John F. “Jack” Treanor has been in the banking industry for about 40 years, the last 10 of those years spent as president and chief operating officer at the Washington Trust Co., the parent of Washington Trust, Rhode Island’s largest independent bank.
Treanor recently announced that he is taking early retirement in October. But he is slated to remain on the board of directors.
He answered a few questions about his departure and the state of affairs in the financial world.
PBN: Why have you decided to leave?
TREANOR: Because it’s time. When I retire, I’ll be 62 and I really never intended to stay until I was 65. John [Warren, Washington Trust’s chairman and chief executive officer] is leaving six month after I’m leaving, so I think it makes an orderly transition. That will give the board enough time to find John’s successor. I have a lot of things to do after this. The numbers kind of work – I’ve been out of college for 40 years, I’ve been married for 40 years and I’ve been doing banking for 40 years. It’s time. I’d like to spend more time with my grandchildren, and I’d like to spend more time doing nonprofit work.
PBN: What has changed in the banking industry since you started? And have you ever experienced a situation in the industry that was as dire as this?
TREANOR: I must be as old as dirt because when I started, there were no personal computers. When I was at Shawmut [National Corp.], I think our department had the first electronic calculator. When I started, banks couldn’t even branch outside their county lines. That’s what forced mergers and acquisitions back in the ’60s and ’70s. If you were in Boston, you couldn’t put a branch outside Suffolk County, so the only way to expand was to buy another bank in another county. That’s all fallen by the wayside. Banks were very regulated. It’s almost a different industry now.
… No banks were open on Saturdays; a lot of them closed at 3 in the afternoon. It was more of a government agency than a public company. That was relaxed, and it’s probably gone a little bit too far.
PBN: Do you believe that relaxation has led to the problems we face now?
TREANOR: I think it has a little bit. To answer your other question, have I seen anything like this before? The answer is no. I was around when the saving bank crisis hit in the 1970s and the [savings and loans scandals] in the late ’80s, early ’90s. That was all real estate related. Then we had the [less-developed-country debt crisis]. Those problems were much easier to deal with than the problem we had today because they were focused and specific. … The crisis we have today is global in nature. It started with real estate, but now it has gone into the capital markets. It’s tremendously weakened the banking industry. It was caused by a lack of regulation on the mortgage broker side. They created some instruments that were so sophisticated nobody understood and couldn’t control them. … What we have now is a global recession.
PBN: What is your opinion of the government response to the crisis, with programs such as the Troubled Asset Relief Program (TARP)?
TREANOR: It hasn’t helped yet. Only time will tell if it does help. I think the banks needed some capital and cash infusion. The capital levels in the major banks are dangerously low, so I think we needed to do that. But it’s unclear to me how the capital that’s going into these large institutions is getting back down to the consumer. The [Federal Deposit Insurance Corporation] will start to monitor how the banks are using that capital. I think it’s inappropriate for a bank to take capital from the government and go out and buy another bank. The TARP was supposed to shore up the banks and ease the perceived credit crisis. The only way the TARP is going to work is the credit getting into the hands of the consumer and they start buying again. I think it’s going to take through the end of this year, into next year to see whether that has any effect.
PBN: Why didn’t Washington Trust take some funds? I know the bank had just raised $50 million, but were the strings attached to the federal money too invasive?
TREANOR: First of all, we didn’t need it. A lot of banks took it, including some of the local banks in the New England marketplace. We have plenty of capital. Our loan growth has been terrific. And we were leery about taking money from the government because the government will come back and start to take a look at how you’re using it. Since we didn’t need it, and we didn’t want the government as part owners of the company, we decided not to take it.
PBN: What are your feelings about efforts in Washington to put caps on executive compensation at banks that receive federal funding?
TREANOR: I have mixed feelings on it. I’d hate to see the federal government coming in and controlling the salary structure of public companies and free enterprise on the one hand. But on the other hand, I think that what happened at Merrill Lynch was outrageous. It was almost criminal. When a government pumps billions of dollars into a company and those billons become bonuses for employees of a company that is losing lots of money and is almost on the brink of failure, that’s criminal.
But I’m afraid the government will overreact and start to control the salary structures of all banks, and I don’t think that’s appropriate. I’m not saying that anybody should be banking $200 million or even $50 million. That’s outrageous. But it troubles me a little bit when the government can come in and control the salary structures of banks.