School is underway all across America, and my nephew recently left home to begin college in the Black Hills, a place my father took our family on vacation when I was a little boy. Attempting to relive that happy experience, I took my own family to the Black Hills a couple of summers ago.
It took us two days to drive a loaded mini-van from our home to Hill City, where we lodged during a four-day stay in the Black Hills. There was a stop at Mitchell along the way to visit the famed Corn Palace. The corn-constructed murals that make up each of the outside walls of the building are changed periodically, and when we were there, there were depictions of a rodeo, a motorcycle and 19th century Native Americans. The palace is a basketball arena on the inside, but when we were there the space was being used for a craft fair.
Mitchell is an important marker on Interstate Highway 90, the main thoroughfare running east and west through South Dakota. East of Mitchell, the cropland we saw looked lush and green, despite the dry conditions typical for late summer. West of Mitchell, the country shifts to ranch land. The earth is brown and flat, with only minimal vegetation. It is about 60 miles to Chamberlain, where the highway crosses the Missouri River. Chamberlain is the last major landmark before we would reach the Badlands National Park, which serves as a kind of gateway to the Black Hills vacation area.
When I made this trip as a boy, I remember my father commenting that there “is nothing between the Missouri River and the Badlands.” It is a barren space, to be sure, but there is something there – open space, something a city person may tend to discount. As we drove west, I saw the rusted weather veins, the abandoned farm dwellings, animals grazing on the low groundcover. I pointed out the sights to the kids, but they failed to take notice. The scenery only made them hot and thirsty, and my oldest asked if we would be staying someplace that had a swimming pool.
Sixty-five million years ago, South Dakota, along with Nebraska, Kansas and all the other Plains states, were thousands of feet under water. What we know today as the Gulf of Mexico reached far up into North America, dividing the continent into two, with the Rockies on the West and the banks of the Mississippi River on the East. As the water receded over millenniums, it left the rich, fertile land that today serves as grazing acreage and cropland for one of the most important agricultural regions of the world.
The most impressive visit of our Black Hills stay was to Mount Rushmore. I remember visiting the site as a child, finding only a minimally cared-for lookout before the massive faces of Washington, Jefferson, Roosevelt and Lincoln. This time, I was greeted by a huge visitors’ center and amphitheatre. Trails led up near the faces, and there was a museum that described the efforts by Gutzon Borglum to construct the monument. Flags from all 50 states and six U.S. territories lined a walkway to the main lookout, adding color to an already impressive site. The improvements were part of a $56 million redevelopment of the site completed in 1998.
We especially liked the evening lighting ceremony when a National Park Service Ranger explained the significance of the presidential choices: Washington represents the struggle for freedom; Jefferson the ideal of self government; Lincoln equality, and Theodore Roosevelt the future as his term bridged the agrarian age with the industrial age at the turn of the 20th century. It took 14 years for Borglum to complete the project begun in 1927.
We found paradise in the region at Custer State Park, where the turquoise water of Sylvan Lake provided a picturesque environment for hiking and rock climbing. The pinnacle of the 73,000-acre park is Harney Peak – at 7,242 feet – the highest point in the state. The view from the top is magnificent. There was wildlife everywhere and we were able to take pictures of bison and big-horned sheep that came right up to our car windows as we drove along the Wildlife Loop Road.
Wind Cave, a national park, was another highlight. Located just south of Custer State Park, the cave features 82 miles of mapped passages. We saw about a half-mile’s worth during the tour we took. The walls and ceiling of the cave are filled with “boxwork,” something akin to honeycombing, only made out of rock. It was cool in the cave (about 50 degrees), which was a welcome change from the humid August weather.
On our way home, back along Interstate 90, we stopped for an afternoon at The Badlands National Park, 244,000 acres of jagged rock and colorful stone spires. When you look out over the landscape of the Badlands, you think they could film some kind of a movie out there about aliens or life on another planet. And, in fact, the park has been used as a move set on occasion. The park is filled with fossils and the ranger, who told us about the Gulf of Mexico coming up this way, also told us scientists learn about the evolution of horses and sheep by looking at the rocks lying around. The tallest rocks are eroding at a rate of about one-half inch per year and, I am certain, the park did seem a little smaller than it did when I was a kid.
The perspective of a child is always so grand. As we made our way home, my kids said they wanted to go back. Maybe we will next summer.
Thursday, September 30, 2004
Friday, September 17, 2004
A Republican would give Minneapolis a seat at the table in the House
The city of Minneapolis is represented entirely by Democrats in the Minnesota legislature – six senators and 11 representatives. That representation may accurately reflect the philosophical nature of a majority of Minneapolis residents, but it is devastating for actually getting anything accomplished, particularly in the House where Democrats make up a clear minority. Republicans outnumber Democrats in the House 81-53. The Republicans have controlled the House since 1999, and with population growing in the suburbs it is not likely that Democrats will regain a majority in the House anytime soon.
It isn’t any fun being in the minority in the House. Ideas raised by minority party members don’t get serious consideration, even if the ideas have merit. That’s just the way it is. In an article summarizing the 2004 session, the Minneapolis Star Tribune said House Democrats are “so small a minority they were largely spectators during the session.”
The largest city in the state needs more than spectators in the House. There are real things that need to happen and Minneapolis needs representation that is in the game, not on the sidelines. With no representation in the majority party, Minneapolis is totally excluded from any discussions in the House about legislation that could have a huge impact on the city’s residents. If there were even one Republican from Minneapolis in the House, the city would at least have a seat at the table when the House determines its agenda, discusses the issues and tries to work with the Senate.
I live in legislative District 60B, which is represented by Rep. Frank Horstein. I respect him, as well as the other legislators representing the city. But given the make-up of the House, none of them can give the city meaningful representation as Democrats.
So would the residents in any of the city’s legislative districts consider voting for a Republican? Perhaps there is good reason to. The city would be much more effectively represented if it had elected officials in the majority party in both the Senate and the House. The city has majority party representation in the Senate, which is controlled by Democrats; in the House there need to be changes. Wouldn’t Scott Dibble, the senator for District 60, have a better chance of moving legislation if he had a majority party counterpart in the House representing District 60A or 60B? Clearly, Republicans and Democrats are going to think differently on social issues such as abortion and the definition of marriage, but on many issues – such as transportation, crime, energy and education -- representatives from the two parties should be able to work together.
Republicans didn’t even field a candidate in the 2002 election for the 60B legislative seat. This year, they have a candidate – Jeremy J. Estenson – who does not appear to have campaigned at all. He is not a serious candidate, so Hornstein easily will win re-election. That means my neighborhood will continue to have only “sideline” representation in the state’s House of Representatives. I don’t think that’s good enough and I hope by 2006 the Republicans field a serious candidate who gives Minneapolis a real shot at making a different in the House.
It isn’t any fun being in the minority in the House. Ideas raised by minority party members don’t get serious consideration, even if the ideas have merit. That’s just the way it is. In an article summarizing the 2004 session, the Minneapolis Star Tribune said House Democrats are “so small a minority they were largely spectators during the session.”
The largest city in the state needs more than spectators in the House. There are real things that need to happen and Minneapolis needs representation that is in the game, not on the sidelines. With no representation in the majority party, Minneapolis is totally excluded from any discussions in the House about legislation that could have a huge impact on the city’s residents. If there were even one Republican from Minneapolis in the House, the city would at least have a seat at the table when the House determines its agenda, discusses the issues and tries to work with the Senate.
I live in legislative District 60B, which is represented by Rep. Frank Horstein. I respect him, as well as the other legislators representing the city. But given the make-up of the House, none of them can give the city meaningful representation as Democrats.
So would the residents in any of the city’s legislative districts consider voting for a Republican? Perhaps there is good reason to. The city would be much more effectively represented if it had elected officials in the majority party in both the Senate and the House. The city has majority party representation in the Senate, which is controlled by Democrats; in the House there need to be changes. Wouldn’t Scott Dibble, the senator for District 60, have a better chance of moving legislation if he had a majority party counterpart in the House representing District 60A or 60B? Clearly, Republicans and Democrats are going to think differently on social issues such as abortion and the definition of marriage, but on many issues – such as transportation, crime, energy and education -- representatives from the two parties should be able to work together.
Republicans didn’t even field a candidate in the 2002 election for the 60B legislative seat. This year, they have a candidate – Jeremy J. Estenson – who does not appear to have campaigned at all. He is not a serious candidate, so Hornstein easily will win re-election. That means my neighborhood will continue to have only “sideline” representation in the state’s House of Representatives. I don’t think that’s good enough and I hope by 2006 the Republicans field a serious candidate who gives Minneapolis a real shot at making a different in the House.
Wednesday, September 15, 2004
One man’s idea spurred South Dakota’s transformation into a business magnet
Minnesota and South Dakota have been feuding for years about which state offers the best corporate environment. The governors of the two states have taken periodic barbs at one another, claiming their state offers the best place to do business. South Dakota appears to have won a recent round in the battle, AcroTech Midwest of Brainerd having announced last week that it will close its Minnesota plant and set up shop in South Dakota.
Before 1980, South Dakota was no threat to Minnesota. Although the state has never bothered to collect a corporate or personal income tax, South Dakota was largely an overlooked outpost on the plains. The man who transformed South Dakota into a magnet for businesses was Thomas M. Reardon, who died August 11 at the age of 90. Reardon is the person who initiated the efforts that led to Citibank’s arrival in Sioux Falls in 1980. That was the first major corporation to come to the state in decades. It spurred meteoric growth in state’s financial services industry, which ultimately attracted other businesses, such as office supply ventures and computer companies. Sioux Falls and the rest of the state clearly have enjoyed disproportionate economic development during the last two and a half decades – some of it at the expense of neighboring states like Minnesota.
Reardon was the long-time chairman and founder of Western Bank, a leading Sioux Falls bank until U.S. Bank purchased it in 1995. In the late 1970s, the Federal Reserve was raising interest rates, driving mortgages to more than 9 percent by 1979. Rules that limited what banks could pay for deposits were being phased out, but the rules about what banks could charge for loans remained in place. South Dakota, like most states at the time, had usury laws that limited what banks could charge for loans. Doug Hajek, a Sioux Falls attorney who worked for Reardon at the time, explained to me that Reardon thought it was about time to get rid of the usury laws.
Reardon served on the legislative committee of the South Dakota Bankers Association and at the committee’s November meeting in 1979, he proposed eliminating the usury law. It was a controversial proposal and Hajek, who was at that meeting, said much discussion followed but the committee ultimately voted to adopt it as an industry position. Lobbyists went to work, and within several weeks, the South Dakota House of Representatives passed a bill exempting banks and other regulated lenders from the state’s usury limits.
No one knew at the time that Citibank was watching, but it was. The nation’s largest bank was losing millions of dollars per year on its credit card operations because of strict usury limits in place in New York, where the bank was based. Citibank was looking for a new home for its credit card business, where it could charge any rate it deemed appropriate. Citibank representatives contacted S.D. Gov. Bill Janklow and told him that if the state adopted the usury exemption legislation, it would move to South Dakota. Janklow, who originally had been against the legislation, changed gears and became one of its biggest advocates.
The legislature, indeed, passed the bill and Janklow signed it into law with fanfare. Although advocates for the law touted its potential for economic development, the idea of letting banks charge whatever they wanted for loans was controversial. Lawmakers were comfortable with the bill, however, because the Federal Reserve had recently implemented its Regulation Z, a rule that required banks to provide detailed disclosure of the exact costs of all loans to customers. With the clear communication of costs, the legislature decided that interest rates could be negotiated between lenders and borrowers without statutory limitations posed by the state.
Citibank held up its end of the deal and came to Sioux Falls, bringing about 3,200 jobs. That opened a floodgate of economic development for the state, and many other companies have come to South Dakota in the last 24 years. Some have even come from Minnesota.
