Former Federal Reserve Executive keynote speaker at Belk College ethics conference
Many of the poor business decisions that led to the nation’s current economic crisis were not necessarily due to a complete lapse in business ethics, but human nature, a former Federal Reserve Bank executive said Tuesday at a conference at UNC Charlotte.
“If you were an AIG executive, would you look at the current situation and say, ‘This was all my fault?’”said Jeff Kane, who retired in February as senior vice president and officer in charge of the Charlotte branch of the Federal Reserve Bank of Richmond. “Of course not. At the time, they were talking about building value for the firm, not intentionally diverging from the moral standard.”
Kane was the opening keynote speaker Tuesday at a conference on business ethics and the credit crisis, organized by Denis Arnold,Surtman Distinguished Scholar in Business Ethics.The eventwas co-sponsored by the Belk College of Business and the Center for Professional & Applied Ethics at UNC Charlotte and was supported through a grant from the BB&T Foundation.
Kane spent 26 years on the regulatory side of the Fed, rising to senior officer in charge of the bank’s supervisory function for Virginia, Maryland and the Carolinas before being promoted to the Charlotte post. “I’m a bank guy,” he said.
Kane blames the current downturn not on one specific person or institution, but on a confluence of factors, including:
• The commoditization of consumer credit. Kane recalled his first job in banking, as a lending officer at a small bank in Virginia. “Applying for a credit card was the same process as any other loan,” he said. “You came to the bank and met with a loan officer in person, you brought your driver’s license… We used to be able to tell who we were lending to.”
• A failure to heed lessons from previous interruptions of the credit cycle. Kane noted that the current recession was the fifth he had experienced as a banker. In each case, he said, “I’m not sure we totally learn our lesson.”
• The overheated real estate market. “We’re all at fault on this one,” Kane said. “We all saw this coming.” Kane reminded the audience when real estate values see gains of 5 to 10 percent a year, “you know there’s going to be a reversion, but it’s human nature that we all want our houses to make us money.”
Kane also pointed to the role of the Fed in the real estate bubble, noting that the bank kept a tremendous amount of stimulus in the economy. “We’ll come out of this one, but we need to remember it next time real estate values start soaring,” he said.
Kane, like many other leading economic experts, feels that the recession is nearing the bottom. “We’re far closer to the end than the beginning,” he said, noting that job losses are a lagging indicator. “By the time you see the impact on jobs, we’re generally through the worst.”
Kane predicted there will not be a V-shaped recovery. “It will look more like the Nike ‘swoosh,’” he said, “with a slow and steady return to growth.”
Kane is a UNC Charlotte Trustee who previously served on the Business Advisory Council for the Belk College. Active in the community, he serves on the boards of Junior Achievement and the United Way of Central Carolinas. Healso is chair of the board of Community Link of Charlotte.