Former FDIC leader Hove optimistic for recovery, but when?
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By RICHARD PIERSOL/Lincoln Journal Star
Andrew “Skip” Hove, unflappable as you might wish a banker to be, has seen turmoil in the financial industry that in some ways was worse than what you’re seeing now.
And in some ways it wasn’t.
Now living in Lincoln, Hove was vice chairman of the Federal Deposit Insurance Corp., (and acting chairman three times) in the early 1990s, when there were 1,500 banks and thrifts in trouble under the weight of $700 billion in assets, some of them loans as dubious as those gaining attention now.
FDIC: Hove served as vice chairman of the Federal Deposit Insurance Corp. from 1990 to 2001. He was acting chairman three times for a total of 4 1/2 years, most recently from June 1, 1997, when Chairman Ricki Helfer resigned, to May 26, 1998, when Donna Tanoue was sworn in as the 17th Chairman.
In Nebraska: Before joining the FDIC, Hove was chairman and chief executive officer of the Minden Exchange Bank & Trust Company in Minden, where he served in every department during his 30 years with the bank.
Hove was mayor of Minden from 1974 until 1982 and was Minden’s treasurer from 1962 until 1974.
Civic participation: Other civic activities included serving as president of the Minden Chamber of Commerce, president of the South Platte United Chambers of Commerce and positions associated with the University of Nebraska. Hove also was active in the Nebraska Bankers Association and the American Bankers Association.
Board member: He is on the boards of Great Western Bank and Sovereign Bank, the Federal Home Loan Bank of Topeka, and NeighborWorks in Lincoln.
Education, naval and military service: Hove earned his B.S. degree at the University of Nebraska-Lincoln. He also is a graduate of the University of Wisconsin-Madison Graduate School of Banking. After serving as a U.S. naval officer and naval aviator from 1956 to 1960, Hove was in the Nebraska National Guard until 1963.
Source: FDIC, Andrew Hove, Federal Home Loan Bank of Topeka
Now there are 116 banks officially troubled and $78 billion in assets at those institutions.
You can do the math.
In those days, the Federal Savings and Loan Insurance Corp. failed in what people with enough time on earth remember as another crisis, the S&L disaster.
The Federal Deposit Insurance Corp. had to take over the task of insuring S&Ls, and the Resolution Trust Corp. took on the task of buying assets of questionable value — homes, not asset-backed securities — off the books of failing institutions and gradually returning them to the mainstream of their local economies.
Sound familiar?
Hove recalled those days last week, as someone who’s seen a lot of financial freak shows, who remains active in retirement and still maintains an optimistic outlook for the U.S. economy, however qualified.
“I’m generally optimistic,” Hove said. “But I’m not sure how long it’ll take.”
He also has no argument with the federal government’s response so far to the cascading crisis, precipitated by falling home values that unrealistically hopeful bankers, investors and homeowners hoped would always keep going up.
You might argue this or that of the details or the approach, he said, but the urgency was there, and a consensus was necessary.
In any case, the real issues are the lack of confidence, attitude and trust, he said. Liquidity of a local bank, or a world economy, depends on people’s faith, after all.
Just lately, even a package of well-performing loans couldn’t be sold without the seller “taking a haircut,” as Hove put it, getting 60 or 70 cents on the dollar.
Summing up the causes and effects of this crisis, Hove described a lending industry that reached a point nationally where anyone walking in the door could get a mortgage, even those classified as NINJNA, No Income, No Job, No Assets.
Eventually, the bad loans infected even the good, he said.
Certainly less imprudent lending happened in Nebraska this time around, he said, and Nebraska lenders are generally in good shape.
The nation needs to rebuild the shaken confidence in its finances, according to Hove.
“That could take a long time,” he said.
But the recovery of assets needing rehab and their resale can work, Hove said.
“It worked the first time,” said Hove, who saw 24,000 people at the FDIC and RTC operate 27 liquidation offices that got rid of almost $700 billion in assets, an amount eerily about equal to the Treasury’s authorized spending this time around.
“We worked through it,” he said. “Got it sold.”
Hove acknowledges the latest financial crisis could get worse in the relatively protected Midwest, but not for his lack of effort.
Now he’s working on an initiative from the Federal Home Loan Bank of Topeka, on whose board he serves, to make letters of credit available to underwrite small municipal spending projects, a fire truck for example, instead of trying to get a bond issue from a big house that couldn’t be bothered by something that small.
It’s a project.
Something that beats discussing the difficulty of building a consensus in Congress.
“There really isn’t much bipartisanship in Congress,” Hove says wistfully. “That’s the unfortunate thing about Congress. They’re politicians and not statesmen.”
Reach Richard Piersol at 473-7241 or at dpiersol@journalstar.com
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