Before 1980, South Dakota was no threat to Minnesota. Although the state has never bothered to collect a corporate or personal income tax, South Dakota was largely an overlooked outpost on the plains. The man who transformed South Dakota into a magnet for businesses was Thomas M. Reardon, who died August 11 at the age of 90. Reardon is the person who initiated the efforts that led to Citibank’s arrival in Sioux Falls in 1980. That was the first major corporation to come to the state in decades. It spurred meteoric growth in state’s financial services industry, which ultimately attracted other businesses, such as office supply ventures and computer companies. Sioux Falls and the rest of the state clearly have enjoyed disproportionate economic development during the last two and a half decades – some of it at the expense of neighboring states like Minnesota.
Reardon was the long-time chairman and founder of Western Bank, a leading Sioux Falls bank until U.S. Bank purchased it in 1995. In the late 1970s, the Federal Reserve was raising interest rates, driving mortgages to more than 9 percent by 1979. Rules that limited what banks could pay for deposits were being phased out, but the rules about what banks could charge for loans remained in place. South Dakota, like most states at the time, had usury laws that limited what banks could charge for loans. Doug Hajek, a Sioux Falls attorney who worked for Reardon at the time, explained to me that Reardon thought it was about time to get rid of the usury laws.
Reardon served on the legislative committee of the South Dakota Bankers Association and at the committee’s November meeting in 1979, he proposed eliminating the usury law. It was a controversial proposal and Hajek, who was at that meeting, said much discussion followed but the committee ultimately voted to adopt it as an industry position. Lobbyists went to work, and within several weeks, the South Dakota House of Representatives passed a bill exempting banks and other regulated lenders from the state’s usury limits.
No one knew at the time that Citibank was watching, but it was. The nation’s largest bank was losing millions of dollars per year on its credit card operations because of strict usury limits in place in New York, where the bank was based. Citibank was looking for a new home for its credit card business, where it could charge any rate it deemed appropriate. Citibank representatives contacted S.D. Gov. Bill Janklow and told him that if the state adopted the usury exemption legislation, it would move to South Dakota. Janklow, who originally had been against the legislation, changed gears and became one of its biggest advocates.
The legislature, indeed, passed the bill and Janklow signed it into law with fanfare. Although advocates for the law touted its potential for economic development, the idea of letting banks charge whatever they wanted for loans was controversial. Lawmakers were comfortable with the bill, however, because the Federal Reserve had recently implemented its Regulation Z, a rule that required banks to provide detailed disclosure of the exact costs of all loans to customers. With the clear communication of costs, the legislature decided that interest rates could be negotiated between lenders and borrowers without statutory limitations posed by the state.
Citibank held up its end of the deal and came to Sioux Falls, bringing about 3,200 jobs. That opened a floodgate of economic development for the state, and many other companies have come to South Dakota in the last 24 years. Some have even come from Minnesota.
Friday, September 10, 2004
Rabobank deal poses taxpayer issue
One of the largest banks in Europe is Rabobank of The Netherlands. It is in the center of a controversy regarding the role of Farm Credit System lenders in this country because Rabobank has proposed to buy Farm Credit Services of America, a Farm Credit System lender based in Omaha serving Nebraska, Iowa, South Dakota and Wyoming. A Congressional Research Service report published August 23 affirmed such a deal is legal.
The proposed acquisition is controversial because no commercial company – let alone a foreign company -- has ever purchased a U.S. government sponsored enterprise such as FCSAmerica. Unlike regular banks, lenders in the Farm Credit System raise money through the sale of bonds on Wall Street. Because government sponsored enterprises have an implicit U.S. government guarantee, those bonds pay investors a little less than bonds from a typical private company. Since they can raise money more economically than typical banks can, the loans made by a government sponsored enterprise are generally priced a little better than the loans banks make. This is a pretty good deal for farmers and ranchers who are eligible to borrow from lenders such as FCSAmerica.
If the deal takes place in early 2005 as Rabobank anticipates, FCSAmerica will withdraw from the Farm Credit System, leaving its regulator – the Farm Credit Administration – the authority to issue charters to other Farm Credit System lenders to serve those four states. Rabobank said in a July 30 press release that it expects the FCA to do exactly that.
