How the Banking Industry, and Washington, Have Changed since 2009

Richard Hunt has been the leading voice for consumer banking in the U.S. for 13 years, and his advocacy for the financial services industry began long before that. This week, he will step down from his role as president and CEO of the Consumer Bankers Association, but he is NOT retiring. Richard talks with us about why term limits for politicians -- and trade association heads -- are a good thing, how Washington has changed over the years, and how the smartphone transformed banking.

We also get Richard's thoughts on working with the Consumer Financial Protection Bureau over the years, which was established just a couple years after he took the helm at CBA,  and how he has grappled with two financial crises.

Key talking points:

Why it's time for a new voice at CBA (1:18)

How the banking industry has evolved since the global financial crisis (3:13)

How Washington has changed in the last 13 years (4:05)

Differences between the 2008 crisis and the coronavirus crisis (5:09)

How banks bolstered the economy through the pandemic (9:04)

Working with the CFPB (10:41)

How smartphones changed banking forever (14:35)

What's next for Richard (16:52)

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Transcript

Colin Hogan  0:14  

Hello everyone and welcome to the Modern Money Smart pod. I'm Colin Hogan.

Sean McMahon  0:18  

And I'm Sean McMahon.

Colin Hogan  0:20  

Today we have the pleasure of speaking with Richard Hunt the president and CEO of the consumer Bankers Association. After 13 years in that role, Richard is stepping away this week.

Sean McMahon  0:31  

As we learned in this podcast, Richard is not retiring. In fact, he might just be the only person in Washington who talks the talk, and walks the walk when it comes to term limits. Now, Richard was lobbying for the financial services industry long before he took the helm at the CBA. So get ready to hear some great insights from him about how both the industry and Washington have changed over the years.

Colin Hogan  0:55  

Richard's known for being outspoken both in person and on Twitter, in his Cajun roots and style of zone have made him a legend in the industry. We're very excited to have him with us as part of his swansong.

Sean McMahon  1:07  

Yep, we had a great conversation. So let's get to it.

Colin Hogan  1:18  

So Richard, after 13 years is the leading voice for the consumer banking industry, you're hanging up your spurs. Can you talk to us about how the industry and Washington both have changed over that time?

Richard Hunt  1:30  

Yeah, so I'm stepping down from CBA. But certainly not hanging out my spurs for a while, while gas may be very expensive, I still have a lot left in my tank. I just thought it CBA was time for a new voice. I really believe every trade association head in Washington should have a 10 year term limit on their occupation. I think it's just good for someone to come in with new and fresh ideas. The question about how has the industry changed over my 13 years? I think everything has changed for a good part of banking. Think about the evolution of the iPhone. For many people that is their bank, and they may be connected to chase or Bank of America or truest. But the iPhone is what gave them accessibility to their bank. 24/7. So that also started around 2009 as well, the evolution of the iPhone, if you think about the role of the branch as well, yes, we still have about 78,000 branches in this country. Yes. Everybody says they don't go to a branch, but they do. And yes, they're saying banks will be obsolete next year. Wrong, wrong and wrong. Some people like to go to their branch. Some people like to just go to their bank on their iPhone. It's everybody's personal preference. Just like some people like to listen to podcast, some people would rather go to their iPad and read. It's all the above today, the biggest difference in banking, I think, is the soundness of a bank. If you go back to 2008 2009, we're coming off a financial crisis, many banks failed. Fast forward 13 years to the COVID crisis that we had, banks led the American small business and individuals to get back on their feet, and to really help Americans weather the COVID storm. So I think it's night and day banking industry is we could not have led in 2009, like they did in 2020.

Sean McMahon  3:36  

Alright, well, Richard, well, I think I'm gonna have to call CNBC because you made headlines a few minutes ago, the column for term limits in Washington.

Richard Hunt  3:42  

Yes. Yeah, as long as it is across the board and equal. Look, I if you look at trade CEOs in this town, a boy said I thought people stay too long. Some trade had stayed 20 years. And I just think both for many individual perspective side, and from an association side, it's just time to have new voices. What's changed

Sean McMahon  4:05  

in Washington since then, your interaction with policymakers? How has that shifted during your time at CBA? Yeah, it's

Richard Hunt  4:11  

much more polarized in Congress. You're the Republican or a Democrat, and that's fine. But usually you had independents or you had moderate Democrats and you had moderate Republicans. You had some 100, which we call Blue Dogs. We're a district could be Republican, one term and democratic another term. But it wasn't a foregone conclusion which party was going to win that race. The Blue Dog caucus is now down to like 12 members. So there's only about 40 competitive races in this country. So you come to Washington DC being one or the other, and not a lot of compromise. It's much more polarized and political than it was in 2008. And yes, I do believe the financial crisis of 2008 led to some degree to the Tea Party caucus As. And it also led to Occupy Wall Street. And you felt this anti big corporation, anything, sentiment, and that continues today.

