Tough Love at TCF

The other thing is that the TARP money is relatively cheap capital at 5 percent dividends plus warrants [to buy common stock.] We couldn’t have raised that capital any other way at those prices. And looking at the state of the economy, having a nice capital cushion isn’t the worst thing.

SW: Does the TARP money put strings on executive com-pensation?

BC: Yes, but it didn’t create a problem for us. We didn’t pay any bonuses [for 2008]. We don’t pay bonuses when we have a bad year. You can’t tie risky behavior to comp plans. We don’t do that. Our board can reduce a comp plan to zero any time they want.

There is, however, the business of a clawback. You got a bonus two years ago and things got worse, so they can make you give the money back: ‘Look at Bob Rubin [former chair of the executive committee at troubled Citigroup]. He made $180 million. You know what? Maybe he ought to give it back.’ That’s a dangerous legal precedent and I don’t support it, but you can understand how they feel that way.

SW: At today’s stock price of around $11 and a dividend of $1 per share per year, TCF is yielding about 9 percent. That’s a handsome yield.

BC: Maybe it’s a good stock to buy (laughs). We earned our dividend last year; most banks didn’t. We expect to more than earn it next year [2009]. We have a very serious board that owns a lot of stock. Every quarter, we go through an analysis about whether it is prudent to increase or decrease the dividend. A lot of people live on that dividend. We have a kind of compact with those shareholders.

SW: With the changing financial landscape, are there businesses you want to get out of?

BC: We look at that all the time. We recently stopped selling annuities and mutual funds in our branches, which had been a pretty big business for us. I have a moral obligation to my customers. When I sell them an annuity, I’ve got to be real damn confident in the insurance company that I’m selling. Do I want to sell an AIG annuity? It isn’t prudent. Whose annuity is prudent to sell? We didn’t make enough money to take that kind of risk for our customers or ourselves. So, we got out of that business.

SW: Businesses to get into?

BC: We are getting into the inventory finance business through our equipment finance group. At the end of the year, we had $5 million in such loans outstanding as we just entered the business. Right up our alley. Secured lending. On the other hand, we got out of the student loan business. The government took the profit out of it, so we left it.

SW: What businesses will you steer clear of?

BC: There are a lot of things we won’t get into. In the whole bank, we have just $50 million of unsecured loans. I don’t want to be in the credit card business. I don’t want to be making $18,000 unsecured loans even to people with good credit. I don’t want to be in the car business. There ain’t enough money in it. It’s a commodity business.