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Thank you Kathleen for your kind words


									Commissioner Raskin Addresses the Maryland Bankers Association at the MBA’s
Day in Annapolis
March 4, 2009

I am going to talk about this banking crisis but I’m going to talk about it from the
perspective of the opportunities it is presenting. The opportunities are invaluable – both
in terms of the strength of your banks and in terms of your ability to withstand the slings
and arrows being showered your way.

Here is the first opportunity I want you to consider: Seize the opportunity to be staring
your bank’s problems in the eye; Right in the eye and without flinching. Some of you do
not want to hear this but you need to hear it: All institutions have problems and those
that deny the problems are having the most difficult time right now. There is no value in
sugar coating these issues. In fact, you do so at your own peril. I’ll tell you a story of
two banks and we will pretend this is hypothetical: Both banks are nearly identical in
terms of their portfolios, their asset quality, their earnings, their sources of liquidity and
their size. Bank one is a straight shooter – they are aggressive but they talk about their
problems to their board without flinching. They lay out the ugliness and even attempt to
quantify it. Bank two is afraid of its board and is constantly looking for ways to obscure
their problems. Which bank do you think is more successful in working through their
very real problems? Bank one is – the bank that is characterized by management that
takes problems seriously and wrestles them to the ground. By the way, your bank
examiners – in their exit interviews and in their written reports – have as their raison
d’etre the function of being a source of pointing out these problems to you. Those banks
that fight those recommendations are showing themselves in this economic downturn to
be the banks that are struggling more. In good times, your profits and general euphoria
obscure the need to be realistic. In times like ours, there is nowhere to hide and being in
denial will hurt you. I have not been the Commissioner long enough to ascertain a
definitive correlation between denial in management and bank duress but I believe
enough in the power of an effective bank regulatory system to know this to be the case
for many of our banks.

Here’s the second opportunity: Seize the opportunity to remember your mission and
what you do best. Until the deposit insurance limit was raised to $250,000, there was no
question in my mind that community banks were getting hammered. The deposit
outflows that Maryland institutions experienced in the early days of the federal
interventions when the announcement was made that money market funds would be
guaranteed was nothing short of dramatic. Community banks continue to get buffeted by
the unintended collateral effects of federal interventions that are geared to the stability of
the country’s money center banks. Despite these tidal waves, it is our country’s
community banks that have been there to dampen and cushion the systemic shudders
emanating from Wall Street. There has been an understandable focus on bank lending
right now – and this focus is partly a result of what many people perceive to be the failed
TARP program. TARP itself deserves its own speech. But what I’m convinced of is

that bank lending when it takes off again will be started at the community bank level.
Because despite the winds buffeting our community banks, lending into the local cities
and neighborhoods and businesses is what community banks know best. So remember
this when you talk to your legislators and policymakers and emphasize and re-emphasize
that you are the engines of local growth for our state.

A third opportunity rising from the duress is perhaps less obvious and sounds oddly un-
regulator-ish. Here it is -- seize the opportunity to attend to your personal well-being. I
know that our examiners have been working round the clock and they come out of some
jobs drained and exhausted, and sometimes lacking in perspective. Do not let this happen
to you. This downturn stresses us all – you, us, customers – and it is more critical than
ever that you try to achieve balance and rest. Ironically, an anxious investor, examiner
consumer or employee actually compound a bank’s distress. Fear drives people to make
rash decisions. So we must all come off of the ledge and do what we need to do to stay
balanced and energized.

I think there are other opportunities to seize upon right now: A fourth opportunity is to
seize the chance to articulate the regulatory structure that makes the most sense for you.
There is no question in my mind that there will be considerable effort at the federal level
to shuffle the regulatory boxes – the OTS could merge into the OCC, the Fed could
become the regulator of systemic risk… there may even be the creation of a new federal
consumer protection agency. The dual banking system also is being questioned. If there
is anything this crisis has taught us it is that the old assumptions may no longer be the
new assumptions. Everything will be on the table for a re-evaluation and I fervently
believe that it makes no sense to build a system based on a flawed foundation. You
might ask, for example, why systemic risk is your issue: The answer is that it is your
issue because many federal responses to the problems of the money center banks have
eroded the notion of moral hazard and there are consequences to you when federal policy
is skewed in favor of saving banks that are too big to fail. Whereas the savings and loan
crisis was largely driven by smaller banks, the banking side (as opposed to the mortgage
side) of this crisis is largely driven by the money center banks and so the question of
when it makes sense for extraordinary federal efforts to be exerted to save banks is the
elephant in the room. How do you want these decisions to be made?

And speaking of the elephant in the room, I need to mention something in my upbeat
discussion today about bank failures. There is an opportunity even here and it exists
somewhere in that no-mans land between supervision and resolution. It’s the land of
enforcement orders, and a bank that has received some kind of enforcement order should
not be allowed to tumble towards the FDIC’s resolution process without the ability to put
on the brakes and turn itself around. Based on the failures I’ve seen across our country, I
am convinced that there should not have been buyers only at the time post-failure; we
must work together with our federal regulators to explore the opportunities here –
between the organizational silos of the examiners and the undertakers so to speak – to
make sure that enforcement orders are not death knells and are in fact rehabilitative.

So how did I end on a down note? Sorry about that! The bottom line is that I don’t at all
feel down; I think we are all collectively dealing with inordinate challenges. But these
are challenges that present opportunities – and these are the opportunities we now get to
confront in the common pursuit of building safer and sounder financial institutions and an
improved regulatory system that is designed to foster and encourage such a financial

Thank you .


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