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The Federal Reserve Bank of Minneapolis has named Dr. Narayana Kocherlakota as its new president, replacing Gary Stern who retired earlier this year. Following is the press release:

Dr. Narayana Kocherlakota will become president and chief executive officer of the Federal Reserve Bank of Minneapolis effective Oct. 8, 2009. The announcement was made by Jim Hynes, chairman of the Board of Directors of the Federal Reserve Bank of Minneapolis.

Dr. Kocherlakota is currently a professor of economics at the University of Minnesota, where he previously chaired the economics department, and a consultant to the Federal Reserve Bank of Minneapolis.

“We are very pleased that Narayana Kocherlakota will be leading the Federal Reserve Bank of Minneapolis,” said Hynes, who is also executive administrator of the Twin City Pipe Trades Service Association, St. Paul, Minn. “This Bank has a strong history of leadership in economic research, and Dr. Kocherlakota will certainly continue that tradition. He is one of the most respected macroeconomists in the field today, and not just because of his intellectual contributions but also because of his professional standing and reputation for collaborating with others. Dr. Kocherlakota is a relentless optimist who works hard to find pragmatic solutions. All of us on the Board of Directors and at the Bank look forward to working with him.”

Prior to his recent tenure at the University of Minnesota, Dr. Kocherlakota has been a professor of economics at Stanford University, an associate professor at the University of Iowa and an assistant professor at Northwestern University. Dr. Kocherlakota entered Princeton at age 15 and graduated four years later (1983) with an A.B. in mathematics. He received his Ph.D. in economics from the University of Chicago in 1987 on the topic of pricing financial assets, incorporating new kinds of consumer preferences and analyzing how risky payoffs influence attitudes. Dr. Kocherlakota has published more than 30 articles in academic journals. 

“For an economist who has spent his career working on issues related to macroeconomics, monetary policy and finance, there can hardly be a better job than president of a Federal Reserve Bank,” Dr. Kocherlakota said. “That is especially true of the Federal Reserve Bank of Minneapolis, which has made so many important contributions to economic thinking, beginning in the 1970s and continuing under Gary Stern’s outstanding leadership. I look forward to continuing that tradition and also to working with my new colleagues on the Federal Open Market Committee. As I learned during my tenure as a consultant and Research staff member, this Reserve Bank and the entire Federal Reserve System are staffed by dedicated public servants, and it is an incredible honor to lead the employees of the Federal Reserve Bank of Minneapolis.”  

Dr. Kocherlakota is married to Barbara McCutcheon, who holds a Ph.D. in economics from the University of Chicago.

There is a lot of bad news on the business pages as reporters chronicle developments in the economy and in the banking industry. The negativity makes it easy to become distracted. It is important to recognize, however, that this is the community banker’s moment.

With so much unpleasant news coming out of the really big banks in New York and other major cities, the public has turned its optimism toward the smaller banks, the community banks close by. They know that if the economy is going to come back and if their own personal economic situation is going to improve, it is more likely to happen with the help of a community bank than with the help of a mega bank.

Daryll Lund, President and CEO of the Community Bankers of Wisconsin, recently shared a very interesting quote from U.S. Rep. Barney Frank, chairman of the House Financial Services Committee. Speaking at the annual CBW convention earlier this month, Lund talked about the power of grass roots lobbying. He quoted Frank: “The larger financial institutions have the opposite of political clout today. The only way a big bank can win is if they get the community banks to be their troops.”

I even think the regulators get it. Consider the FDIC, which lowered its proposed special assessment earlier this year to 5 basis points from the originally proposed 20. Consider further the FDIC’s plan to let banks pre-pay three years’ worth of premiums instead of levying another special assessment. Since payments to the FDIC impact community banks more than very large banks, any efforts the FDIC makes to minimize the pain of replenishing the Deposit Insurance Fund is an acknowledgement of the importance of community banks.

While there are difficult decisions to make managing through this economy, this is really the community bankers’ time to shine. We at NorthWestern Financial Review want to help you make the most of it.

The FDIC is asking banks to prepay their estimated quarterly risk-based assessments for the fourth quarter of this year and all of 2010, 2011 and 2012, for a total infusion of $45 billion.  FDIC said the banking industry is awash in liquidity and this proposal:

“will put the industry’s liquid balances to good use in conserving capital and helping to maintain the capacity of banks to lend while they rebuild the DIF.”

ICBA praised FDIC for not levying another special assessment, but expressed concern about the length of the prepayment period. It said it would lobby for flexible payment options.

