Two weeks ago, I listened to a talk at Atlanta Rotary by the CEO of Synovus Bank, Kessel Stelling, Jr. Synovus, for those of you who don’t know it, is a large Georgia community bank that almost went under a couple years back. To date, close to 80 Georgia banks have actually gone under. Here’s one proud place that Georgia actually leads the nation.
The heart of Synovus’s near failure was its relationship with one borrower, its largest, The Sea Island Company. Bill Jones, III, who ran Sea Island, dreamed big and his dreams cost a ton of money. Some would say a ridiculous amount of money. Whom did he turn to for help? Synovus, on whose Board he sat and whose CEO (and fellow trustee) was an old hunting buddy of his. In the business, this is called insider lending. Not illegal as far as I know, but also not such a good idea. To make a very long story short, Sea island went bust and Synovus almost went down with it. Even by Mr. Stelling’s own admission, Synovus never should have overplayed its hand in one deal with one customer. Others might not be as generous as that, especially the more than one thousand Synovus employees who lost their jobs. Or maybe the American taxpayers who “bailed” Synovus out to the tune of one billion dollars, which has not yet been repaid.
Mr. Stelling appears to have done a nice job turning the company around. After many quarters of losing money, it has returned to profitability. I appreciate that kind of work. Truly I do. And he seems like a completely decent guy. I am sure that he is. What I didn’t appreciate, however, was Mr. Stelling’s 45 minute defense of the banking industry and the blame he kept heaping on those he considered to be the bad guys, the press and the government regulators.
I know these stories are complex and I don’t really fall into the camp that needs to find villains. I don’t think there were evil people at either Synovus or Sea Island. I do believe, though, that there were people, employed at the highest level, that were out to make a lot of money and made some horrible decisions in that pursuit. I would have preferred for Mr. Stelling to just own up to that on behalf of his bank and move on.
This takes me to an article a friend just sent me about Goldman Sachs, printed in the March 14, 2012 issue of the New York Times: Why I am leaving Goldman Sachs, by Greg Smith. He writes on his last day at the bank, after what appears to be an illustrious 12 year career. He begins by talking about what he drew him to GS after his graduation from Stanford and, a bit of a shock to me, it was the company’s culture. A culture he says revolved around teamwork, integrity, a spirit of humility and a commitment to always do right by its clients. How refreshing is that to hear?
As he prepares to leave, he writes: “I am sad to sat that I look around today and see virtually no trace of the culture that made me love working for this firm for many years.” Instead, he continues, the entire idea of leadership has changed –leadership used to be about ideas, setting examples, and doing the right thing. Today, it has become about one thing and one thing only – making money for the firm. If one can persuade your clients to invest in stocks and products that serve the firm’s interests, your “stock” will rise. Pun intended. “It astounds me how little senior management gets a basic truth: if clients don’t trust you they will eventually stop doing business with you.”
That word “trust” takes me back to Synovus. People used to count on our government and the leaders of our largest businesses to do the right thing, for us, not for themselves. The fact that nearly 80 community banks have failed in Georgia is not an accident. Some 20 years ago, our government and business leaders made it a whole lot easier to get a banking charter in our state. The standards were eased and lax lending practices, including insider lending, followed. For a while, a few people did very well. In 2011, Georgia bank failures cost taxpayers $1.8 billion dollars. Synovus ended up with a billion dollars of our money and yet its CEO rails against government’s regulation of his bank and the press’s unfair attack on his institution’s credibility. I just don’t get that.