Colin Hogan  5:09  

So I want to stay with you there a little bit on the crises because your career has kind of been bookended by the two big crises in recent history. You know, you started in 2009, just after the global financial crisis. And you're retiring here at the end of the COVID pandemic down and stepping down, stepping down. Yeah. So can you talk about the differences between those crises, and particularly how the differences in how you needed to respond to those?

Richard Hunt  5:36  

Yeah, so as you know, I worked at Securities Industry Association, then became SIFMA. Going into 2008. Going to a board meeting was a doggy dog world. If you're a company on Wall Street, you think you knew everything. You thought you knew how to treat the customer. You knew how to make profits better than the person sitting next to you. And then it all collapsed. So what I considered, I thought, the smartest people in the financial world, were some of the same people who led us into financial crisis. And I remember there were a couple of times I thought to myself, Man, it's just not right, somebody owning a house worth seven times their income. Were when I grew up, you only pay two to three times your earnings. Yet everybody's stock price was climbing through the roof, yet they had no idea why it was going through the roof. And then you had these new products called special purpose vehicles, which I never could understand. But yet, they were the golden product of industry, and yet they all collapsed. So it made me tell people always trust your gut instincts when it comes to new and innovative products. So yes, the banks and the non bank mortgage companies, credit rating agencies, yes, members of Congress, yes, banks, all said, the number one dream of an American is to own a home. Well, maybe that was their version. But it's not necessarily someone's own version of what their dream should really about. So there's this mad rush for everybody to own a home. And it was easy to own a home or to buy a home back then, than it was to rent an apartment. Think about it back then to rent an apartment, you had to put up their first month's rent, and the last month's deposit as well. To buy a house many people would have to put $1 down to buy a house. And of course when real estate bubble burst finally, when you had Adjustable Rate Mortgages, whereas all of a sudden you go on from paying $1,000 for a mortgage to 1700 to 2300 and some much more expensive than that. It all burst and it came to an end. And I remember at SAA SIFMA. We lost 40% of our membership overnight. Who would have thought mother Merrill, Merrill Lynch would have to be saved by Bank of America who would have thought the other banks that failed? Lehman Brothers Bear Stearns would fail, never imagined that could happen. And so when I left SIFMA, I said to myself, you know, Wall Street was fun. It was great. I was God on Capitol Hill for about six years. But I knew it was too good to be true. And so that's why I was thankful for the calling of the consumer Bankers Association to represent the consumer side of the bank, not the investment side. So yes, it was gratifying that on March 11 2020, walking back from the White House, the day that the President shut down travel to and from Europe, the day the NBA and NCAA basketball shutdown. I knew this was the time in the banking industry, that the banking industry could lead and help small businesses and consumers get back on their feet.

Sean McMahon  9:04  

What are some of those your proudest moments about that response to this this COVID crisis? I mean, there's a few more than a few. There's a lot but you mentioned quite a memorable. Was there anything else there any other meetings or conversations you just had?

Richard Hunt  9:15  

Oh, sure. Look, the fact that the banks had a start up the paycheck protection program. The banks did something like 30 years of loans in two weeks, 30 years of loans in two weeks. So they were administrating the paycheck Protection Program as the rules were being changed as they were home, taking care of their own family. The guys remember back then when Amazon package would show up he had to wipe it down because it could have been contaminated by COVID. And people moved in with their parents or the parents moved in with them, but yet still working 24/7 to process these loans. I remember many of our CEOs of CBA were helping press Cecil loans, as well as they wanted to be part of the action, and to help their consumers, we're taking people who I weren't sure could spell small business, moving them in to the Small Business Division to help with the workload as well. So those are the proudest moments. And look, I think at CBA, we took special pride in all things on student lending, helping people get reasonable loans, and not being in debt. Like the federal government is putting millions of people in debt each and every year, I think we're more responsible to do it. And I think that's gonna be one of my projects when I get to the other side of not retiring. But stepping down.

Colin Hogan  10:41  

for about as long as you've been the voice of consumer banking, we've had now the Consumer Financial Protection Bureau, which was established, maybe what, maybe a couple years after you started with CBA? Yeah, about two years. Okay. So can you talk about how your relationship has been with them over the years how you've interacted and evolved? Yeah, so