ABA emphasized the importance of industry support for FDIC in its statement on the announcement.

Jerry Cavanaugh, general counsel for the Community Bankers Association of Illinois, presented an overview of recent legal decisions affecting the banking industry. The presentation came Friday at the association’s 35th annual convention, conducted at the Renaissance Hotel in Schaumburh, Ill, just outside of Chicago. Jerry discussed several cases, but my favorite was the one about the $74,000 bag of chips. Here’s what happened:

An employee came to the aid of a co-worker who had inserted her money in a vending machine at their place of work when her choice, a bag of Fritos, got stuck and did not fall from the spindle. The employee tried to shake the machine but when that didn’t work, he slammed his body into the side of the vending machine. The impact caused the Fritos to drop, but also fractured the employee’s hip and immediate surgery was required. An arbitrator and the state’s Workers’ Compensation Commission ruled that the employee was entitle to workers’ comp benefits totalling $74,000 on the basis of the “personal comfort” theory (an injury is compensable even though the worker may not have been working at the time of the injury if he was taking a brief respite from work to engage in a reasonable act of personal comfort.) The employer appealed to the circuit court, which reversed the decision of the arbitrator and the workers’ compensation commission. The circuit court concluded that the personal comfort doctrine did not apply in favor of an employee who was not on his own break and was not seeking is own personal comfort.

So, was the employee entitled to workers’ comp benefits for injuries sustained when coming to the aid of his co-worker against a notorious, unforgiving vending machine?

The Illinois Appellate Court, Second District, ruled in favor of the employee, but not because of the personal comfort doctrine. To be compensable under the Workers’ Compensation Act, the injury must arise out of the claimant’s employment and must have occurred in the course of employment. The court found that the employee’s injury “arose out of” his employment because there was no question that the vending machine was placed in the store by the employer for the use of employees and customers, nor was there any question that the machine was defective and posed a risk reasonably known to the employer. The court ruled that the personal comfort doctrine did no apply but instead, the Appellate Court cited the “good Samaritan doctrine” which states that an employee who departs from his work duties to render aid to another person is still acting within the scope of his employment if the “good Samaritan” act by him was reasonably foreseeable. 

It’s the law in Illinois! So if you have any vending machines in your bank, be prepared!

Five of the 14 members of FDIC’s new advisory committee on community banking are from the NorthWestern Financial Review readership area. They include leaders from three community banks, one bankers’ bank and the Graduate School of Banking in Boulder, Colo. The committee is charged with advising FDIC on policy issues affecting “small community banks from around the nation.” The Midwestern members are:

• Craig M. Goodlock, chairman and CEO of Farmers State Bank, a $63-million bank based in Munith, Mich.
• Jack E. Hopkins, president and CEO of CorTrust Bank, N.A., a $542-million bank based in Mitchell, S.D.
• Timothy W. Koch, president of the Graduate School of Banking, Boulder
• Bruce A. Schriefer, president of Bankers’ Bank of Kansas, N.A., based in Wichita
• Matthew Williams, chairman and president, Gothenburg State Bank & Trust Company, a $106-million bank based in Gothenburg, Neb.

MyCommunityMyBank launched yesterday. The new site, sponsored by Independent Community Bankers of America, collects video clips from customers and prominently prompts visitors to submit supportive anecdotes about their local community banks, or to send letters to their lawmakers. The site’s themes are “Stop the shake down. Fix too -big-to-fail.”

ICBA has claimed a great deal of success in inspiring political action and grassroots advocacy among bankers themselves, but going directly to the people is an interesting and timely idea, especially in light of the townhall talkbacks that dominated news coverage in August.

Take a look.

Our friend, Mark Olson, the former Federal Reserve Board governor from Fergus Falls, Minn., has a new job. He has joined Corporate Risk Advisors, LLC., as co-chairman. Here is his comment from an email he circulated among associates:

“As I have discussed with many of you, upon leaving the PCAOB it was my goal to continue involvement in the financial services world in areas such as corporate governance, public policy, and strategic and regulatory advice, and to balance those efforts with participation in improving financial literacy. Linking with Corporate Risk Advisors is a natural step in that direction.  CorpRA has a talented core group of professionals and is actively building additional staff capability. With the unprecedented changes we are experiencing in our industry, I look forward to working with this team in providing industry businesses with the sound representation and advice they need.”

After three years as chairman of the Public Company Accounting Oversight Board, Olson resigned effective July 31.