But I say, wait just a minute.
If the shareholders of FCSAmerica approve its acquisition by Rabobank, aren’t they essentially saying they don’t need a Farm Credit System lender? At the very least, they are saying they would rather have the money. FCSAmerica has 51,000 shareholders who would split the $600 million sale price. That’s an average of about $12,000 per shareholder but, in fact, some shareholders would receive a lot more and others less. AgStar, a Farm Credit System lender based in Mankato, Minn., has made a rival bid for FCSAmerica. AgStar is offering $650 million.
Sens. Tom Daschle and Tim Johnson of South Dakota have called on the Senate Agriculture Committee to hold hearings on the situation. Sen. Tom Harkin of Iowa also wants hearings. And, this morning’s St. Paul newspaper reports that one of Minnesota’s U.S. Senators, Norm Coleman, now also is calling for hearings. Since we already know that Congress can’t stop the deal, the focus of those hearings should be about the authorization of new Farm Credit System lenders in the affected area. I strongly urge the Farm Credit Administration not to issue new charters.
Let’s face it, new Farm Credit System lenders in South Dakota, Wyoming, Iowa and Nebraska simply are not needed. The FCSAmerica shareholders are saying as much if they approve the transaction with Rabobank. If new charters are granted, what’s to stop Rabobank or some other entity from buying those new lenders in a few years; the shareholders make thousands of dollars more and the Farm Credit Administration grants additional charters. The process makes a mockery of American taxpayers, who are ultimately on the hook for government sponsored enterprises. As a taxpayer, I will not be taken for granted. Ag borrowers in South Dakota, Wyoming, Iowa and Nebraska either really need a government sponsored lender or they don’t – they can’t have it both ways. Taxpayers are willing to take the risk of backing government sponsored enterprises because we assume such entities are really needed. But if the people who are benefiting directly from the government sponsored enterprise vote to sell the entity, then they are sending a clear signal that they really don’t need taxpayer help anymore.
The proposed acquisition is controversial because no commercial company – let alone a foreign company -- has ever purchased a U.S. government sponsored enterprise such as FCSAmerica. Unlike regular banks, lenders in the Farm Credit System raise money through the sale of bonds on Wall Street. Because government sponsored enterprises have an implicit U.S. government guarantee, those bonds pay investors a little less than bonds from a typical private company. Since they can raise money more economically than typical banks can, the loans made by a government sponsored enterprise are generally priced a little better than the loans banks make. This is a pretty good deal for farmers and ranchers who are eligible to borrow from lenders such as FCSAmerica.
If the deal takes place in early 2005 as Rabobank anticipates, FCSAmerica will withdraw from the Farm Credit System, leaving its regulator – the Farm Credit Administration – the authority to issue charters to other Farm Credit System lenders to serve those four states. Rabobank said in a July 30 press release that it expects the FCA to do exactly that.
But I say, wait just a minute.
If the shareholders of FCSAmerica approve its acquisition by Rabobank, aren’t they essentially saying they don’t need a Farm Credit System lender? At the very least, they are saying they would rather have the money. FCSAmerica has 51,000 shareholders who would split the $600 million sale price. That’s an average of about $12,000 per shareholder but, in fact, some shareholders would receive a lot more and others less. AgStar, a Farm Credit System lender based in Mankato, Minn., has made a rival bid for FCSAmerica. AgStar is offering $650 million.
Sens. Tom Daschle and Tim Johnson of South Dakota have called on the Senate Agriculture Committee to hold hearings on the situation. Sen. Tom Harkin of Iowa also wants hearings. And, this morning’s St. Paul newspaper reports that one of Minnesota’s U.S. Senators, Norm Coleman, now also is calling for hearings. Since we already know that Congress can’t stop the deal, the focus of those hearings should be about the authorization of new Farm Credit System lenders in the affected area. I strongly urge the Farm Credit Administration not to issue new charters.
