Bloomberg TV's Erik Schatzker sat down with Toronto Dominion CEO Edmund Clark, who calls himself "an old-fashioned banker," to talk about the strategy of Canada's second-biggest bank and why the countries' banks have fared better than U.S. counterparts. Clark's "old-fashioned" approach of lending money to businesses and consumers has helped TD post a three-year return that is 11 times higher than JPMorgan's, with almost half the volatility.
Clark said that, "If you want to speculate, don't call yourself a bank, call yourself a hedge fund" and "a huge portion of Wall Street's earnings were built around the model of 'I'm going to bet against my clients.'"
Clark on whether JPMorgan CEO Jamie Dimon is looking at the capital surcharge the wrong way:
"Well, Jamie, I know, is a phenomenal banker. So I would acknowledge that if we had to choose…most people would choose him and not me. But, I think fundamentally what he's saying is 'the way we did business before, we're not going to be able to do under the capital and liquidity rules that we have.' And that's exactly what the regulator's trying to get you to do, is change your business model. And no one likes to change their business model. I believe in capitalism and I believe in an economy, what happens when you increase the cost of a good. So do I think 10 years from now JPMorgan will be out of business because of Basel III? No. They'll figure out another way to make money, but in a way that may be more investing in the economy and less speculating against competitors."
On whether the world's largest banks should pay a capital surcharge:
"I'm in favor of capital surcharge. I know, and I've said before, it makes me a little unpopular with my colleagues. But I do think we have to recognize that as we get bigger and bigger and more complex, and most people would say it's the complexity that's the issue less than pure size, the consequences of getting it wrong for society are larger and therefore the cushion or insurance, which is what capital is, should be larger."
On regulation:
"I'm a big advocate of Basel III. I think the industry should be saying we want everyone to have lots of capital, adequate capital, and we want them to have lots of liquidity. And so instead of attacking Basel III they should be supporting it."
On Wall Street banking:
"A huge portion of Wall Street's earnings were built around the model of 'I'm going to bet against my clients. I'm going to regard my clients not as clients—and you can hear it in their language, but as counterparties. They should be sophisticated. And the fact that I'm on the other side of the trade shouldn't bother them at all.' You've heard all those expressions. And I sit there and I say, 'This is your client.' You should get up every morning… And my job is to figure out how my client can make more money, and I know that I'll be rewarded doing that."
On why Canadian banks fared better than their U.S. counterparts during the economic downturn:
"Canada was successful for a number of reasons, but I think regulation was one of the reasons. But the regulation is different than what I call American regulation. American regulation is prescriptive regulation, and Canadian regulation is principle-based regulation. And I think if you had to choose, you would choose principle over prescriptive. What Canada did was have very strong capital and liquidity rules. And then say to the CEOs, 'You own the risk. This isn't you run your institution and we try to catch you. You own the responsibility of getting your institution and running it the way that, if a crisis happens, you will survive." On whether the banking industry gets what it means to be an old-fashioned banker:
