New director of banks for DFI comes full circle as regulator

Call it a banker’s kismet.

The head of the state Department of Financial Institutions – Scott Jarvis, who happens to hail from Long Island, N.Y. – loses his director of banks to a job offer in private industry.

The vacancy attracts a group of some 30 candidates, and a few days before the application deadline, Jarvis receives an application from Rick Riccobono.

Who happens to hail from Long Island, N.Y.

Who recently resigned from a highly paid position as president and CEO of the Federal Home Loan Bank of Seattle.

Who happens to have 25 years of experience as both a banker and a federal regulator.

“I did have another finalist,” Jarvis said. “Rick was clearly the star of the pool. I welcomed his name. He’s a fellow New Yorker, but I didn’t hold that against him.”

Selection panels and personal interviews followed.

Riccobono was named to the position in late June.

The News Tribune spoke with Riccobono last week at his office in Tumwater.

Is it just a coincidence that you and (Scott) Jarvis both have roots in the same home town?

We went to two different high schools. We had 750 in my graduating class.

Any claims to fame in Massapequa, N.Y.?

Jerry Seinfeld. The Baldwin brothers – their dad was a teacher.

And how was it growing up?

My dad was a small businessman, a mechanical contractor. He sold his business and bought a trucking and crane operation. I worked for him at New York City construction sites. My father worked us hard, making sure we got a good education. “Forget about construction,” he said. “Become an attorney. What you really want is a fallback.”

You’ve lived in the Northeast and the South, so what do you think of the Northwest?

I grew up on the water. We enjoy boating, and this is the best boating in America, bar none. We think the Pacific Northwest is America’s best-kept secret. I love to fish. When I was a kid we’d catch flounder, fluke and bluefish.

We’d go out for a whole day. Some days we’d get some ice, lemons, ketchup and horseradish and go for cherrystone clams.

Like your dad advised, you became an attorney, and a CPA. You’ve worked as a regulator – you’re a regulator now – and yet you don’t quite seem to love regulation. Back in 2005, when you were with the Office of Thrift Supervision, you testified in Congress that “removing unnecessary regulatory obstacles” was a goal.

I have a real problem with how the pendulum has swung way too far to crack down on banks, especially community banks. It dries up credit.

How was the industry when you were starting out?

Banking was in absolute turmoil in the late ’70s and early ’80s. It was an incredibly dynamic time. I found the work interesting. I liked working with examiners. It was policy, legal and enforcement. It was all those things. It was a great challenge to help clean up the thrift business.

The marketplace is like Mother Nature in the sense that you don’t want to try to artificially create weather.

The official announcement said you resigned as head of the Seattle FHLB, but there was no real explanation. Why did you leave?

Frustration with regulators. They wanted to issue a cease-and-desist order against the bank. I was not going to consent to the issuance of a cease-and-desist order. If I was not going to sign, I had to leave. My board said the bank was signing, then I said I was going to retire. My members fully understood why I left. It was a matter of principle.

What’s the basic philosophy there?

I believe the whole purpose of a regulator is not just to accept GAAP (Generally Accepted Accounting Principles) and apply blindly, but to fully understand the economics of the situation and apply the oversight using professional judgment. The (FHLB regulators) didn’t quite get it. There were a lot of politics involved. While the bank has written off $450 million, they’re all paper losses. They’re hypothetical.

So you’re no fan of marked-to-market accounting.

It’s asinine. It’s a crime what we’re doing to American business, allowing FASB (Financial Accounting Standards Board) to force these problems.

There’s an irony there, no? You left a position because of pressure from regulators, and you’ve just taken a new job as a top regulator.

I’m never going to take action against a bank for parochial, political reasons, but only when I believe it is the right thing to do.

You’ve just closed Bank of Whitman.

It killed me to do that, but we had to. It was out of capital because of a lot of bad loans.

Can we expect more closings in the near future?

I’m going to work hard to find solutions. There is investor money out there. There is interest from other banks.

Now, is the economy going to turn around or is it going to go south? I would hope we’re in a position where we can find some solutions for our troubled banks rather than close them. I’ve spent my career enforcing regulations and I’ve had to live under the regulations. This can be done right. I think I can help do it right.

C.R. Roberts: 253-597-8535
c.r.roberts@thenewstribune.com