Let’s face it, new Farm Credit System lenders in South Dakota, Wyoming, Iowa and Nebraska simply are not needed. The FCSAmerica shareholders are saying as much if they approve the transaction with Rabobank. If new charters are granted, what’s to stop Rabobank or some other entity from buying those new lenders in a few years; the shareholders make thousands of dollars more and the Farm Credit Administration grants additional charters. The process makes a mockery of American taxpayers, who are ultimately on the hook for government sponsored enterprises. As a taxpayer, I will not be taken for granted. Ag borrowers in South Dakota, Wyoming, Iowa and Nebraska either really need a government sponsored lender or they don’t – they can’t have it both ways. Taxpayers are willing to take the risk of backing government sponsored enterprises because we assume such entities are really needed. But if the people who are benefiting directly from the government sponsored enterprise vote to sell the entity, then they are sending a clear signal that they really don’t need taxpayer help anymore.
Tuesday, September 07, 2004
Conversation with the Commissioner
I had the opportunity to visit with Glenn Wilson last month and talk about his responsibilities as Minnesota’s Commissioner of Commerce. Here is a portion of that conversation:
You were president and CEO of Knutson Mortgage for 10 years and left a job at U.S. Bank Mortgage to become Minnesota’s Commissioner of Commerce. What draws you to the public sector?
I’m at the end of my career. I had announced my retirement -- for the second time! It was some of my friends who told the governor I was now available. I was not involved in his election campaign in 2002. I never met him, but after talking with him and seeing his commitment, I thought: “Here’s a guy who intends to do the things that I always thought ought to be looked at.”
You have made a lot of changes at the Commerce Department since taking over on Dec. 17, 2002. You cut costs, including reducing the phone system to 70 lines from 450. How do you get people to change? It’s harder to get people to change than changing the phone system.
It’s an on-going task. And it doesn’t matter whether it’s business or government. Things are changing dramatically and more quickly than they used to. To keep up, it is incumbent upon management to constantly be looking at where we need to be -- five years, 10 years, 15 years down the line -- particularly in a regulatory environment. We’ve got to be a strong regulator, but at the same time we don’t want to impede the businesses in our own state, or they become disadvantaged quickly. A few years back, the banks and insurance companies we regulated were state-wide. Today, many of them are national, and a good number of them are global. So to maintain the investment in our state, to maintain the employment base, it’s a challenge to balance the line between regulating them but not restricting them. It is important that we get this right because those companies have lots of opportunity to invest elsewhere.
How do you effectively balance good regulation with the interests of the consumer?
That’s part of the challenge. But I believe everyday that’s doable. Most businesses want to retain customers. They want a referral. They know the only way to do that is by treating the customer with respect -- give them the benefit of the bargain. As a business guy, I always did, and the people I dealt with always did. But there are always some scoundrels. People that get on the edge. They skate on the edge so long, that eventually they fall over the edge and we have to dig up the consumer protection but, by and large, I think we do a good job with that balance.
Where to you see the Commerce Department fitting in with Gov. Tim Pawlenty’s overall vision for the state?
We’re in a slightly different position than most of the other departments in as much as we are a regulator. We have to vigorously follow the laws and regulation of the state. But I do think it is part of our responsibility to the businesses in the state to be current, to stay fair, to do the right thing. A good deal has to be fair to everybody. I was a Rotarian for a lot of years; if a deal is not fair to everyone then it’s not a good deal. And ultimately there has to be a balance. That’s what we try to strike every day. And I think the culture of our department understands that.
In the mid 1980s, you headed up Ginnie Mae, one of the three Government Sponsored Enterprises that provides a secondary market for mortgages. Any comments on the role of GSEs?
Ginnie Mae has the direct full faith and credit of the U.S. Government. The other GSEs don’t, but they take advantage of the fact that they are sponsored by the government and they are so huge that most investors think they are more regulated than they are. So, they get a disproportionate advantage, in my view. Fannie [Mae] and Freddie [Mac] can get cheaper money, making it harder for the private sector to compete, and so the market share of the secondary market has been going more and more to the large GSEs than I think is good and healthy. They are strangling the private sector. I don’t particularly think that is a good idea.
Any thoughts on interest rates you’d be willing to pass on?
