CEO Ellen Alemany’s speech to the Greater Providence Chamber of Commerce
Providence, RI
November 24, 2008Tonight, I come here knowing that I am part of a proud tradition. Citizens has been a member of the Chamber since 1914 and then, as now, being part of this community allows us many privileges and many responsibilities. We take both very seriously.
I feel not only privileged to be here in Providence, but I also feel at home. Maybe that's because I was born and raised in an Italian neighborhood like Federal Hill with a backbone of small businesses. My Dad owned a small business in the Bronx. Most of the local businesses were named after their owners-Arturo's Bakery, Dominick's Restaurant, Madonia's Bread Shop.
Those men, those families were all connected through ambition, enterprise, hard work and pride. They worked on the same street, but more importantly, they were part of the same community. And that's something that all of us in this room care about.
We're seeing big job cuts across industries and sectors, and Rhode Island has been hit particularly hard. Many of our customers and the communities we serve are hurting-they're worried about keeping their jobs, paying their mortgages, educating their children, and having money enough to ever retire.
Without question, the economic crisis we're in is stunning. But every one of us in this room has lived through crises. It's been said, “That which does not break me will make me stronger.” I believe this crisis presents an opportunity, a chance to correct fundamental flaws while reinforcing the incredible strengths of our system.
Tonight, I want to share with you my perspective and what I think our priorities should be as we address the challenges ahead. I want to talk about what's good about our economic system, and what we can do to preserve that, even as we learn to manage it better.
My Citizens Bank colleagues across the state, led by our Rhode Island president, Joe MarcAurele, are incredibly dedicated to the customers they serve, and I am constantly impressed by their loyalty to the company and the community. We helped build this city and this state, and our commitment today is as strong as ever. We are part of this community. We are committed to its success and survival. But we know the days ahead are not going to be easy, for any of us.
Much has changed since our founding 180 years ago on High Street. Citizens today has a 13-state footprint in New England, the Mid-Atlantic and Midwest. We have grown from the fifth largest bank in the smallest state in America to one of the top ten banks in the country, thanks in no small part to my predecessors Larry Fish and George Graboys. These men showed tremendous vision and as a result, built the company we are so proud of today.
We've been part of the Royal Bank of Scotland for 20 years-one of the largest financial institutions in the world. That connection has fostered new commerce.
18 months ago, RBS Americas was created, encompassing all RBS activities in North and South America. Our connection to this larger, worldwide institution gives our Rhode Island-based bank a position of strength and influence at a very big table, which is important to all of us in this room. In fact, I think our founding fathers were onto something when they put Rhode Island and New York on equal footing.
Let me share just one example of the difference being part of a global institution can make. On Friday September 12th of this year, I was in Hartford, Connecticut, having just completed a string of town hall meetings across New England with Citizens Bank employees. I got a call from the Federal Reserve Board; could I please come down to New York City for an urgent meeting. When I walked in, I found my fellow CEOs of leading U.S. financial institutions. Hank Paulson was telling everybody that Lehman was at a crisis point, and that he needed our help to find a solution.
It was a long weekend and perhaps an historic one. And if it wasn't for RBS, Citizens - and Rhode Island - might not have had a seat at that table. Our presence that weekend reflects a recognition of who we are and what we have to offer, and it was a privilege to be there.
But with privilege comes responsibility. And I have to tell you, it's an extraordinary time to be leading the ninth-largest bank in the country. It's not just the astounding volatility we've seen over the past several months and the steep challenges before us. I also see potential ahead-helping businesses, creating opportunities, and giving back. America has always been at its best in times of crisis and challenge. This is one of them … this is one of them …and it offers us an opportunity to change, innovate, and ultimately lead.
Some of you may be shaking your heads a bit at my confidence-guarded though it may be. And it's true; things look pretty grim. We're experiencing a perfect storm of critical factors and failures. Each alone was not enough to cause a full-blown crisis, but together they set in motion the situation we're in now.
There is more than enough blame to go around, and the causes are many:
- Too much easy credit
- Lowered lending standards
- Lax regulation
And the results are astounding:
- Respected institutions that stood for more than 100 years have shut their doors, been acquired or otherwise transformed - in some cases, overnight.
- The housing market has been knocked on its heels.
- Americans have lost $7 trillion in wealth since summer 2007.
- The stock market has taken us to some astounding lows.
- And the credit market has yet to thaw.
This is not just a problem for the Fortune 500. We had heard that we were living in a global economy, but now we've actually seen how extensively American businesses are connected to the rest of the world. Today, even small businesses are often global businesses.
This has been called the most difficult economic crisis since the Great Depression. We have a tough road ahead, one that will hold hard choices and sacrifices for all of us, before we turn the corner. But we, the business community, have survived these cycles before.
Back in 1893, there was a huge panic. Railroad over building and shaky financing sparked a series of American bank failures and produced a terrible economic crisis. Then came the Great Depression. Many of us in this room weathered the crash of 1987 and the recession that followed. We survived the tech bubble bursting … And we pulled together to get through 9-11. The difficult market cycles of the past century and a half make up a very long list.
But let this remind us of all the businesses - large and small - who proudly put their names over their doors. The entrepreneurs and immigrants and dreamers who lived and worked through and survived these crises. That which did not break us did make us stronger.
