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Doug Mandich , President Empire Bank
January 9, 2009 @ 12:00 am EST
Our speaker this morning was Empire Bank Chairman and CEO, Douglas Manditch.
I suppose the conventional wisdom among bankers may be that the banks need to be bailed out. Not according to Manditch. Doug said instead of getting bail out money these folks should be going to jail. Paraphrasing Doug, Jail ‘em, don’t bail ‘em.
The banking system was turned on its head (my words not his) because of false expectations. Mr. Manditch said the mortgage problems were the product of false expectations. If you borrowed for a house using a low interest loan that would later go up, there would be no problem. By that time you will be making more money, and there would always be an eager buyer to take the house off your hand at a higher price. Well it didn’t happen that way, as we all now know.
As far as AIG and Citibank are concerned, they should have been relegated to the scrap heap. They are unmanageable in the best of circumstances, and any attempt to rescue them continues the problem.
Doug was generally reassuring about the way things will eventually turn out. Not that there will be no pain, but we will recover after we have paid for the sins of the past. “We’ve been there before, and while this recovery may be somewhat more painful, we will be OK again.” He did not think that the measures taken so far have been particularly useful. In fact they may make recovery slower.
The thinking that Manditch did like was a true energy plan, and building infrastructure He noting that it will provide jobs, and it will improve efficiencies for later growth, but it may not make the recovery any faster. He also said that a floating tax on gasoline that would stabilize the cost at $4 per gallon made sense. The excess revenues should be directed to alternative energy research.
Mr. Manditch spoke about Madoff and said a charity that he had been a board member of was invested. He didn’t understand the investments and motivated the charity to get out. They did, despite some grumbling from some board members. He pointed out that financial statements are often obscure, these were totally opaque. I pointed out that those investors should have gotten a clue with a name like “made-off’.
These are matters that affect us profoundly and many bankers are running their operations using sound principles, according to Manditch. That’s the good news.
This was a meeting rich in content and a lively Q&A.