The Columns

Sounding a Warning

— by on August 17th, 2012

Tom C. Frost’s first job in banking was as a teller. That was in 1950, the same year that he graduated from Washington and Lee with a degree in commerce. When Tom retired in 2007 as senior chairman of the board of Texas-based Frost Bank, he had spent 57 years in the banking industry.

So when Tom talks about banking and the future of the industry, people take notice. And recently, he has been sounding alarms about that future.

Just this week the Dallas Morning News began an interview with Tom this way:

Tom Frost is sounding a clarion call.

The 84-year-old chairman emeritus of Frost Bank — the only chief executive to stay at the helm of a major Texas bank throughout the state’s debacle two decades ago — sees clear and present danger to the financial system again.

This time, he fears the entire nation is at risk. If trends aren’t reversed soon, really soon, he believes the banking system as we’ve known it will be irreparably damaged.

That piece comes several months after Tom wrote an op-ed in the Wall Street Journal titled “The Big Danger With Big Banks.”  And his WSJ story came less than a week after Tom gave testimony at a hearing on “Is Simpler Better? Limiting Federal Support for Financial Institutions” in front of the U.S. Senate Committee on Banking, Housing & Urban Affairs. You can read Tom’s testimony here and can watch an archived webcast of the entire hearing here.

In his testimony, his WSJ op-ed and the latest Dallas Morning News article, Tom refers to what his great uncle Joe Frost, then CEO of Frost Bank, told him when he joined the bank out of W&L. In the Morning News, he says: “My Uncle Joe told me we were not in the money business. We were in the people business and happened to use money as a way to serve the needs of the people. That’s not anywhere in the story now.”

The Morning News article notes that Tom was Lyndon Baines Johnson’s personal banker “from the time Johnson was president until he died.” And it further credits him with managing to keep Frost Bank and its holding company parent, Cullen/Frost Bankers Inc., intact during the decade “when every other Top 10 banking company in Texas sold out or went broke.”

A trustee emeritus at Washington and Lee, Tom’s solution to the current crisis is to erect “an impregnable firewall” between the investment of commercial functions of banks “so that if the investment side goes up in flames, it doesn’t take the commercial side with it.”