WASHINGTON- Thomas Johnson, chairman, president, and chief executive of Green Point Savings Bank and its new parent, GP Financial Corp., recently made headlines when the giant, Flushing, N. Y.based mutual thrift sold stock for the first time in a controversial deal.
The American Banker caught up with Mr. Johnson when he visited Washington recently.
Q.: What are the top issues in Washington for your institution?
JOHNSON: I think the most important Washington issues are interstate banking and regulatory agency consolidation. Interstate banking is probably the premier issue if you are really concerned with the health of our banking system.
The single most important thing that you could do to create a banking system which doesn't go through the terrible cyclical problems that it always has is to let people be geographically diversified.
If you're locked into Texas and all you have there is energy and agriculture and real estate, of course you are going to have energy, agriculture, and real estate in your portfolio.
Q.: How much do you think it would add in efficiency to the banking system?
JOHNSON: One way of looking at it is to look at the noninterest operating expense ratio of the U.S. banking system versus the same ratio in other countries that do not have these artificial constraints.
My guess is that you would find $50 billion to $100 billion dollars. It is massive bucks. If you get $50 billion, at today's tax rates, that's $20 billion dollars in federal tax revenues that the government is not getting.
Q.: Do you think other bankers may find that an unusual argument to make?
JOHNSON: No, it is just one aspect. If you allow people to make more money, they are going to pay more taxes. The other side of it is that you have got employees that are going to get unemployed. I think most economists would argue that you ought to let things be as competitive as they can be, and as efficient as they can be.
Q: Is regulatory consolidation an important issue to you?
JOHNSON: It does not, in the long run, pay to have competing regulators. At the federal level, I think there is a convergence of the types of business that people do now, there seems to be a convergence of the rules... For there to be a bunch of different agencies regulating people just seems to me to be inefficient...
I would favor regulatory consolidation. My preference would be to have a truly independent agency - a single one - truly independent, analogous to the independence of the Fed...
The Fed has had a very distinguished record of independence on the monetary policy side, and I think if that could be used as a model to set up an independent agency on the regulatory side, the country would be well served by it. I would not have it beholden to the executive branch.
Q.: If you were a Washington bank regulator now, what would you be keeping your eye on, industrywide?
JOHNSON: I would be extremely concerned about understanding where people are lending their money. Historically, the way banks get in trouble is through their loan portfolio, by and large. And right now banks have got an unbelievable amount of cash.
They have repaired their capital, and it is just the kind of period when I think you would want to worry about what type of lending is getting fashionable as a way to get that last few cents per share that you otherwise would not get.
Q.: What kind of lending is getting fashionable right now?
JOHNSON: People are pushing on a string to lend to smaller businesses... I would worry about the resurgence of interest that I think I am hearing about in commercial real estate lending... The last time I looked, you couldn't get enough on the upside to offset the inevitable downside.
