ULI Washington News

Full Member Only Executive Conversation with Ron Paul Event Recap

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Approximately 20 Full Members of ULI Washington gathered at Ballard Spahr to have a conversation with Ron Paul. The discussion started with a focus on leadership and how the new generation of workers may not have the leadership qualities or the fire in the belly of previous generations. At Eagle Bank, a conscious effort is being made to focus on succession planning and mentoring. A mentoring program pairs individual employees with senior level managers and they create and they talk together on a regular basis about the person and their needs, issues, and challenges in their career and in other aspects of life. The program focuses on communication skills, work ethic and corporate culture in an effort to build a reputation for an organization. Ron Paul said that “no one wants to be a banker” so when people do express an interest in the bank as part of a summer internship program, they are exposed to corporate culture as much as banking practices. Matt Hopkins from Streetsense said that in their company, the focus is on creating small social groups of peers that come up with creative and innovative ideas when they are given the opportunity to do so.

Yolanda Cole from Hickok Cole Architects described the program at her firm that has created employees who are excited about working there and have come up with creative ideas about a variety of issues. Individuals are given up to 80 hours of work time to solve a problem that they want to explore. The results have been unbelievably surprising; Yolanda gave an example of one project that looked at what office trends will be beyond co-working, to fill the space between standard models of leasing and the co-working model.

The conversation turned to the banking industry with a question about Wells Fargo and the problems they have been having with signing up customers for accounts they had not requested. Ron said that big banks are entirely different than a community bank but nonetheless, these issues create an image problem for all banks. It is contemplated that there will be new regulations on reporting, incentives and call backs for banks as a result of the scandal.

Ron discussed high volatility commercial real estate (HVCRE) and said it is going to be the demise of our economy when lenders will not be able to lend into projects deemed HVCRE. Under today’s post-recession banking regulations, real estate development may become less profitable and real estate development loans more expensive. To offset potential losses from failed construction loans, regulated institutions are now required to set aside increased capital for High Volatility Commercial Real Estate (HVCRE) loans—those made to finance the acquisition, development or construction of real estate. As a result of these new rules, lenders are reporting increased related costs in the range of 40 to 150 basis points, depending on their specific situation.  Ron’s advice was to get commitment letters from banks now before regulators focus on the banks with which you do business.

When talking about the banking industry’s future, Ron said that 90% of deposits are controlled by 12 banks and new community banks are not being created.  When banks reach assets of over $10 billion, their regulatory oversight becomes stricter.

Ron was asked “what makes a great bank?”  He answered that it is one which is entrepreneurial and flexible.  He also talked about physical banking locations.  These banks are like expensive billboards for the retail banks, taking up prime real estate and underutilizing it.  Branch banks generally have only about 20 walk-in customers per day.  New branch models are being explored such as a coffee bar branch and those that have classes and social events to try and build the relationship between the bank and their customers.  At the end of the discussion, Ron said that some, including Elizabeth Warren, believe that real estate caused the demise of the economy in 2006-2008; Ron Paul’s solution to not letting that happen again is a new type of regulator who understands the nuances of real estate.

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