In his new book, a local banker fires a broadside at the hackneyed expression ‘Too Big to Fail.’ MidSouth Bank President and CEO Rusty Cloutier is never at a loss for words, and at age 62, he’s finding a growing audience. Last week, he was on CNBC’s “Squawk Box.” Earlier this year, he testified on Capitol Hill and was profiled in The New York Times Magazine. As a lifelong community banker, director of the Atlanta Federal Reserve’s New Orleans branch for six years and former chairman of the Independent Community Bankers of America, Cloutier had a unique vantage point of last year’s economic crisis, which he shares in his recently self-published book, Big Bad Banks: How greed and ego among the big shots in banking and government created the crisis that wrecked our economy. Last week, The Ind caught up with Cloutier at his Lafayette office.
What was your goal in writing this book?
My goal in writing the book was when we got to the crisis of 2008, March, 2008, and as I watched all the talking heads on television and all the big banks coming out, I didn’t feel like they were giving the correct account of the way they looked at things. And so I felt that there needed to be another side of the story, of a community banker out there in the United States, you know, telling the side of the story of what really happened. And I have been in a position that I had seen most of it, so I felt I needed to write another point of view. I mean it’s a point of view from a smaller banker of what went on and somebody who was involved throughout this thing, back to the recession in the 1980s as I write about in the book. What happened and what lessons we should have learned and didn’t.
Seems like the timing for the book is pretty good with Alan Greenspan recently doing his mea culpa on too big too fail.
Yeah, and John Reed, the guy who put together Citicorp with Sandy Weill, coming out and saying that it’s really bothering him what he did and that they shouldn’t have been allowed to violate the law and that they shouldn’t have done that. So yeah, advanced publicity; if you’d have told me six months ago that Greenspan was going to come out and say this and John Reed was going to say this, I’d have thought you were smoking something. I’d say, “No way they’ll ever admit this.” But they did, and nobody forced them to admit it. It wasn’t like they were under oath or they were really concerned about something; they just freely went out and said this.
In your book, you say three people you’d like to induct into the hall of shame are Sandy Weill, Alan Greenspan and Phil Gramm. These people knew the financial industry backwards and forwards, two of them with Ph.D.s in economics, yet pushed for the type of deregulation that wound up undoing the financial sector. How’d they get it so wrong?**
I’ll quote Alan Greenspan on that. He said he really didn’t think that people would be that greedy and that they wouldn’t risk that much — they wouldn’t risk everything. His theory was that if you let them play with all the assets of the United States they’re going to be good stewards of the money, and come to find out they weren’t, and that’s what he did the mea culpa about. He said, “I just didn’t realize they would be this greedy and they would have no controls on what they were doing.” Look, what’s the saying, power corrupts, ultimate power ultimately corrupts? It’s just that they got so large, they thought they were above the law, which they are right now. And of course, as I stated in the book, Alan Greenspan should have never been allowed to serve 19 years as federal reserve chairman — just way too long, way, way too long.
Were the bank bailouts necessary?
Yeah, I think that the government had gotten to the point where these companies that were too big to fail were going to bring down the country. Now, what bothers me today is, I don’t see them doing anything to make sure it doesn’t happen again. I didn’t have a problem with them bailing them out; you gotta do what you gotta do to save the country. But obviously, if the government owns 40 percent of Citicorp now, why aren’t they breaking it up? Why are they saying, “Well, we’re going to give you a chance to come back. We’re going to give AIG a chance to come back. We’re going to give all these companies a chance to go do what they did before.” To be honest, they’re making them bigger than they were before — they’re actually increasing the size [of the financial institutions]; they’re not decreasing, they’re increasing.
Now the Obama administration is proposing new regulations they say should prevent another meltdown of the financial sector like we recently experienced from ever happening again. How confident are you they can achieve that?
Unless they break them up, not at all. I mean, your top 10 banks in America now control 72 percent of the assets, OK? Seventy-two percent. You know, who’s got to pay attention to who? So yeah, they’ll pass a bunch of new laws like Sarbanes-Oxley which affected us a great deal, never affected a big company. And to my knowledge, and nobody’s corrected me on this yet, not one person in this crisis was indicted under Sarbanes-Oxley, which they could have, but, you know, they’re not going to let that happen.
You’ve testified on Capitol Hill several times on these issues yet still seem pretty frustrated by what’s been done. Is Congress just ignoring the advice of community bankers like you?
No, I don’t think they’re ignoring advice, but let me tell you, it’s an uphill fight. One of the major banks spent $2 million last quarter on lobbyists. They’ve got a lot of power up there.
What’s your assessment of Lafayette’s economy today?
Very, very good. I think Lafayette is still doing very well. When I talk to a lot of people in other parts of America, we’re still the envy of most of the country. It’s maybe slowed up a little bit, but you know, as I write a lot in my book about the crisis here in the ’80s, we learned a lot of lessons in the ’80s. People here have been very conservative. Businesses have been very conservative. So I think we’re in pretty good shape. We may have a couple of problems, little slowdowns here and there, but we are 100 times better than the rest of the country.
Any truth to the rumors that you’re considering a run for political office ?
I will tell you that I’ve been married to a beautiful woman for 41 years and that would end my marriage very, very quickly. There have been people who have discussed with me running for political office. I love what I do. I love the banking business, and any ambitions to [run for office] most probably have passed in my life. I’m not telling you I’m not politically active — I am — but at this period in time in my life I don’t see me ever running for political office.
This is the first book you’ve written. Can we expect a follow-up?
No, I doubt it very seriously. It was much more complicated that I thought it was. I owe a lot of people a lot of debts for helping me with it. I felt like I really took advantage of some friendships I had to get this book done. I have no ambitions to write another one, and I have not started another one, have no plans to start another one and, you know, I’ve pretty much said what I wanted to say in this book, and that’s pretty much it. If the American people buy it and read it and believe that I’ve written something good, great. If they don’t, then my kids are going to inherit a hell of a lot of books because I got a warehouse full of them.
People ask me, “Well, what comes after the book?” Not much. I’m not planning to retire anytime soon, but I also realize that I’m 62 and, after writing a book like this, I’m not going to be invited back to the front of the table anytime soon. And I understood that when I wrote it, but I wrote it for my kids and my grandkids and for the American people who wanted to know what I thought was the truth and what really went on and what really happened.
[Editor’s Note: The Independent Weekly’s Steve May, Odie Terry and Leslie Turk are acknowledged in Big Bad Banks for donating their time in support of Cloutier’s dream to put onto the printed page his version of the events that led to the collapse of our country’s economy.]_
Rusty Cloutier will be signing copies of Big Bad Banks: How greed and ego among the big shots in banking and government created the crisis that wrecked our economy from 10 a.m. to noon on Saturday, Dec. 12, at Barnes & Noble in Lafayette.