Trust and Integrity: Pat Baird on the Lessons of the 2008 Financial Crisis

In a dynamic address given to an overflow crowd in the MMU University Commons for the Barbara Knapp Endowed Business Lecture Series, Pat Baird, retired president and chief executive officer of AEGON USA (Transamerica), reflected on the causes of and contributors to the financial meltdown of 2008, recounted how he and other leaders helped steer AEGON and the insurance industry through dire financial straits and suggested that while there’s plenty of blame to go around, trust and integrity must be re-established.

Last night, Pat Baird, retired president and chief executive officer of AEGON USA (Transamerica) and this fall’s keynote speaker for the Barbara Knapp Endowed Business Lecture Series spoke to an overflow crowd in Mount Mercy’s recently opened University Commons. In a space packed with students, trustees, business leaders and friends of Mount Mercy, Baird addressed the profound economic dislocations of the last five years in “The Brink of Collapse: The financial Crisis of 2008,”  reflecting on its personal, professional and global impact. Although the financial services industry was hit hardest by the crisis, as the CEO of the fifth largest insurance company in America, Baird, like many corporate leaders, was faced with tough choices and a dire situation—and in truth, according to Baird, the insurance industry would have been next in line.  Just how dire was it? According to Baird, who testified before the U.S. Senate Committee on Finance and worked with Hank Paulson, U.S. Secretary of Treasury, and Ben Bernanke, Chairman of the Federal Reserve, “most of the key players felt that at one point, we were three-to-five days away from significantly changing life as we know it.” The country was on the verge of a financial meltdown that would have done as much damage as the Great Depression while also wreaking havoc on global markets. Though this sentiment was something he and his peers kept under wraps—to avoid adding to the panic the media was fueling at the time—the event significantly transformed his personal and professional life—since then, he rarely gets a full night’s sleep.

He reviewed the key contributors to the collapse of the housing bubble that ignited the crisis and the start of the recession, citing loan origination companies, 10 to 12 of the largest U.S. investment banks, the insurance giant AIG, and rating agencies as the primary instigators. By lowering credit, repackaging suspect mortgages, and not doing due diligence on credit and buyers, each helped create an environment in which large-scale financial failure became a reality—although he was quick to point out that none of these institutions were acting in a conspiracy. There were several mechanical causes as well, ranging from the velocity of pre-programmed trades executed within seconds to ineffective or non-existent market-to-market accounting.

Yet, while there’s plenty of blame to go around, in many ways Baird’s talk was grounded in a commitment to basic values. He believes Paulson and Bernanke were heroes and doesn’t view the federal TARP (Troubled Asset Relief Program) funds as a bailout but as the only tool that would restore the banking system. He also felt that the housing bubble implosion did not happen because of a lack of regulatory oversight, but was due to “corporate leaders and managers who did not manage responsibly.” Responsibility became a core strategy in managing AEGON USA (Transamerica) through the crisis. Together with the AEGON leadership, he worked to ensure that no life insurance company would fail, not just AEGON; nor would any use the crisis to gain financial advantage over another.

This kind of ethical leadership has marked Baird’s career and is the keystone to finding solutions for a crisis he’s “not entirely sure is over.” Now, while still grappling with global fallout and the escalating debt problems in Europe, we need to embrace “responsibility and accountability like never before.” Our political system needs to change and the public anger displayed by both the Tea Party and the Occupy Wall Street protest needs to be more sharply focused on finding solutions. His parting advice to MMU business students, not only summed up a lifetime’s hard-earned business wisdom, but suggested timeless but effective solutions: “We should always root for companies because the vast majority of them are run ethically and have a positive impact on our communities and way of life.” For Pat Baird, MMU students should strive to work in businesses that can make such a difference, be willing to admit to their own mistakes, and know that trust and integrity will always win.

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