It might not be well-reasoned; it might not always be civil; and it might not be fair. But the Occupy Wall Street movement, with its anti-finance bias, is with us and it is real. And unless the economy improves, or some other dramatic event occurs that at the moment seems remote, the reality is that banks are stuck for now in a reputational backwater.
True, community banks and credit unions came out better on "transfer day." But in the end, the animosity reflected in these protests hurts all banks.
The antipathy for banks at this time is particularly counterproductive because banks, including Wall Street itself, hold some of the most important keys for getting the country out of its current economic malaise. Whether it is lending to business for new plants and equipment, or to start-ups to grow a new idea, credit is vital. No loans mean, essentially, no jobs.
An angry mindset also overlooks the simple fact that the banking industry as a whole does more civic good than just about any other industry in America. The top five U.S. banks alone made more than $1 billion in charitable grants last year, continuing a decades-old trend of community engagement. One banking organization alone donated $320 million through its charitable giving program. These weren't just headline-grabbing gifts, but also grants to small businesses and nonprofits looking to cover operational expenses.
Community and regional banks in particular play an outsized civic role in their markets. Whether it is preschool educational programs or micro-credit programs to support the disadvantaged, Rotary scholarships or the local Halloween parade, community and regional banks are typically there when the mayor calls and needs help for the city or town.
There are obvious reasons why banks face a reputational dilemma despite the good they do. An era of excess lending by too many, loose standards by some fueled by securitization and an overheated markets, and other questionable practices — most of which were actually outside the banking system — tainted the industry as a whole. But there are many things that can be done for banking to retake the high ground.
For me, a good place to start is focusing bankers on their role as the trusted financial counselor. Of course, numerous banks have been dependable advisers to their customers for years, from families looking to buy a home to corporations that need financial advice. But over the past several decades, banks have faced new competition from virtually unregulated "shadow banks" in their role as a financial home-base. Mortgage brokers now act as a buffer between borrowers and lenders. Check-cashing services have moved into the mainstream of consumer finance, serving what one Wal-Mart executive called the "happily unbanked." Retailers selling prepaid debit cards have lured some customers away from checking accounts altogether.
But in the face of all these new products, banks remain a safe and trusted pair of hands that typically has the customer's interests at heart, and this I believe should be emphasized. Indeed, the industry might consider establishing a special set of standards that go beyond current standards that are required to be a financial adviser.
It is easier to build this trust done in small towns where face-to-face banking still exists. It is harder with young people who want to use their mobile phones for everything from watching movies and playing games to managing their banking relationships. However, even internet banking offers the banker opportunities to advise customers of the best products for their circumstances. And indeed, many bank internet sites do just that. Some banks give customers free access to investment advisers and organize that advice by life stages; many help borrowers understand their potential mortgage rates and refinancing costs.
Indeed, I think banking is wise to set the highest standards for advice and customer care in contrast to competing financial providers. Most banks have strong codes of conduct to which all employees must agree; no doubt banks should make customers more aware of them. Indeed, it might even be well for bank trade associations to adopt codes of conduct that banks can sign up to and to which customers can be made aware.
In this regard, I am personally a big fan of uniform national standards that are fairly enforced at a national level. And perhaps Congress will revisit the notion of state-by-state rules and state-by-state enforcement, in those cases where banks can sign up for very high standards. Besides being fairer to consumers throughout the United States, it avoids balkanization of the U.S. marketplace, itself giving America a competitive advantage versus say Europe with its myriad rules and customs.
But that is secondary. The main point is that banks will need to go the extra mile to regain community support. One way of doing this is to polish, through deeds as well as words, banking's historically high standards of service and customer care.
Eugene A. Ludwig is a founder and the chief executive of Promontory Financial Group LLC. He was the comptroller of the currency in the Clinton administration.