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September 2007
Sensitive Job
By Ellison Clary

     He talks regularly with Ken Thompson of banking giant Wachovia as well as chief executives of small- and medium-sized banks throughout the Carolinas, and he knows their operational details. So Jeff Kane has to be careful.

     As senior vice president of the Charlotte Branch of the Federal Reserve Bank of Richmond, Kane interacts with a lot of people, both professionally and socially. If he let inside information slip out about a big bank based in Charlotte, or about any other bank, the financial consequences might be huge.   

     “I have to be discreet,” Kane says simply.

     Does he know the sensitive areas at various banks? For the Carolinas, he does. “At the Fed, we lend to banks,” he says. “In terms of organizations that are having difficulties, we know it. But we don’t talk about it.”

 

Banking on America

     Congress created the Federal Reserve System in 1913 to serve as the nation’s central bank. It operates in 12 districts across the country. Charlotte, along with Baltimore, is home to branch operations of Richmond, headquarters of the Fifth District which supervises banking in North Carolina, South Carolina, Virginia, West Virginia, Maryland, and District of Columbia.

     “We are a very hard organization to understand,” Kane smiles as he explains three overall responsibilities of the Fed. “Probably the first thing that jumps into your mind would be our role in monetary policy. When the Fed chairman speaks and the stock market moves, people tend to paint us in that light.”

     That’s because the Fed, with the interest it charges banks to borrow from it, sets interest rates that banks assess on loans to their customers.  

     Another Fed role is as the fiscal agent for the US Treasury. “We don’t print money, but we are responsible for the circulation and recirculation of money,” Kane says. Banks depend on the Fed to provide cash, clear checks and facilitate various payment vehicles.

     “Thus, we have a significant presence here to meet the needs of the large banks and other financial institutions in the Carolinas,” he adds.

     Further, the Fed serves as the umbrella regulator of bank holding companies. Charlotte’s Fed building contains teams that deal with Bank of America and Wachovia, whose towers loom on the skyline a few blocks away.

     Fed employees based in Charlotte also check up on other Carolinas banks. They look for overall compliance with monetary rules, laws and procedures and they perform credit evaluations. That’s how the Fed knows if a bank is healthy or in a financial tight spot.

     About 420 people work at the Charlotte Fed and about half report to Kane. That’s because the Fed has switched from operating strictly by geography to a system more aligned by function. Kane is in charge of the cash operations in Charlotte as well as in Baltimore and Richmond.

     “The staff in Baltimore and the staff in Richmond that do all the cash processing, the lending, the reserve account functions, they report through their officer chains and it ends up here,” Kane says as he relaxes on a sofa in his Charlotte office.

      He also oversees the Reserve Accounts/ Loans division for the Fifth District, which brings him in contact with Lewis, Thompson and many other bank chief executives and their top lieutenants.

 

Depositing Experience

     Kane grew up in the Tidewater area, he earned a bachelor’s in Mathematics at the University of Virginia in 1975. Later, he finished at The Stonier Graduate School of Banking at the University of Delaware and the Virginia Bankers School of Bank Management at the University of Virginia.

     Fresh out of school in 1975, he joined Bank of Virginia near his home in the Hampton Roads area of coastal Virginia. For the bank that eventually became part of Wachovia, Kane made small business loans and was the primary student loan officer.

     After a couple of years, Kane was getting restless. Serendipitously, long-time friend Gene Johnson approached him about joining the Federal Reserve.

     “There weren’t many African Americans in the Federal Reserve Bank at the time,” Kane remembers, “and Gene would have been one of the few in a supervisory capacity.”

     But the Fed was changing its hiring habits in more ways than one. Rather than recruiting right off college campuses, it was looking for people with banking experience for its supervisory functions. That’s where Kane fit in.

     “When you start traveling around to banking organizations doing these exams and reviews, it can become painfully obvious that you’ve got somebody that just graduated college rather than somebody that’s actually been on a lending desk,” Kane explains.

      Kane spent his first 20 years with the Fed based in Richmond but traveling the five-state Fifth District. He remembers the savings and loan crisis of the late 1980s and how he and others were instrumental in bailing out the S&L private insurance fund in Maryland.

      He spent three months in Charlotte during 1991, when then-NCNB sought Fed approval to buy C&S-Sovran, a deal that ultimately produced NationsBank, predecessor of Bank of America. The Fed wanted a full-blown credit review at NCNB before it flashed thumbs up and Kane’s team combed the books.

 

Branching Out to Charlotte

      The Richmond Fed promoted Kane to senior vice president of its Banking Supervision and Regulation Department in 1999. Soon the Fed shuttled more resources to Charlotte and, in 2003, Kane moved to the Queen City.