Being an old man, having been in business a long time, I will say things cycle. Almost everything cycles. This particular low-interest rate cycle and the housing boom cycle has been longer than any in my entire business career. So when it ends, I don’t think you can say there was a bubble in that sector, but I do think there’s going to be a dry spell for housing. No market can stand to be at a record high pace year after year without ultimately fulfilling demand. Even if rates stayed low, at some point you have to believe the housing market is reaching saturation, or at least a leveling out of demand. I think we are well into that phase.
You were president and CEO of Knutson Mortgage for 10 years and left a job at U.S. Bank Mortgage to become Minnesota’s Commissioner of Commerce. What draws you to the public sector?
I’m at the end of my career. I had announced my retirement -- for the second time! It was some of my friends who told the governor I was now available. I was not involved in his election campaign in 2002. I never met him, but after talking with him and seeing his commitment, I thought: “Here’s a guy who intends to do the things that I always thought ought to be looked at.”
You have made a lot of changes at the Commerce Department since taking over on Dec. 17, 2002. You cut costs, including reducing the phone system to 70 lines from 450. How do you get people to change? It’s harder to get people to change than changing the phone system.
It’s an on-going task. And it doesn’t matter whether it’s business or government. Things are changing dramatically and more quickly than they used to. To keep up, it is incumbent upon management to constantly be looking at where we need to be -- five years, 10 years, 15 years down the line -- particularly in a regulatory environment. We’ve got to be a strong regulator, but at the same time we don’t want to impede the businesses in our own state, or they become disadvantaged quickly. A few years back, the banks and insurance companies we regulated were state-wide. Today, many of them are national, and a good number of them are global. So to maintain the investment in our state, to maintain the employment base, it’s a challenge to balance the line between regulating them but not restricting them. It is important that we get this right because those companies have lots of opportunity to invest elsewhere.
How do you effectively balance good regulation with the interests of the consumer?
That’s part of the challenge. But I believe everyday that’s doable. Most businesses want to retain customers. They want a referral. They know the only way to do that is by treating the customer with respect -- give them the benefit of the bargain. As a business guy, I always did, and the people I dealt with always did. But there are always some scoundrels. People that get on the edge. They skate on the edge so long, that eventually they fall over the edge and we have to dig up the consumer protection but, by and large, I think we do a good job with that balance.
Where to you see the Commerce Department fitting in with Gov. Tim Pawlenty’s overall vision for the state?
We’re in a slightly different position than most of the other departments in as much as we are a regulator. We have to vigorously follow the laws and regulation of the state. But I do think it is part of our responsibility to the businesses in the state to be current, to stay fair, to do the right thing. A good deal has to be fair to everybody. I was a Rotarian for a lot of years; if a deal is not fair to everyone then it’s not a good deal. And ultimately there has to be a balance. That’s what we try to strike every day. And I think the culture of our department understands that.
In the mid 1980s, you headed up Ginnie Mae, one of the three Government Sponsored Enterprises that provides a secondary market for mortgages. Any comments on the role of GSEs?
Ginnie Mae has the direct full faith and credit of the U.S. Government. The other GSEs don’t, but they take advantage of the fact that they are sponsored by the government and they are so huge that most investors think they are more regulated than they are. So, they get a disproportionate advantage, in my view. Fannie [Mae] and Freddie [Mac] can get cheaper money, making it harder for the private sector to compete, and so the market share of the secondary market has been going more and more to the large GSEs than I think is good and healthy. They are strangling the private sector. I don’t particularly think that is a good idea.
Any thoughts on interest rates you’d be willing to pass on?
Being an old man, having been in business a long time, I will say things cycle. Almost everything cycles. This particular low-interest rate cycle and the housing boom cycle has been longer than any in my entire business career. So when it ends, I don’t think you can say there was a bubble in that sector, but I do think there’s going to be a dry spell for housing. No market can stand to be at a record high pace year after year without ultimately fulfilling demand. Even if rates stayed low, at some point you have to believe the housing market is reaching saturation, or at least a leveling out of demand. I think we are well into that phase.
