Late last week, Thomas M. Hoenig, President and Chief Executive Officer of the Federal Reserve Bank of Kansas City, gave a speech in Omaha titled “Too Big Has Failed“.
A lesson to be drawn from Continental is that even large banks can be dealt with in a
manner that imposes market discipline on management and stockholders, while controlling taxpayer losses. The FDIC’s asset disposition model in Continental, which used incentive fees and contracts with outside specialists, also proved to be an effective and workable model. This model was employed again in the failure of Bank of New England in 1991, the failures of nearly all of the large banking organizations in Texas in the 1980s, and also for the Resolution Trust Corporation, which was set up to liquidate failed thrifts.
He goes on to conclude:
If an institution’s management has failed the test of the marketplace, these managers should be replaced. They should not be given public funds and then micro-managed, as we are now doing under TARP, with a set of political strings attached.
Read the whole paper – he’s very thoughtful about his analysis and prescriptions.
Scott is a founder of Glenbrook with more than 30 years of experience in information technology. He is a co-author of the book “Payments Systems in the U.S.” and a co-inventor of US Patent 6,332,126 and US Patent 7,840,459. At Glenbrook, Scott focused his work on payments innovation, mobile payments, and social media / Web 2.0 in banking and financial services.
Previously, Scott was group executive vice president at First Data Merchant Services and at Visa International, where he led the development of Visa’s global payment systems strategies. Scott began his career as a systems engineer with IBM, where he held a series of technical management and product planning positions over seventeen years. Scott formally retired from Glenbrook in October 2016, but remains important to the firm as both a friend and advisor.