Interview — Larry Winum

Editor's Note: Larry Winum, president of Glenwood State Bank, Glenwood, Iowa, concluded a two-year term as Treasurer of the Independent Community Bankers of America at the group's annual convention in Orlando, March 17-20. He visited with NorthWestern Financial Review publisher/editor Tom Bengtson. . Q. Two years ago while you were returning home from this convention, you were in a serious car accident, in which you lost your wife, Martha. What thoughts come to mind as you reflect back?. A. My life changed a bunch when I drove home and I lost my wife. We were coming back from the convention. And it was here, in Orlando.. You listen to people say all the time that we are ICBA family. I really came to realize that. I had more phone calls and emails from well wishers, from people I didn't even know very well. Some people I didn't know at all. And they would just be nice enough to send a little note, saying "we don't want any response, we just wanted to tell you we are thinking about you." When you go through something like that it is really nice to have that kind of network of people who really do care.. It is a little bit difficult to come back here; it is bitter sweet. Certainly Martha would want us to be here and keep doing what we are doing.. From my standpoint, this shows that community bankers really do care. Any time I go anywhere, they want to know how I'm doing, are things going well? They don't over-do it but they have been very supportive. You feel like if you ever needed anything, they'd be right there. And the executive committee people have been just unbelievable. . Q. As association leadership, you get to meet with the heads of the various regulatory agencies. Tell us what that's like.. A. My first year, we had breakfast with Ben Bernanke. This was two years ago, before everything hit the fan. It was probably about three weeks before Bear Stearns. I am sitting there, kind of quiet. Everyone is asking questions. I am the rookie, thinking I shouldn't say too much. But at the end, they asked, "Does anyone have any more questions?" I said, "Yeah, I've got one. We are hearing some rumblings that the bigger banks and the non-bank entities are having problems. We haven't talked about too big to fail for a long time, but do you think you could fail a big bank?". The chairman said, "I think we have a system in place in which it will be more difficult to bail them out." He meant that the president, the Treasury secretary and the chairman of the Federal Reserve would all have to agree that the struggling institution posed a huge systemic risk. "I think we have minimized that by the things we have in place." I think he believed it. And then all of a sudden, boom. They bail out Bear Stearns. So a year later, in Phoenix, we got to meet again and this time I asked the first question. I said "I kind of hate to bring this up, but you remember when I asked you the question last year about too big to fail?" Before I could even finish, Mr. Bernanke said, "I remember and you were right." . Q. Although almost every banker would agree the too-big-to-fail problem needs to be solved, you say it remains the most divisive issue in the industry.. A. I get a little frustrated when other trade groups talk about unifying everybody. They send the message that ICBA is not doing that. Well, we are unified for community banks. We are not unified for Citigroup. There's a big difference. Citigroup, in my view, needs to pay a systemic risk premium, and I think they need to change the calculation on deposit insurance premiums so too-big-to-fail banks pay more. They are taking way more risk than we are.. I would like to see them unwind the big guys, right now. We have the data to know what it would take. In other words, if Bank of America was broke, and they were, if Citigroup was broke, and they were, how much capital would they have needed to avoid bailout? I bet that number is 25 percent. How many regulators are going to require 25 percent capital? They are not going to do it. So if you are not going to do it, then you are never going to fail them. The only other solution is to unwind them to a level where you can fail them.. Q. What is your take on the current versions of financial regulatory reform being considered by Congress?. A. We feel like what came out of the House was a pretty positive bill, with the exception of CFPA. We did not support CFPA but we wanted to work with Chairman Frank. We wanted to be at the table. Bottom line is you can take the strategy that says "nope, CFPA, forget it." Or you can say, "We don't like CFPA, but we want to be able to work with you and massage this thing." So ultimately we think we should have consumer protections but they should be focused toward the non-bank entities, and the unregulated entities that caused this mess. The fact that we were able to get a commitment from Chairman Frank that banks with $10 billion or fewer assets would not have CFPA as their primary regulator, we saw that as movement in the right direction. Had we not been at the table, that wouldn't have happened. . It's all about strategy. I have heard some community bankers say "what are you guys doing? What are you supporting that for? If we were all together on that particular issue, then we would have had a better chance of that being killed." That could be true, but it would appear with this Administration and this Congress that they want some kind of consumer protection. So we made the decision if we say "hell no" that might just make them mad and they would assume that we don't even want to be part of the process. We took the position that we need to be at the table. . Q. Are the good times over for community banks?. A. No. Family-owned banks and community banks are not driven as much by earnings. We have to make money, we have to build our capital, but it's really about "can we continue to be somewhat profitable and serve our community and make the community a better place and grow?" That's the most important thing and I think most community bankers would agree with that. Now, when you have a lot of shareholders who want to get paid dividends, that pressure becomes greater.. I think we will have fewer banks. There are days when it is not as much fun as it used to be. What's fun is trying to help people … If we can help them grow their business, help some consumer get a college loan, get their first car, that's kind of enjoyable. But when you get paperwork like we get now, that gets frustrating. You get people who are just tired of the regulatory burden. We will have fewer community banks, but I think the community banking industry will be stronger because, for the ones that want to stay in it, I think we will do well and maybe the earnings will come back then.