It's not often you see the CEO of a major bank criticizing his industry publicly, but that's exactly what M&T Bank CEO Robert Wilmers did in the bank's annual report.
Wilmers wrote that he's disturbed by the way what he calls the "Wall Street" banks have soured Americans on the banking industry, including the "Main Street" banks that play a key role in financing the U.S. economy.
Indeed, it is difficult, for one who has spent more than a generation in the field, to recall a time when banking as a profession has been publicly held in such persistently low esteem. A 2011 Gallup survey found that only a quarter of the American public expressed confidence in the integrity of bankers. We have reached a point at which not only do public demonstrations specifically target the financial industry but when a leading national newspaper would opine that regulation which might lower bank profits would be "a boon to the broader economy." What's worse is that such a view is far from entirely illogical, even if it fails to distinguish between Wall Street banks who, in my view, were central to the financial crisis and continue to distort our economy, and Main Street banks who were often victims of the crisis and are eager, under the right conditions, to extend credit to businesses that need it.
Wilmers then queued up a blistering critique of what he sees as the industry's major sins during the last decade or so. Here are some of the highlights.
- On scandals and wrongdoing: "Since 2002, the six largest banks have been hit by at least 207 separate fines, sanctions or legal awards totaling $47.8 billion. None of these banks had fewer than 22 infractions; in fact one had 39 across seven countries, on three different continents. The public, moreover, has been made well aware of such wrongdoing. According to a study done by M&T, over the past two years, the top six banks have been cited 1,150 times by The Wall Street Journal and The New York Times in articles about their improper activities. It is not unreasonable to presume that these findings must represent a proxy for the national, if not international, press as a whole."
- On excessive compensation: "Public cynicism about the major banks has been further reinforced by the salaries of their top executives, in large part fueled not by lending but by trading. At a time when the American economy is stuck in the doldrums and so many are unemployed or under-employed, the average compensation for the chief executives of four of the six largest banks in 2010 was $17.3 million -- more than 262 times that of the average American worker. One bank with 33,000 employees earned a 3.7 percent return on common equity in 2011, yet its employees received an average compensation of $367,000 -- more than five times that of the average U.S. worker. Thus, it is hardly surprising that the public would judge the banking industry harshly -- and view Wall Street’s executives and their intentions with skepticism."
- On fighting reform: "Nor can one say with any confidence that we have seen a fundamental change in the big bank business approach, which helped lead us into crisis and scandal. The Wall Street banks continue to fight against regulation that would limit their capacity to trade for their own accounts -- while enjoying the backing of deposit insurance -- and thus seek to keep in place a system (that) puts taxpayers at high risk. In 2011, the six largest banks spent $31.5 million on lobbying activities. All told, the six firms employed 234 registered lobbyists."
- On shady accounting: "The absurdity of current accounting principles was emphasized in the third quarter of 2011, when the value of the debt issued by five of the largest banks decreased $9 billion, and yet these institutions booked the same amount as profits, representing 44 percent of their combined $21 billion in pretax earnings."
Wilmer concludes by laying out the consequences for M&T Bank and other Main Street banks: a raft of onerous new regulations leveled indiscriminately at banks regardless of their past behavior.
This is pretty noteworthy stuff. M&T Bank, while not the largest bank out there, is far from a minor player (the bank is ranked No. 24 nationally in terms of assets, according to SNL Financial), so to read passages written by its CEO that could pass for an Occupy Wall Street manifesto is significant.
What do you think? Is Wilmers' critique valid? Do more Main Street-focused banks have room to criticize large national banks?
(h/t to Joe Weisenthal of Business Insider)
Follow me on Twitter: @ClaesBell.