The root of the Great Recession which began in 2008 in the United States, shriveling up bank accounts and withering cash flow, is simple to banking executive and author John G. Taft.
Taft, the great-grandson of the 27th U.S. President William H. Taft and grandson of U.S. Sen. Robert A. Taft, is the current chief executive officer of RBC Wealth Management-U.S., based in Minneapolis, Minn. He’s held that post since 2005.
In his newly published book, “Stewardship: Lessons Learned from the Lost Culture of Wall Street,” Taft explains in great detail the overarching value that was not only lost by banking companies, but how it also caused the breakdown in the nation’s financial services industry.
Taft said that financial companies must revisit and restart the practice of stewardship for their clients. That is all about meeting individual needs and serving as an intermediary between investors and corporations, governments, public agencies and nonprofit organizations that can deploy capital to increase the common good, he said.
“That’s what we’re here to do, and we lost track with our mission purpose and values,” he said in a telephone interview Wednesday. “Until we find our way back, we’re not going to be in a position to protect investors from the kind of crisis they experienced in 2008 and 2009.”
Taft shared his message with local clients when he visited Hagerstown on Wednesday. About 130 to 150 people were expected to attend the meeting at the Washington County Museum of Fine Arts in City Park, according to Brendan Fitzsimmons, RBC’s Hagerstown branch manager.
While “400 different books” highlight the many reasons for the collapse of the national economy, Taft said the recession can be attributed to how the financial services industry lost track of its stewardship mission.
A prime example was the mortgage services industry, which issued loans to people who couldn’t afford to pay or started giving out money with terms that weren’t aligned with the borrower’s ability to pay, he said.
“All types of financial institutions stopped putting their balance sheets to work for their clients and started to put their balance sheets to work for themselves,” Taft said. “... All of which is fine up to a point, but it got excessive, and that’s what got us in trouble.”
The U.S. was not alone when the recession hit, he said. Many countries experienced the same issues, but Taft pointed out that no Canadian banks failed during the same span that saw numerous American banks go bankrupt.
“Our parent company, (the Royal Bank of Canada), earned over a billion dollars in cash earnings every quarter during the financial crisis,” he said. “There’s something about the Canadian system that worked, and my book goes into that. There is a positive example right across the border, and we ought to pay attention to that.”
The issue of stewardship and financial responsibility resonates with all people whether they invest or not, Taft said.
“People are worried that ... we are facing real serious issues, and they’re asking themselves what needs to happen in order to address these issues more effectively,” he said.
Taft pointed to Europe as an example of what could be coming for the U.S. if fiscal responsibility, both public and private, is not stressed.
“Europe is just a decade ahead of us, but if we don’t make some decisions,” Taft said. “If our political leaders don’t behave like stewards ... if we don’t start making decisions based on what’s good for generations down the road, instead of what’s convenient for us today, we’re going to have the same kinds of problems that Europe is dealing with today.”