Saturday Cup of Joe: a lending and techish newsletter

Friends & Colleagues:

Good Morning! (originally distributed Saturday morning) This morning’s Cup of Joe is actually coming to you from Milwaukee, WI where Meredith and I are spending the weekend to celebrate a friend’s wedding. It was also our 9th wedding anniversary on Wednesday (8/10) so we are taking advantage of a kidless weekend. Luckily, I finished up the Saturday CoJ early this week to prepare. Next week, perhaps I can share some photos from the Wisconsin State Fair (this afternoon’s activity) before the wedding later tonight.

It’s generally slowing down in August as folks go on vacation and the government takes a summer break/recess. This year sales seem steady if not stronger than usual for most lenders and with a Presidential election in full swing (in case you haven’t noticed), this August is more active than most. We’ve been watching the Olympics each night and spending some time outside once it cools off in the evening. Here’s the view from our balcony as well. (“I can see Canada from my house.” — my best Tina Fey doing Sarah Palin impression).

This week we look at:

· TIAA buys EverBank (Of Interest)

· Current and future state of Fannie and Freddie (Got Me Thinking)

· Sensitive discussion of how we make housing policy — locally, regionally or nationwide? (A Look Ahead)

· A Tale of Two Cities — Detroit and Hartford (Have You Heard?)

Of Interest: TIAA’s acquisition of EverBank made headlines this week. A really interesting deal for a variety of reasons. For TIAA it offers two immediate benefits — hedge into direct to consumer products and immediate growth for their existing online lending arm. The deal was creative enough from TIAA’s perspective that the CEO requested an escape clause in case regulators believe it is too far afield from TIAA’s core business. Nevertheless, many see it as a beneficial move for both companies.

The Takeaways: This deal underscores the potential market for consumer lending, especially internet based lending. A traditional, safe insurer and manager like TIAA not only launched TIAA Direct a few years ago but now acquired a healthy, dynamic lender to push the business further. According to the NYT, “EverBank is a prime example of a target. Despite operating mostly as an internet bank, it bears similar characteristics to Main Street rivals: Its revenue is struggling to grow; it spends about 67 cents of each dollar of revenue on expenses, more than US Bank and Wells Fargo, which usually spend [around 57 cents a dollar]; and its return on equity rarely pitches over the 10% mark generally considered sufficient to cover the cost of capital.”

Have you heard?: Detroit is coming back. According to the Kresge Foundation, Detroit’s Comeback is outpacing perception. Kresge interviews regional and other business leaders to gather what these folks are thinking about our city. Business leaders believe in Detroit. Business leaders love the narrative. But business leaders did not realize the city was out of bankruptcy and around 40% have not visited Detroit in the last 2 years. Generally, though, there is a sense that Detroit is on its way to success. See attachment for the Executive Summary.

I also saw a related story this week about Hartford, Connecticut. Metro Hartford Progress Points released the third edition of a report profiling the region. The results are what you might expect. The report says recent graduates are leaving because jobs are scarce and infrastructure, particularly regional transit, does not support a walkable lifestyle. This made me think of Military Direct Mortgage, a new consumer direct platform from my friends and former colleagues at Norcom Mortgage. I know they are hiring, just email James Morin at or Patti White at, if you are interested. Norcom has always been among the best places to work in CT and a growing place in the Greater Hartford area. In fact, even as the insurance companies have leveled out a little in adding new talent, Norcom and other mid-size companies in the area continue to grow. As my t-shirt says, “little state, big heart.”

Got Me Thinking: Here is an in-depth look at Fannie and Freddie. The author gets into everything from their creation, current position under supervision and potential future options for the 2 giants. I did not agree that the connection between the 30 year fixed mortgage and the existence of Fannie and Freddie is as interdependent as the author makes it seem. At the same time, there was an interesting quote in the middle of the piece that Americans believe they should have access to an affordable mortgage just as we have come to rely on electricity delivery when we turn on the lights. If true, this is another example where popular demand may outweigh what’s actually best for the economy or the country. It’s almost as if we should not allow a world without the 30 year fixed mortgage because then some people might not get houses. My take on certain elements of the sentiment behind this article is that we need to decide what takes precedent — our expectations or our country’s financial health. When those two thing align, like in the case of entrepreneurship (we believe it is a good thing / pays off and overall it is a good thing), everyone wins. When Americans demand something that is risky long-term, it is supposed to be when Congress or other institutions step in to make a judgment call. Increasingly, that’s not happening and no one is willing to deny American expectations. American exceptionalism has become American expectationalism. This is not altogether a bad thing as long as we recognize our expectations of comfort take precedent and may (in some cases) cost more. Therefore we have to do other things, like pay more for the 30 year fixed mortgage or pay more to the federal government in other ways, to offset the risks associated with giving everyone what they expect. If we can be honest about that, we can continue to provide 30 year fixed mortgages to everyone. If we cannot be honest about it, we’ll continue to want our cake and eat it too (affordable mortgages for all, low student debt, low taxes and vibrant growing economy) which is an impossible position going forward.

A Look Ahead: NIMBY strikes again. Washington Post profiled Brisbane, CA just outside the ever-growing Bay Area near San Francisco where local residents are attempting to block any development deal that involves housing. The tension, apparently, is making local policy that too often favors only the residents in the community who actually “sleep there at night” and not those who used to live there, work there or may live there in the future. The tension is further complicated by a “plot line” that Emily Badger frames as “individual towns stymie efforts to address what is a regional quandary.” The article highlights a fundamental issue — who do we make policy for?

Top 20 cities adjusted for commuter populations

Quick hit: The nonprofit Tax Foundation used recent data from Bureau of Economic Analysis to measure how far $100 goes in each state. Looks like FL is the closest to $100 at $100.91. DC is the lowest value at $84.67 and in Mississippi $100 will stretch to $115.34.

Image from Tax Foundation via @HuffPo

Sidenote: How can we not mention the Olympics? I’ve been a Michael Phelps fan from his first appearance and this year’s games only added to his legacy. In the spirit of national pride and the excitement of watching random competition each night, here’s a photo that circulated on the Internet this week. I couldn’t resist…

Credit to lots of people on Twitter

Today’s Thought: 3 steps to shortcut managing. Obviously there is no shortcut for solid management. As leaders, we must communicate our vision clearly to the team member most capable of succeeding and stay consistent with feedback, support and direction over a long, patient process of constant improvement. That. Is. Not. Easy. There is no shortcut. Nevertheless, if you needed to remember a quick rule of thumb, I have found this helpful to remember. There are 3 messages that your organization needs to hear, in your voice, and they can figure out how to navigate the rest. We need to be better at communicating the following:

1). This is important to me.

2). One or two weeks later, how is that thing that’s important to me coming along?

3). When appropriate, clearly identify, this (whatever it was that just happened or was said) is not who we are.

With those three messages, over time, the team will know exactly where you stand and will execute accordingly.

Quote: “It is not enough to be busy…The question is: what are we busy about?” — Henry David Thoreau

Random blog found this week: A few weeks ago my Dad gave me a book on leading with the heart. Leadership that builds a following from understanding and investing in people. From that book, I was researching online and stumbled on Lolly Daskal, an expert in Leading From Within. I’m not that familiar with her work. But thought you might find her blog or this post valuable.

Bonus article: This is what one man thinks should be meant when we say, “be a man.”

Continued Success,