Since the Depression, the U.S. and other nations have become more aggressive about intervening when economies struggle, and that's mitigated the impact and eased the recovery. What has compounded the cycle this time is that it is happening globally.
As the U.S. markets slid into this mess, we didn't do so alone. European banks have been facing similar challenges. We can now see that problems have been brewing for several years in the U.S. and around the world. And now we're in a global crisis that demands global solutions.
We are struggling to innovate and build in a hurricane. And there's been some initial progress. So far, governments in Europe, the U.K. and the U.S have injected nearly ten trillion dollars into the financial system-with almost a trillion alone for capitalization of the financial firms.
These government-led solutions would have shocked us last year-yet they are now accepted as necessary.
I believe we are approaching a great frontier of change, and we will emerge stronger as we forge through this crisis. But we must be bold and we must be honest about what we are facing. When America was plagued by the energy crisis in the 1970s, we had an opportunity to act, but we didn't invest in sustainable, alternative sources of energy. We are now. And sustainable energy will be one of the great growth industries of the 21st century.
Examining our economic history lets us see the similarities as well as the differences that can help us shape solutions. So let's get down to it. Where are we in the cycle right now, and what's next?
By almost all accounts, we're in a recession. The current downturn, which probably began last January and may extend until the spring of 2009, is likely to be the longest and most severe since the early 1980s.
As you all know, businesses are cutting spending. What's more, consumers are cutting their spending for the first time since 1991, and at the sharpest pace since 1980. The demand for housing has fallen, and we may not see the bottom of the housing market before mid-2009.
We also anticipate that the real GDP figure will fall at an average pace of 2 ½ - 3% annualized in the next two quarters before turning positive again.
And as we saw in October, the Fed has continued to lower its benchmark interest rate, to one percent, and we expect they may do so again in December. But this is just a sideshow when compared to the massive amount of liquidity that policymakers have introduced over the past few months. The Fed has committed to adding more than $1½ trillion in dollar reserves to the financial system. Looking ahead, we don't expect the funds rate to increase before 2010.
Getting back to the issues in the markets, what are the lessons we can take? Market forces need checks and balances; without them, the system is subject to abuse.
- We need strong regulators and we need to re-engineer the regulatory system.
- We need greater transparency, for both institutional and individual investors.
- And finally, we need to do this, because our markets going forward are going to be more global and more competitive … and we need to re-establish America's markets as a place for trust and opportunity. We need to rebuild that trust.
It will be especially important to preserve and reward the special genius of capitalism. We need to stay focused on what's best about our economy, and be sure we continue to unleash its potential. We also need to get back to basics. The businesses that succeed in these hard times will be those that
- focus on efficiency,
- carefully seize new opportunities while keeping a keen eye on their priorities,
- stay true to their core functions to weather this tough environment,
- and are not distracted by the storm outside.
- Businesses that focus on these back to basics will be more successful in difficult times.
As Rhode Island's business leaders, I know you are concerned about how to unleash potential growth and improve economic conditions here at home. With the Fed providing liquidity, the banking community in Rhode Island, which we are so proud to be part of, can contribute to restoring the state's economy. It can lend and make credit available while preserving high standards and great integrity.
The world trusted America's business. Our community trusts us. As we rebuild, trust is the cornerstone. It's important that we get this right because I truly believe financial services can be a tremendous force for good.
Helping out in my father's store in the Bronx, I got a glimpse of how successful businesses created their own virtuous circle- they supported employees and customers, and contributed to the stability of the community. By increasing access to capital and credit, we can help to
- create jobs,
- build stronger communities,
- give businesses the means to expand,
- and grow a strong tax base.
The tremendous economic growth we've experienced over the past 50 years has fueled more advances in technology, science and health than in all of humanity's previous history. Free enterprise has led to a spectacular reduction in global poverty-it's fallen more in the last fifty years than it did in the previous five hundred. As difficult as it is out there, we should keep this in mind, and we must be careful in diagnosing what's wrong.
I've talked to you this evening about some of the challenges we face. But despite the crisis it's important not to lose sight of the many blessings we have. Thanksgiving is just a few days away, and it's a good time to reflect for a moment on why we still can be thankful.
No matter how you voted, we can be thankful that after nearly two years of primaries and debates, we have a new Administration, one that will commit fresh energy and ideas to restoring stability and growth to our economy.
We can be thankful that despite a rough ride and some tough times ahead, we are still blessed with the best economic system in the world.
We can be thankful that we live in a country where the greatest opportunities are available to all, and where the question is not if we can return to economic prosperity, but when. Not if, but when.
And finally, speaking as the CEO of Citizens Bank, I am thankful for our customers, and many of you are here with us this evening. It is a privilege to be part of the Chamber, and part of this community.
If there is one thing I want all of us to take away it is this: trust that we will get through this crisis, and trust each other.
We are in this together.
We are connected.
We work in the same world, in the same community, and sometimes even on the same street.
We are partners in progress. Help a business in need if you can, equally important, don't give up your own. We can survive and we can be even stronger.
I wish all of you a peaceful holiday season, and thank Laurie and Ed again for inviting me to be here tonight.
Thank you very much!
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