The Economy: “This Too Shall Pass”

Vernon Hill, founder and former CEO of Commerce Bank, and Jack Bogle, founder and former CEO of Vanguard Mutual, had never met — until we got them together to talk about the economy, Wall Street’s excesses, ninja loans, and their dictatorial reputations.

Bogle: But aren’t you really saying that the banking system will survive by going back to basics? Not by taking all of those mortgages off the books and selling them to somebody else?
Hill: Yes. My philosophy over the years has been, the ultimate value of a bank is in its core deposit base. And the further away you got from a deposit funding model, the worse you got. And I think we are going to go back to the basic model.
Bogle: Lord Keynes warned, “When enterprise becomes the bubble on a whirlpool of speculation … the job is likely to be ill done.” You’re right — we have to go back to basic capitalism, where the rewards go to the right people, where investments are made for the long term. May I close with one more quote? A Middle Eastern monarch once summoned his wise men and said, “Come back and tell me a piece of advice that you can successfully give, no matter how dire things look or how wonderful things look, or how bullish or bearish or how grim.” And the wise men went away and came back and said, “Here’s the advice: This too shall pass away. This too shall pass.”      
Hill: That’s a great place to leave this. This too shall pass.