Yes, Bill Cooper, Chairman and CEO of Minnesota-based TCF Financial famously wants to give back his bank´s $361 million in Tarp money. And though it took only six lines on a single page to get it, and already 280 pages filed with regulators to try to give it back, that´s not really what he wants to talk about. In the opening address at SourceMedia´s Best Practices in Retail Financial Services Symposium in Florida on Sunday, Cooper outlined the leading causes the financial crisis, and why he returned as chairman in 2008 after retiring in 2005.
Regulators, Congress, MBAs, unscrupulous lenders and borrowers-get ready to duck. Cooper´s thoughts on how each contributed to the financial crisis are not always politically correct, but often spot-on, and delivered with an edge that sometimes made financial fallout seem funny.
1. The Fed"The Fed has evolved into an entity that is going to keep the economy growing without bumps and have slow growth without recessions," Cooper notes. "In other words, a managed economy like you might find in Cuba, Russia, or China-how good that works."
2. Congress"The ultimate culprit here is Congress," Cooper says. "Fannie and Freddie are probably the biggest mistake any Congress has ever made, it's probably going cost $500 billion in connection with what went on with Fannie and Freddie."
3. Federal and State Banking Regulations"Does anybody think there´s not enough regulation in the banking business?" Cooper asked, to a burst of laughter. But, he argues, the regulation is misfocused on issues like BSA instead of fundamental safety and soundness. "They come in and audit the living crap out of you on BSA. Have you guys lived through this? It´s a life/death experience if you flunk BSA. ...The only terrorist the BSA program has caught is Spitzer with his pants down."
4. The SEC"The SEC ought to have one of those striped shirts on and be refereeing a wrestling match....The SEC was basically responsible for supervising the investment banks; what a great job they did."
5. Accountants"Mark to market accounting makes no sense," he says. "I´m a CPA by background. When I started out in this business, accounting was wrong, but it was simple and everybody understood it. Now it´s wrong, complicated, and nobody understands it."
6. Ratings Agencies"Rating agencies are another gang that ought to have on a striped shirt," he says. "They ought to have on a striped shirt behind bars in my opinion."
7. Computer Models"The biggest component, the thing that created the problem is there was nothing in there, those computer models assumed home prices were going to rise forever," Cooper says.
8. Banks and Investment Banks"What too big to fail really means is too big to manage," Cooper says. "If anybody here thinks the CEO of Citi has any idea what´s going on in all the important areas of his bank, it is impossible! Some guy in Tanzania can be doing something that takes you down for $100 billion. It is impossible to manage a bank that big."
9. Derivatives"Derivatives might have served a purpose if you hedged risk with it," Cooper opined. "But accountants again have screwed all this up with their mark to market accounting. But if you look at the dollar amount of derivatives is five times bigger than if you hedged everything on earth."
10. Originate and Sell"If you eat what you kill, you don´t eat rotten meat," Cooper says. "Originate and sell is a big mistake. It´s dried up now; it´ll come back in some other form. There´s some Harvard MBA investment banker is thinkin´ up some way to bring it back and screw us again."
11. Looting and GreedCooper worked his way through college as a Detroit police officer during the riots of 1967 when the police pulled out of Detroit, everyone turned to looting. "When there´s no more supervision people loot and rob, that´s the way it is," he says. And, "As it turns out that´s the way it is in the banking industry as well....The people who were regulating this were not regulating. The police pulled out, in effect."
12. Fraud by BorrowersBankers these days didn´t start on the teller line and work their way up. "What we have now are masters of the universe. They went to these business schools; they all have master´s degrees. They can compute the present value of everything on earth with an answer that´s meaningless but they´ll use that answer," he says. "They didn´t know there were bad borrowers-somebody who has never paid you, never will."
13. Lending to the "poor""What Congress said is if we can make more people homeowners, we´ll improve their character. But the fact of the matter is what improves a person´s character in connection with owning a home is the fact of getting good credit," he says. "A whole group of people went got subprime loans without going through that process. As a matter of fact, borrowing money became an entitlement, another entitlement, and it worked just the opposite: Instead of improving their character they got something for nothing."
Take two: Too good to leave out.
On exotic investments:"I thought swaps were what guys did with their wives in California."
On the value of SARs to national defense in the hands of the BSA regulators:"What the hell? These guys couldn´t find this loan problem when it sat in front of them; they´re going to find a terrorist?"
The big picture:"I believe at least 90 percent of this crisis was government driven, created by the government through bad monetary policy, the wrong kind of regulation, the whole impetus for managing economy, lending to the poor, encouraging what was in effect bad lending. All of this stuff was encouraged by the government, and a lot of honest bankers went long with it and didn´t make good judgments."
And, finally, why he returned as chairman and CEO of TCF Financial:"I own 5 million shares, I am the largest individual shareholder at TCF. Frankly, I came back because I have a long and deep affection for my money."