A Call to Courage

Lee Habeeb & Mike Leven

It’s a riveting pitch. The 60-second U.S. Marine Corps commercial begins with images of soldiers running straight into scenes of chaos and danger. The commercial ends with a question that crosses the screen:

“Which way would you run?”

Since the founding of our nation, Americans have selflessly responded to the call of duty, and volunteered to run into harm’s way. And not for the money, but to serve their country.
Contrast that kind of courage with the way many of our nation’s CEOs deal with chaos and danger.

For decades, the ever-growing administrative state has made it increasingly difficult for business leaders to do their jobs. While regulators do play a role in protecting our free-enterprise system and the lives and health of our citizens, much of what passes for regulation has nothing to do with protecting the environment or making the markets safer; it’s about power, control, and revenue. And sometimes, it’s about protecting the interests of one group at the expense of another. A case in point.

In a recent Wall Street Journal article, we learned about what should have been a routine conference call on some rule changes that impact small and regional banks. On the call were officials at the Office of the Comptroller of the Currency and nearly 1,500 bankers. A man who identified himself only as a fourth-generation banker from Minnesota began complaining about the possibility of having to set aside much more money when making nontraditional mortgage loans.

The banker didn’t understand why the bureaucrats were for this change, because he’d been making loans of that type for nearly 40 years, with almost no defaults.
That’s when things got interesting.

“Then came an eight-letter barnyard epithet,” the Wall Street Journal’s Victoria McGrane reported. OCC officials cut the Minnesota banker off to take another question, but the next three bankers in line agreed with him.

The Journal reported that “executives at many small banks complained that the rules could force them to cut back on loans to small businesses or homeowners. Camden Fine, president of the Independent Community Bankers of America . . . said that he had never heard such blunt talk from bankers.”

Fine added that “more than 100 emails piled up in his box after the conference call, and similar outreach efforts by other regulators resulted in hundreds of additional messages.”
But here’s the kicker: That angry Minnesota banker who didn’t use his name in the conference call confirmed the comments he made in that call in an interview with the Wall Street Journal. But he asked not to be identified in the article either.

He refused to be identified not once but twice. Why? He was afraid of his own government.

All across this country, business leaders harbor similar fears. They won’t say it on the record, but they’re afraid to challenge or call out publically the bureaucrats who wield tremendous power over their lives, for fear of reprisals.
It’s not just small bankers who are afraid of their own government. Talk to people in the energy business, and ask them about the EPA. Talk to people in the pharmaceutical industry about the FDA. Or talk to the petrified executives in the automobile business, and you’ll get an off-the-record earful about the NHTSA.

Why the cowering?

There are many reasons why CEOs exhibit cowardice under government fire. Much of it has to do with their advisers and corporate governance itself.

For openers, legal departments are not known for courage in a fight. Indeed, lawyers are charged with mitigating risk. They are routinely looking to avert legal or regulatory problems. But what about the risk of not taking risks?

Then there are the public-relations departments. The spin masters argue that fighting regulators will put a target on the back of the company and harm the corporate brand. But what if you’re so busy protecting your brand that you lose an industry?

Then there are the shareholders. Regrettably, what matters most to them is what affects share prices in the next quarter. But what happens if you are so busy protecting your quarterly earnings that there are no earnings left to protect down the road?

Despite advice to the contrary, that Minnesota banker had real options. He could have called up his fellow leaders — and that’s what CEOs are supposed to be, leaders — and rallied them to speak up against the regulatory burdens that are forcing so many of them to sell out their businesses to larger banks.

Talk about a David vs. Goliath story the public would love. They could have gone directly to the American people and explained how the George Baileys of the industry were being squeezed out of business by government bureaucrats and too-big-to-fail multinational banks.