I'm at a loss to understand why reporters continue to view Hugh McColl as a banking-industry genius. He's anything but: as a result of the enormous bank-buying binge he embarked then-NCNB on starting in the mid-1980s, McColl is arguably responsible for perhaps more value destruction than any executive in stock market history. I just don't see why reporters keep on printing the nonsense that McColl spouts.
But it's hopeless. McColl was popping up in the papers again last week following the death of his predecessor at NCNB, Tom Storrs, who ran the bank from 1974 to 1983 and hand-picked McColl to succeed him.
Sure enough, the McCollian blather was on full display. "The truth is I really continued a strategy developed by [former CEOs] Addison Reese and Tom Storrs," he said last week. "We realized that if we didn't leave North Carolina we would never amount to anything, that we would not be important. The reason was North Carolina was the 11th largest state in the Union so, ergo, you'll never be better off than the state's growth would be."
Expensive words! There you have as revealing an instance of Hugh McColl's monumental egomania and contempt for shareholders as you are likely to find. The whole point of running a bank, McColl now says, has nothing to do with generating an adequate return for the people who actually own the business. Of course not! All McColl cared about was making NCNB—and by extension himself— "important." I'm a little shocked that he even has the nerve to say that in public.
[Related -Has Warren Buffett Found The Best Investment In Oil?]
[Related -The Return Of Crisis]
Not only is McColl's comment deeply misguided, it's also plain wrong. In fact, banks all over this country have, do, and will grow at rates considerably in excess of the growth rate of the state in which they operate. And when that happens, their shareholders--the owners of the company--are rightly rewarded.
But it appears to me that McColl never cared about shareholders. He famously noted on a number of occasions that big-bank CEOs make more money than small-bank CEOs, and that he preferred to be the CEO of a big bank. But he never said anything (and I doubt it ever occurred to him) about the returns that shareholders of big banks earn relative to shareholders of small banks. He seemed to be oblivious to the interests of shareholders.
The kindest view of McColl's strategy for running BofA was that he believed there was some advantage in getting big fast. In a consolidating industry, he might have thought, the winners would be the companies that were the first to be able to exploit economies of scale and pricing power. So do deals as fast as you can, then hammer out the operating details later on.
We now know this was a recipe for disaster. The mirror image of BofA's strategy was the one that Dick Kovacevich followed when he ran Wells Fargo.