Let the Good Times Roll

What a year was 1997! Inflation inched downward. Unemployment continued its decline. To the surprise of many, long-term interest rates fell, after a mid-year spike upward, and the year ended with 30-year bond yields dipping below 6%. And to cap things off, economic growth continued strong, but manageable, at a little over 3.5%.

And for those of us lucky enough to earn our keep around the banking industry, “laissez les bon temps rouler.” Financial services stocks were up 40%, compared to 28% for the blue chips. Mutual funds specializing in banking and financial services beat the S&P againu00e2u20ac”just as they have for six out of the past seven years.

Oh my. I wonder if it’s maybe time to get a little nervous.

Are we getting so used to good times that we’re forgetting the old? Is it okay that banks can pay 4.2 times book for other banks, then turn around and pay record earnings multiples for securities firms, and earn “attaboys” from the very same analysts who, a year or two ago, were shaking their heads and lowering their forecasts for deals at a mere twice book? Or are we seeing hubris at work in our industryu00e2u20ac”the same Greek hubris that has brought down men and institutions for centuries?

Saw Donald Trump on television this week, touting his new book, The Art of the Comeback. Donald says (and why should we doubt himu00e2u20ac”after all, he came back)… anyway, Donald says all those financial problems he had in the late eighties wouldn’t have even happened had he not lost focus and started playing golf. And today, thanks to his renewed focus, the Trump empire’s stronger than ever. It wasn’t the recession, wasn’t the economy, it was his focus!

And when I went to the bookstore to see if some of the more outrageous Trump statements found their way into print, I was struck by the business books out there written by people with very short memories or very small minds. Albert Dunlap wrote one of these. You may remember Al. He’s the one that buys companies like Sunbeam, cuts divisions and people, shows no top-line growth, but impresses the analysts with a black bottom line and a penchant for short-term victories and short stays at the companies he slaughters. The title of Al’s book is, Mean Business. How I Save Bad Companies and Make Good Companies Great. The shelves today are full of these “Aren’t’ I special” books, where the good times are explained by a new generation of accomplished back-patters.

It’s an interesting world out there right now, with this confluence of good times and

self-appointed brilliant people taking credit for them. It seems like a million years ago when bank stocks were at rock bottom, when the FDIC was suing banks and bank directors, and when this magazine was counseling bank boards on how to attract quality directors, even as those directors’ accountants and attorneys were saying, “Don’t even think about going on a bank board.”

As we enter the new year, maybe it’s best not to take ourselves and our prospering industry too seriously.

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