Commerce Pick Wilbur Ross: Bank Flipper, Critic of U.S. Regulators


Image: Bloomberg

That may be a sigh of relief you are hearing from bankers and bank regulators.

Both could best be described as frenemies of the billionaire investor Wilbur Ross, who had been a possible pick for Treasury secretary. Instead, President-elect Donald Trump isreportedly poised to name Rossas its choice to lead the Commerce Department, a post that would have much less direct influence on banks, bank supervision and housing.

Ross, who turned 79 Monday, was a staunch supporter of the Trump campaign. In an interview with CNBC in June, Ross said he supported “amore radical, new approach to government.”

Ross is a noted distressed-asset buyer who primarily made his fortune in the coal and steel industries, sectors Trump has vowed to revive.

Ross’ WL Ross Co. was among the most active private-equity firms in banking during the financial crisis. It started in May 2009 with a deal with the Federal Deposit Insurance Corp. to acquire BankUnited after the South Florida thrift’s failure. He and fellow investors injected $900 million. Led by veteran banker John Kanas, the new BankUnited recreated itself as a commercial bank and expanded to New York. BankUnited’s private-equity backers, including Ross,divested from the company in 2014.

With a road map in hand, Ross over the next several years invested in several banks across the country, including a young Michigan bank that grew into the $6.6 billion-asset Talmer Bancorp. Ross divested from Talmer in 2015, and Chemical Financial Corp. bought it for $1.1 billion earlier this year. Notably, Ross helped rescueAmalgamated Bank in New York, which has long been tied to labor unions and progressive causes.

Ross has also been active ininvesting in mortgage companies.

Overall, private equity had a topsy-turvy relationship with banking and its regulators during, and in the years following, the economic downturn. When traditional lines of capital went dry, regulators were open — perhaps reluctantly so — to private equity buying failed banks and propping up struggling ones. Navigating the rules and laws associated with bank holding company requirements proved difficult, but manageable.

Yet there was a small window for PE deals, and the terms became less lucrative as other strategic partners — meaning existing banks that made it through the storm — stepped up to buy their fallen or struggling brethren. The economic recovery, characterized by extremely low interest rates, has lasted longer and been weaker than expected, too.

Ross also stands out in private equity as someone who speaks his mind — the rest of the PE industry has historically been rather shut off. Specifically, he has willingly shared his thoughts on the banking regulatory environment, such as in thisemail sent to American Bankerin 2012 following a rumored potential sale of BankUnited. In it, he detailed his frustration with the bank regulatory landscape.

“Our only discouragement is that regulatory attitudes toward private equity seem to be becoming less friendly in the United States, and that is among the reasons we invested in Bank of Ireland and in Virgin Money’s acquisition of Northern Rock,” he said. “Odd as it may be, the Irish and U.K. regulators seem more comfortable with private equity than is true in the U.S.”

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