Agencies should focus on important matters

By DAVID MOON, Moon Capital Management, LLC
December 26, 2010

In the 1980s, my wife and I were about to build a swimming pool in the backyard of our new, but very modest, starter home. In our excitement and anticipation, we spent weeks preparing the backyard by picking up all of the construction gravel that still remained around the house.

Once work on the pool began, we had more rocks and gravel in our yard than we did during the actual house construction. We might have felt as if we were doing something useful or meaningful by picking up that gravel, but it was a complete waste of our time. We should have been planting privacy trees.

It’s human nature. We want to concentrate on the simple, obvious things, rather than the important ones.

I saw a perfect example of this phenomena a couple of weeks ago when, as a part of a routine bank review, federal bank examiners told the Payne County Bank in Perkins, Oklahoma that it had to remove its Bible verse of the day from the bank’s website, crosses from its teller counter and the “Merry Christmas, God is with us” buttons from their attire.

The regulators cited a federal regulation that prevents the use of any form of communication that implies or suggests a policy of exclusion or discrimination.

Perkins, Oklahoma is home to 644 families, and not a single mosque or synagogue. I’m not sure who the bank might have offended or mistreated, even if it had tried.

That really shouldn’t matter, however. Here is what is important. The bank is a private entity. They make sound loans. Payne County Bank puts neither the FDIC nor the depositors at risk. In terms of safety and soundness, it is in the same class as Home Federal Bank here in Knoxville.

Every bank should be so well run. I’m reminded of the quip attributed to Abraham Lincoln who wanted to learn what brand of whiskey Ulysses Grant drank so he could send a barrel to all of his generals.

If you think I’m being a bit tough on the Feds because I’m a Christmas-guy, let me put the story into even better perspective.

Until its acquisition by Eastern Bank last month, Wainwright Bank was a small bank headquartered in Boston. The cultural distance between the two banks is greater than the 1,600 miles that separate them. One of the basic tenets of Wainwright’s business model is to support liberal social causes, including the gay and lesbian rights movement. Its website features a photo of two men in a loving embrace, along with a description of what the company calls “socially responsible banking.”

Gay couple: yes. Merry Christmas: no.

I don’t object to bank examiners ignoring the potentially exclusionary messages of an overtly gay-friendly bank. It’s a private business. That’s fine with me.

The real issue, it seems, is how these same agencies overlooked the dangers of under-collateralized loans, no-document mortgages and borrowers who never repaid any principal – and now they are worrying about picking up gravel in the back least in some back yards.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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