      Right away, he started interacting with chief executives of banks across the Carolinas. Wachovia’s Thompson serves on the Fed’s federal advisory group and Bank of America CEO Ken Lewis recently attended a dinner for the Richmond Fed’s board while it was visiting Charlotte.

      “There’s a tremendous amount of information that flows back and forth between the banks and the Fed,” Kane says. “Imagine the amount of information in Bank of America’s application to buy LaSalle Bank of Chicago.”

     Outside activities are the hardest part of his job, Kane says, as well as what he enjoys most. He came to Charlotte with specific instructions to focus on connecting with people. Now he voices pride in having forged closer links with communities throughout the Carolinas.

     “We had trouble getting local directors,” Kane says with a shake of his head. “We didn’t know people and they didn’t know us.”

     By getting involved in civic organizations, Kane gradually raised the Charlotte branch profile. He is a frequent speaker across the Carolinas as well as for area groups and he’s joined boards of organizations such as Junior Achievement of Central Carolinas and the Belk College of Business advisory council at the University of North Carolina at Charlotte.

In the latter function, he forged a friendship with Claude Lilly, who recently resigned as the UNC Charlotte business school dean to become dean of the College of Business and Behavioral Sciences at Clemson University.

     Kane, who successfully pushed for Lilly to join the Fed’s Charlotte directors in May, says Lilly’s new position makes him even more valuable. “He’ll be engaged with the business community in the Greenville-Spartanburg area just like he was here,” Kane says.

Lilly agrees, adding he can provide a South Carolina economic perspective from an academic point of view. He welcomes the chance to repay Kane for his contributions to UNC Charlotte’s business school, he says.

     “People like Jeff,” Lilly continues, “and because of that and his business background, Kane uncovers economic information that someone else might not find.”

     “He also heads the diversity initiative for the Richmond Fed,” Lilly says. “I like to see Charlotte with a leader in that effort.”

 

Gaining Insights

     Kane values anecdotal economic data from Carolinas directors and passes it on to Richmond. Questions included at a recent Fed-sponsored Community Bankers CEO Forum in Raleigh reflect the type of information Kane gleans.

     Sample queries: Based on interactions with your customers and others, what is your assessment of prospects for economic growth in your area? What are the biggest risks facing your bank? What supervision and regulation issues do you believe the Federal Reserve should be aware of?

     “In terms of leading indicators, the information we get from our directors is never lagging,” he explains. “It’s always in advance of things that are happening. They’re bringing insights.”

     Although he doesn’t have a big budget for civic contributions, Kane uses the Charlotte Fed to help non-profits through in-kind donations and the volunteer efforts of staff.  For the United Way of Central Carolinas, for instance, the Fed’s print shop produces many of the organization’s materials.

     Another reason Kane values discretion is that his wife of 12 years, Pat Nowak, is a compliance risk executive for RBC-Centura in North Carolina. Until recently, she served in a similar capacity with Wachovia in Charlotte.

     Kane chuckles about a luncheon at the Charlotte Fed when someone asked him how his wife was doing at Wachovia. Chairman Thompson, sitting within earshot, was surprised. “Your wife works at Wachovia?” he asked.

     Facing his 54th birthday this month, Kane professes his hope to remain at the Charlotte Fed for the rest of his career. This office will thrive, he believes. For employment at the Charlotte Fed, Kane thinks 300 is the bottom and 400 is the top.

     Although a recently announced consolidation of check clearing functions from Charlotte to Atlanta will cut Fed employment here, Kane sees that as merely a reflection of the waning importance of checks in the American payment system.

     “I think it’s important we’re here,” he says. “You’ve got the two big banks here and you throw in BB&T, and the vibrancy of North and South Carolina in community banking, if you are engaged and are a central bank, you’ve got to be here.”

      Kane recalls how Hugh McColl Jr., former chairman and chief executive of Bank of America, was a strong advocate of a significant Fed presence in Charlotte. “He was thinking about the ability to influence policy and he wanted Fed folks here that he could interact with in forming policy,” Kane explains.

     Ben Bernanke, the current Federal Reserve chairman, is from Dillon, S.C., and his parents live in Charlotte. That, too, is a benefit, if only in that Charlotte might enjoy a greater ability to entice him to visit. Bernanke will be here in late November to accept the Charlotte Chamber’s Citizen of the Carolinas award.

     Asked about the economic health of the greater Charlotte region and Carolinas, Kane discounts recent negative media stories as he voices confidence in the area’s underlying strength. Credit remains available, the local real estate market is fairly solid, inflation indicators have improved and job creation continues, he points out.

 

     

 

 

 

Ellison Clary is a Charlotte-based freelance writer.
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