“There is no more respected player in the financial services business than Mark Olson,” said Jeremiah Buckley, president of Corporate Risk Advisors, a Washington, D.C.-based consulting, compliance and strategic advisory firm specializing in financial services. “Mark can provide best-in-class guidance to companies as they navigate the changing regulatory and business environment in which financial services firms must operate today.”

Olson was a Fed governor for five years. Prior to that, he worked for Ernst & Young. In addition to other roles, he was the youngest president ever of the American Bankers Association in 1986-87 at the age of 43 when he was president of Security State Bank of Fergus Falls.

Daryll Lund, President/CEO of the Community Bankers of Wisconsin, told bankers and guests at the association’s annual convention last week that a CBW delegation met with members of the Wisconsin Congressional delegation last month to communicate industry priorities. These are the five key points they made:

1) Large complex banking institutions should be subject to more rigorous regulatory oversight and supervision than community banks. They should pay a risk premium to protect taxpayers.

2) Systemic risk institutions — which are too large or interconnected to manage, regulate or fail — should either be broken up or required to divest assets until they no longer pose a systemic risk.

3) Non-bank financial services providers in unregulated financial products should be subject to supervision and be required to pay for such supervision.

4) Charter choice must be preserved. In Wisconsin, about 80 percent of the banks have state charters. CBW will fight any attempt to eliminate the state or thrift charter options.

5) The Consumer Financial Protection Agency would undermine a community bank’s ability to meet the unique needs of its local customers.

Look for CBW convention coverage in the Oct. 15, 2009 edition of NorthWestern Financial Review magazine.

Tom Stanberry, who last night started his tenure as past-chairman of the Iowa Bankers’ Association, opened Monday morning’s general session of the IBA convention with several homely descriptions of recent events in finance. To illustrate the effects of stimulus spending Stanberry described a man who put up a $100 deposit to tour a hotel where he was considering taking a room; the hotel owner immediately paid an outstanding S100 tab at the butcher’s; the butcher promptly paid the farmer who sold him a steer; the farmer paid up at the grain elevator; the elevator operator owed the hotel for a vacation he had taken with his family and settled his bill by handing over the $100 he got from the farmer. Then the prospective guest came back from his tour unimpressed and asked to have his $100 back:

“That’s federal bailout at work,” Standberry said. “Everyone has been paid and all the money is gone.”

Last year at this convention bankers began what is now a familiar tune: we didn’t cause the problem but we’re going to be saddled with the solution. A year later the contours of that saddle seem clearer; the Obama administration’s consumer financial protection agency is seen as a serious threat. In recounting a year that was “humbling and exhilarating,” Standberry said the hard work is far from finished. If the CFPA becomes law, “the federal government will prescribe what products we can offer, what products we must offer and how much we can charge for them.”

ABA chairman Arthur Connelly punctuated Stanberry’s remarks when he followed him to the podium, saying the CFPA is “the biggest proposal your bank has faced in a long time.”

Look for much more in the Oct. 15 edition of NorthWestern Financial Review magazine.

University of Wisconsin men’s basketball coach Bo Ryan was the closing speaker at the Community Bankers of Wisconsin annual convention in Madison last week. Ryan is very popular. How else can you explain more than 200,000 hits on this YouTube video? While most of the convention featured speakers addressing legislative issues, regulatory concerns and operational challenges, Ryan talked about leadership. He offered this 10-point outline for being a leader:

1) Build Self-esteem. “People need to feel they are part of something special,” he said. “Make every person on your team feel important.”  

2) Set demanding goals. “People have dreams, that’s a good thing. Focus on substance, not flash,” he advised.

3) Always be positive. “The more adversity you face, the more positive you need to be,” he said.

4) Establish good habits. “Practice smart; organize your day… do the unpleasant things first,” he said. Also, he said, do your homework and stay in good physical shape.

5) Master the art of communication. Accept the fact that you can’t win every discussion, but leaders motivate people to do things.

6) Learn from role models. “Learn from the experience of others,” he said. And, don’t confuse a role model with a celebrity. “A role model teaches you something on your journey to success.”

7) Thrive on pressure. “Pressure means opportunity,” he said. “Prepare for the moment, and stay positive under pressure.”

8 )  Be ferociously persistent. But don’t be obnoxious. “The pursuit of excellence is not a sprint but a marathon,” he said. “The harder you work, the tougher it is to surrender; the only time failure is bad is when you quit.”

9) Learn from adversity. “Don’t blame others, accept responsibility for your actions,” Ryan said. “Handle yourself with class and dignity.”

10) Survive success. “Don’t forget the work that it took to get you where you are and don’t forget those who helped you get there,” Ryan said.