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UpClose with Lauren Kingry

Lauren Kingry (Photo by Evan Wyloge/Arizona Capitol Times)

Lauren Kingry (Photo by Evan Wyloge/Arizona Capitol Times)

Lauren Kingry was looking for a way to make some money while attending Friends University in Wichita, Kan., where he took a job working as a mail boy in a family-owned bank. He had no idea it would be the beginning of a four-decade career in banking, leading to a position overseeing the Arizona Department of Financial Institutions, the regulating agency for 3,800 businesses across the state.

Kingry said the fact that he was the CEO of a failed bank distracts from his accomplishments. Moreover, he said, it overshadows the important lessons he learned from the experience, which are applied each day as his agency evaluates the soundness of financial institutions and their practices.

But at heart, Kingry says he’s just a farm boy who loves to ride his John Deere lawn mower and tinker with his 1931 Ford Model A — the first vehicle he ever owned.

Describe your work.

Of the many businesses that operate in Arizona, each has a license to do business in the state, and that license has to be accomplished by somebody. So 18 of those specific licenses have been assigned to the Department of Financial Institutions.

It grew out of just banking and credit unions, but as other industry types came about they were added to this agency.

What do you feel is least understood about your agency?

I think the most misunderstood is all of the license types. The DFI (Department of Financial Institutions) probably becomes reasonably clear when you talk about banks and credit institutions. They are large and visible and it’s very common for some state or federal agency to be responsible for their supervision, but there are 16 other license types grouped under DFI.

So I think probably the most misunderstood is why they were added, what causes them to be under the DFI. Probably the easy answer for me is that all of them have to deal with the transfer of money or the granting of credit to an individual.

Of those different types of licenses, which do you think stick out for the average person as unexpected?

Probably the license that is connected with car dealerships, because your first thought of car dealerships is that they are in the business of buying and selling cars, not that they are in the business of financing of cars, so that’s one that was a surprise to me.

A new license that we are all dealing with now is the license for loan mortgage originators that are not employed at a national bank or a federally supervised bank. That is new.

What’s the biggest challenge in regulating this industry?

We have an unprecedented economic challenge — not only globally or within the state, but in our own homes. And that translates directly into these licensees.

So there is a more deliberate frequency that we must step in and supervise these licensees, because they’re dealing with the transaction of money. They’re dealing with people’s credit, with people’s lives. So the economy itself has been a challenge because the frequency of our examinations is more critical.

The other challenge for DFI is that we, along with many of my agency colleagues, are dealing with limited resources and limited budget resources.

That and a very troubled economy make up my biggest challenge — managing the timely frequency of those exams.

What could go wrong if the proper management of those examinations doesn’t happen?

Since the licensees have some diverse aspects to them, it’s difficult to make a wide statement, but what I would tell you is that in the banking and credit world, there could be lending techniques, there could be concentrations of lending types that would be outside of their licensed purview and their safe and sound business practices.

So we go into those banks frequently, in order to ensure ourselves that they have not strayed from that particular plan, as it relates to escrow and title agencies and collection agencies. Some people could, in fact, be using unauthorized procedures.

In collections, for example, they could move into a harassing-type environment, or changing their business approach, which is not approved by statute, and which is unacceptable for safety and soundness.

What are your thoughts on the recently passed financial reform package?

It’s significant for our time. It will be significant to interpret for several years to come, and it will cause several more laws to be written and rules to be written in order to define what it means.

Anything that is over 2,000 pages has got to have a great deal of scope to it. So I think it will change some of the landscape for banks and banking. It may change a bit of the landscape for Arizona, and we’re just being informed of that now.

Are banks doing enough to address the foreclosure crisis going on right now?

I think they are. If you look at a bank as being an individual business, the amount of activity they can provide in bringing and helping with foreclosure, stopping a foreclosure, being communicative about a foreclosure or being able to be compromising about a foreclosure is based on the health of that business.

That business has been compromised across the board.

In good times, if you asked me this question, I would tell you the banks could probably do more. Now they are compromised just as much as the economy is, so they are looking at their own bottom line, looking at their soundness, and they’re doing what they can. But the economy has brought such a volume of foreclosure, that it’s sometimes a stalemate.

Sometimes they can’t do more because it will hurt them even greater, and then we have regulations that they must follow in order for them to stay sound. It is a dilemma for them also. I would say that the banks that we supervise, in the state, I’m surprised at the number of things they are doing to help with the foreclosures.

How can banks improve what they do with foreclosures?

I think I would encourage the banks to be more clear and quicker on their decisions, from what I’ve observed. Sometimes the foreclosure process is drawn out a long way. Sometimes it harms the customer and the bank when there is indecision on what to do.

What advice would you give to individuals who are either about to go into a foreclosure, or who are in the middle of the process?

I would suggest not to let any question go unasked, and to be as transparent as you can with your lender. Once you’ve come to a point where it may mean the loss of a home or business, you’ve now stepped into a time when transparency and complete clarity about your situation and what your needs are and what your limitations are.

So I would encourage the willingness to explain fully, honestly, transparently to that lender. When that lender sees that, it would be my understanding that would be the best starting ground to make their decisions quickly and transparently and understanding where you’re coming from.

When banks make a decision to take a loss on a foreclosure rather than renegotiate the terms of the mortgage, just so they don’t set a precedent for allowing a wide range of renegotiation, are they worsening the foreclosure crisis for the sake of shorter-term demands?

Foreclosure and facing a loss in a financial institution on a transaction is very serious, because the decision to take that loss is harmful for the balance sheet of the bank, but it’s also making a decision about the value of the stock for the stockholders of the bank.

So each decision point is really important to see if it causes a belief that the bank will always react in this manner or a belief that the bank is not doing enough, or that the bank is only being driven by the regulator and not by common sense or practice. So it’s very difficult to really analyze overall how banks are reacting with their foreclosures, and (whether) it’s causing a greater trouble.

But I’ll tell you that I think their methodology for weighing the health and welfare of their organization, given this elongated problem — if it were a shorter-term problem, then I think we could be more critical of the banks, but this is longer-term. So they’ve got to weigh out what they can handle, and what is going to be acceptable for customer understanding, and what is going to be in the best interest of the customer in the long term, whether to renegotiate or take a loss.

Have you personally gotten a bad rap because you were the CEO of a failed bank?

No, other than the initial headline.

It was a nine-month consulting event, in a 39-year career in banking. Actually, it has caused some extremely good experience for what I am now involved in — that is regulation — and in the most unfortunate circumstance, closure of banks and credit unions if it’s necessary.

I was asked to come in as a consultant, and one who had the expertise to possibly have that bank recover. It was too late, and we could do too little.

So, other than the initial advertising of that being a part of my career, it’s probably given me experience and strength to do what I’m doing now.

But you were the CEO of a failed bank. So for the person who only heard that fact about the new head of the DFI, what details fill in the more complete picture of you and your experience?

It’s real common for banks, credit unions, businesses that find themselves moving into a very critical health and soundness situation to change management. That’s what this bank did. The board saw a concern.

They brought in a credentialed banker who had knowledge of the area and of banking. You bring these people in with the knowledge that you may be in too deep.

I think the information of more importance is that I was found to be one who had the credentials who could possibly save it, but the chance of failure was always there. And it was the only experience I’ve ever had with (bank failure), and it wasn’t my interest to have it end that way. We did everything we could.

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