Tough Love at TCF

SW: Are you a betting man?

BC: I’ve made my bet. I own 5 mil- lion shares [of TCF]. Things will get better towards the end of ’09.

On Remedies

SW: Some would say that the job now is to figure out who are going to be the survivors and get rid of the dead-banks-walking.

BC: One flawed idea is not foreclosing on homes. The best thing to do is flush it. Take the medicine. In taking that medicine, however, you don’t want a crash. You don’t want to ruin confidence in the system. We came close to that. The faster that we roll it through, the better off we are.

SW: A lot of people are arguing for a new comprehensive regulatory framework for the financial services industry.

BC: A lot of what is going on in regulation is politically motivated. Sometimes there is a huge overreaction, and they run around and bayonet the wounded to make themselves look tough after the fact. The SEC [Securities and Exchange Commission] had the perfect powers to do what they needed to. They just didn’t do it. They had people tell them exactly what was going on with Madoff and they didn’t do anything.

The problem is that government agencies are inherently not equipped to do a very good job on that stuff. Particularly when the banks are as big as they are. What I would like to see is an agency that is only responsible for safety and soundness: How good? How sound? That’s all. And if there are other agencies needed to examine, for example, compliance, that’s all they do.

SW: What do you mean by safety and soundness? Capital ratios and liquidity?

BC: That’s part of it. An Enron-like example: Some banks have created off-balance-sheet subsidiaries with lots of risk. Some regulator should have rung the bell on that and said you can’t do that. Or look at the subprime phenomenon: You’re making bad loans to bad people without checking their credit in a housing boom. You’ve got a problem coming. Stop. As opposed to the idea that we want you making loans to poor people—that’s the political influence.

SW: How serious a problem is the credit shortage, and what should be done about it?

BC: We talked earlier about how loans were packaged and sold off. That’s over, done with. Now, you book a loan, you’ve got to put it on your balance sheet. We had easy credit. Look what it got us. But I would say this: If you’re a good credit and want to buy a house today, you can get a loan at 4.5 percent. If you’re a company that is decently solid, you can get a loan.