Richard Hunt  11:03  

Elizabeth Warren took advantage of the financial crisis, to create a pet peeve of hers a mission of hers called the Consumer Financial Protection Bureau. Look, mortgages got us into the financial crisis. And absolutely, Congress and regulators need to address the underlying problems of mortgage qualification they did. But within Dodd Frank, they started adding things into it that had nothing to do with the financial crisis. And this is one of them, the CFPB, taking the consumer divisions of all the other regulatory agencies and housing them into one arena. I understand that in some areas that made it easier, but it gave them too much power. So now they have rules over the vast majority of the market share of banking. It touches almost every single financial consumer product as well. So when they created it, it was a commission was a five per person, bipartisan commission, that passed the House of Representatives, it got to the Senate, they said, No, we don't want a commission anymore. We want a dictatorship type of leadership structure. And I just think that was just dead wrong, that there's no minority voice at the CFPB. Regardless, who's the head of it, whether it's Republican and Democrat? So let me get to your question is how do I get along with the CFPB, the first person who was finally confirmed, although he was appointed illegally, and that's what the Supreme Court said, was Richard Cordray. And Rich and I certainly had differences of opinions about how consumer protection, safety and soundness should be regulated. But so what, as long as we had a cordial arrangement with each other, where I would opine when I thought he was wrong on a regulation, he would opine when he thought banks were wrong. On our practice, we would come together. We met with him multiple times, our board of directors, our committees, were at the CFPB, almost on a weekly basis. And that was fine. Now I didn't like some of the rules he came down with, he had never been a banker. He didn't know and doesn't know how a bank actually operates. But not a lot of regulators do. But he had total control of the Bureau as set up by Congress. Then when he left, and he left it in a very bad state of play at the CFPB because he did not have a deputy director and number two in charge, he went a year and a half without having a number two in charge. And then you had an acting, Mick Mulvaney director, and then you had Kathy kraninger. And everybody on the Democratic side said, now that Trump has their person in, they're going to be soft on banks. poppycock. I have just as many people mad at Kathy kraninger, a Trump appointee, as we did with Richard Cordray, a Obama appointee. But now we got Rohit Chopra, who's in confirmed, of course, by are appointed by President Biden. And he just has a totally different philosophy of relating to banks, as kraninger or Cordray did. And it's a two way street. Look, if he wants to have a good open relationship with the banking industry, we're here. It's okay if we disagree. But you got to be factual. I thought both Cordray and kraninger were both very factual, very transparent and very open. And I don't see that Rohit Chopra just yet.

Sean McMahon  14:35  

All right. I want to follow up on somebody mentioned earlier, it's very timely that you mentioned you know, the iPhone and how that kind of changed the technology side of banking and I think the iPhone actually turns 15 years old next week. So what are some of the other ways technology has helped the interaction between banks and consumers evolve during your tenure at CBA?

Richard Hunt  14:50  

Yeah, so I don't have grandkids right. But when 70 year old grandparents started texting with their grandkids, It's around 2010 2011, we knew the world had changed, because kids today don't like to talk to you. They consider though texting as a form of talking. So the grandparents fully realize if Johnny and Susie want to talk to grandma and grandpa, we're gonna have to learn this texting business. So I think that started it right there. And then once you got comfortable with texting your grandkids, you then got comfortable interacting with your bank via the iPhone. So you could check your balances, you could move money, you could deposit money on something called remote deposit capture, who would have thought you can take a physical check, take two pictures of it, and boom, the bank gets it. But the grandparents finally learned I don't have to get in my car anymore to deposit a check a dividend check they may have gotten from their previous employer, they can just do it online. Now it took a while for people to get comfortable. But let me tell you my biggest surprise, I thought people would either go all tech, or all visiting the branch bank. Some people like to go to the branch to see their favorite teller get their lollipop get their little pin in and everything else. But what we're learning is people want both. They want the technological advancements. But yet they still want their branch as well. So I think I missed that one, quite a bit. But there's no doubt, you're seeing the younger generation being much more tech savvy. A person today can have the same telephone number and same bank from birth to death. And that's a big change from when I was in college. When I would move from city to city, I would change banks don't have to do that anymore.

Colin Hogan  16:43  

So Richard, before we run out of time with you here, we've made the mistake of saying you're retiring. Will you tell us what's next then for you now that you're stepping down? Yeah, look,

Richard Hunt  16:52  

my next process is number one priority I have for the next two months is doing whatever Lindsey Johnson, my successor needs me to do. And if that means to stay at home because she doesn't want to see me. Or if that means she wants my advice on something and she wants to do some traveling together. I'm all hers. And then somewhere around September one, I turn the page and your viewership will here on September one ish by next step in life. But I will tell you this, unless it's the PGA or the LPGA, the golf associations, I will not be running another trade association Been there done that been involved in Trade Association Award for now, for over 20 years. It's been fun, especially last 13 years. And also, I'm going to do my best not to have another direct report to me as well. This whole new generation, this whole new workforce, they're a little different than how I grew up. But I think that's in my rearview mirror. Well, hey,

Colin Hogan  17:50  

we really appreciate you coming on and talking with us.

Sean McMahon  17:53  

Richard, thank you very much for your time and all these years of doing busy. It's been a pleasure. So whatever's coming next, like you said September 1, I'm eager to hear what that might be.

Richard Hunt  18:01  

Yeah, you bet. Look, the good Lord may take you guys tonight. So enjoy your day today. Thank you. Thank you guys.

Transcribed by https://otter.ai