Friday, September 03, 2004
9/11 and the meaning of 'is'
In about a week, we will note the third anniversary of 9/11. I remember that morning so well – the horror, the uncertainty, the fear. Oh, what I would give to go back to the innocent life of September 10, 2001!
August 17 marked another anniversary. It was six years ago on that date that William Jefferson Clinton uttered the phrase that would come to define his presidency: “It depends on what the meaning of ‘is’ is.” As absurd as that snippet of Grand Jury testimony was, it offers meaning worth considering in the context of 9/11.
The Book of Exodus offers the story of God speaking to Moses through the burning bush. When God commands Moses to go to Pharaoh, Moses asks whom shall I say sent me? God instructs Moses to say he was sent by “I am.”
‘Is’ and ‘am,’ you might know, are forms of the same word: the verb, ‘to be.’
So what Clinton was really saying was: “It depends on what your meaning of God is.”
I was thinking about this while listening to U.S. Rep. Collin Peterson speak to a group of business leaders on August 6 in Alexandria, Minn. Peterson, a Democrat representing Minnesota’s Seventh Congressional District, has held a seat on the House Select Committee on Intelligence since spring of 2001. He told the group, mostly made up of community bankers from throughout Minnesota, that the war against terrorism isn’t going well. He said we need to shift our efforts toward covert operations, away from a military approach. Further, he said, “some people are going to have to be assassinated.” People applauded.
When I was thinking about what ‘is’ means to me, I recalled Francis of Assisi. Known today mostly for his love of animals and nature, Francis was a peacemaker in his day. Troubled by fighting between Christians and Muslims, in 1219 he traveled from Italy to the heart of the war on the east bank of the Nile. While all those around him where wielding swords, Francis approached the Sultan unarmed and negotiated a peace. God was the common denominator for the two sides, although they had different ideas of who God is.
We are told the terrorists who flew airplanes into the World Trade Center did so in the name of God. It is very difficult for most Americans to comprehend this meaning of God.
But, if we are ever going to find peaceful co-existence with those who hate us, maybe we should try to understand their meaning of God. It was an important step to peace some 800 years ago and, to me, it seems more promising than assassinations or on-going war.
August 17 marked another anniversary. It was six years ago on that date that William Jefferson Clinton uttered the phrase that would come to define his presidency: “It depends on what the meaning of ‘is’ is.” As absurd as that snippet of Grand Jury testimony was, it offers meaning worth considering in the context of 9/11.
The Book of Exodus offers the story of God speaking to Moses through the burning bush. When God commands Moses to go to Pharaoh, Moses asks whom shall I say sent me? God instructs Moses to say he was sent by “I am.”
‘Is’ and ‘am,’ you might know, are forms of the same word: the verb, ‘to be.’
So what Clinton was really saying was: “It depends on what your meaning of God is.”
I was thinking about this while listening to U.S. Rep. Collin Peterson speak to a group of business leaders on August 6 in Alexandria, Minn. Peterson, a Democrat representing Minnesota’s Seventh Congressional District, has held a seat on the House Select Committee on Intelligence since spring of 2001. He told the group, mostly made up of community bankers from throughout Minnesota, that the war against terrorism isn’t going well. He said we need to shift our efforts toward covert operations, away from a military approach. Further, he said, “some people are going to have to be assassinated.” People applauded.
When I was thinking about what ‘is’ means to me, I recalled Francis of Assisi. Known today mostly for his love of animals and nature, Francis was a peacemaker in his day. Troubled by fighting between Christians and Muslims, in 1219 he traveled from Italy to the heart of the war on the east bank of the Nile. While all those around him where wielding swords, Francis approached the Sultan unarmed and negotiated a peace. God was the common denominator for the two sides, although they had different ideas of who God is.
We are told the terrorists who flew airplanes into the World Trade Center did so in the name of God. It is very difficult for most Americans to comprehend this meaning of God.
But, if we are ever going to find peaceful co-existence with those who hate us, maybe we should try to understand their meaning of God. It was an important step to peace some 800 years ago and, to me, it seems more promising than assassinations or on-going war.
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