banks alike already do some of this financial literacy work (and the ABA does a lot as an organization too), but they could do so much more, and they need to. Furthermore, this sort of "walking community streets with conviction," will actually change things, for the better. It will also help to insure that this crisis never happens again.
If you want to make a difference in your community, become one of Operation HOPE's nearly 10,000 HOPE Corps volunteers (www.operationhope.org) teaching dignity, financial literacy, hope, entrepreneurship and opportunity.
Help us reach, teach and touch 5 million young people, through 5 MILLION KIDS (www.5mk.org), and to "make smart sexy again," because we sure have made dumb sexy over the last 20 years. Let's make sure this crisis never happens again.
Rainbows, after storms. You cannot have a rainbow without a storm first.
John Hope Bryant is the founder, chairman and CEO of Operation HOPE, vice chairman of the U.S. President's Advisory Council on Financial Literacy as well as chairman of the Council Committee on the Under-Served, financial literacy advisor to the World Economic Forum Global Agenda Council, a Young Global Leaders for the World Economic Forum, and author of LOVE LEADERSHIP; A New Way to Lead in a Fear-Based World (Jossey-Bass), which debuted in August, 2009, #8 in the CEO Reads Top 10 Best Seller List.