Kaiser Permanente appointed Alexandra Morehouse Vice President of Advertising and Brand Management. Alexandra had been Executive Director of the "Marketing Innovation Lab", or MiLab, a joint venture of Google, Facebook, and the Direct Marketing Association. Before that, she had been Chief Marketing Officer at AAA, and had previously served in marketing leadership roles at Charles Schwab and American Express. Read more in the prnewswire press release.
Allianz Life Insurance Company of North America appointed Janelle Walter Director of Life Insurance Sales in their Marketing Division, responsible for development and execution of life insurance marketing strategies. Janelle, who has been with Allianz for 10 years, had been Life Insurance Marketing Manager. Read more in the Business Wire press release.
JPMorgan Chase & Co. (NYSE: JPM) appointed Eileen Serra Chief Executive Officer of Chase Card Services. EIleen is presently Head of the Chase Card Consumer-branded Products. Before Chase, Elieen had been with Merrill Lynch as Managing Director and Head of Private Client Banking Solutions, and before Merrill, worked at American Express where she led the small business credit card and lending businesses. Read more in the Business Wire press release.
U.S. Bank appointed Gailyn Johnson Chief Operating Officer for U.S. Bank Wealth Management. Gailyn had been Senior Managing Director of Wells Fargo Advisor's Direct Financial Solutions. Read more in the Business Wire press release.
Northern Trust (Nasdaq: NTRS) appointed Laura G. Mandel President of the Northern Trust Company of Delaware. Laura, who has been with the Bank for 12 years, had been a Senior Fiduciary Relationship Manager there. Laura holds a JD from the Loyola University Chicago School of Law. Read more in the Business Wire press release.
Calvert Investments appointed Lynne Ford Executive Vice President and Head of Distribution, leading a team that includes retail sales, institutional sales, marketing, and public relations, and becoming a member of Calvert’s Management Committee. Lynne had been Executive Vice President and Chief Executive Officer of Individual Retirement at ING US, and before that spent nineteen years at Wachovia. Read more in the Business Wire press release.
Lincoln Financial Group (NYSE: LNC) appointed Ellen Cooper Executive Vice President and Chief Investment Officer. Ellen had been Managing Director and Global Head of the Insurance Strategy at Goldman Sachs. Read more in the prnewswire press release.
Diamond Hill Investment Group, Inc. (NASDAQ: DHIL) appointed Lisa Wesolek Managing Director and Head of Distribution, responsible for the firm's distribution strategy including business development, sales support and marketing. Before that Lisa had been an executive at JPMorgan Asset Management and Wells Fargo Funds Management Group. Read more in the prnewswire press release.
American International Group, Inc. (NYSE: AIG) appointed Laurette T. Koellner Executive Chairman of International Lease Finance Corporation (ILFC), reporting to Robert H. Benmosche, AIG President and Chief Executive Officer. Laurette, who had been an independent director of AIG since June 2009, is a former President of Boeing International, a division of The Boeing Company. Read more in the Business Wire press release.
Suffolk Bancorp (NASDAQ: SUBK) appointed Patricia M. Schaubeck Senior Vice President and General Counsel. Patricia had been General Counsel at State Bancorp. See Business Wire press release.
I wonder what Alexander Hamilton would think of our financial system today? Would he see it as a problem of Wall Street versus Main Street? After Hamilton established banks in America as the first United States Secretary of the Treasury, other kinds of financial institutions sprouted up as the need for new products arose to “add value” and support our robust economy. Commercial banks were there to lend money to companies for business needs and to lend to individuals for personal needs. Private equity became important as companies grew and needed more capital rather than just bank loans, and provided a way for companies to reorganize and reverse poor management practices and create partnerships which would encourage further growth. Investment banks advised companies on what path to take and which capital structure was appropriate, to make markets in company stocks and to issue stock for companies as they grew. Hedge funds arose to keep balance in the financial markets and provide arbitrage opportunities for companies and banks to reduce their risks in volatile interest rate or commodity markets. Insurance companies provided major capital to be invested in companies and a safety net for consumers to protect against catastrophe.
All these functions are necessary in our system and should have provided appropriate checks and balances to avoid collapse, just as the three branches of our government provide checks and balances for our democracy. The trouble surfaced when these companies started doing business in each other‘s backyard and forgot about “adding value“. While the checks and balances of the three branches of government are defined and protected in our constitution, not so for financial institutions. Financial regulators did not deter the financial institutions from changing their risk profile by operating outside their market. The solutions to the problem still seem elusive as we continue to see financial institutions operate outside their sandbox and lose huge amounts of money to boot.
The solution, however, may be simpler than you think. What we need to do is go back to basics. Financial education rather than more regulation could be the answer. Individuals need to understand the risks they are taking when they sign mortgages or other loan documents or deposit their life savings in an institution. And banks and other financial institutions should have a responsibility to combine financial education with their financial products. Now that so many bank transactions are done online, most banks have plenty of space to create financial centers to better educate their customers, which would then provide the banks with a better borrower and a better quality portfolio. In order to deter bad behavior, the government often requires continuing education. For example, in response to a speeding ticket or other traffic violation, some states require that in order for drivers to continue to be licensed, they must attend a specified number of hours of additional driver's training. Why isn’t financial education mandated by government entities in the same way? In order to allow a person to file for bankruptcy or refinance debt, governments and banks should require people to attend financial training to avoid the need for future financial aid or assistance from governments and banks.
Looking back on the financial crisis, it’s amazing that a simple financial instrument like a mortgage could have caused such havoc. Why did it go from being a loan for people to have the home of their dreams and work hard over 15 or 30 years to pay off, to being a financial trading instrument used to make money, often off balance sheet and unregulated (strike 1)? But even if the instrument had changed and was trading in huge amounts just to make money, the risks to the banks would have been minimized if the underlying asset had been valued correctly (strike 2), or the individuals who were taking the mortgage out better understood the risks of foreclosure and if they really could afford the payment terms (strike 3!)? If simple basic financial principles had been understood by all involved and applied appropriately, there might have been a crash as often happens in business cycles, but the overvaluation of the asset would have worked its way through adequate loss reserves (strike 4!?!) and a reduction in stock price instead of causing such a calamitous financial crisis.
There will always be people who will try to go around the rules or ignore them all together and operate in the shadows, so creating more regulations for everyone does not solve the problem. It just adds more cost to the products and more distraction for bank management already overburdened with regulations. But we need to answer some basic questions. Were the appropriate people creating the mortgage instrument and did they understand the product? Did the people taking out the mortgage on their home understand the product and the risks they were facing? Financial education will help people make better financial decisions and keep others from taking advantage of them, and financial education should not be limited to mortgages as there are big financial risks in credit cards, debit cards, prepaid payment cards, and other financial products. In today’s economy, people on all sides of the street should be educated and act responsibly if we want to avoid future meltdowns. Combining financial education with financial products would be a good start. Commercial bankers are different from investment bankers, who are different from private equity and hedge fund managers, who are different from insurance brokers. Everyone on Main Street and Wall Street should understand the difference