Welcome to The Benchmark, powered by Blend. In this video series, Blend’s executives meet with leaders across industries to share insights about growth and success during a time of extraordinary change.
For this episode, Blend President Tim Mayopoulos met remotely with Jack Lew, who has held several key roles in government, including U.S. Secretary of the Treasury, White House Chief of Staff, and Director of the Office of Management and Budget. In addition to his public service, Lew has worked in law, academia, and financial services. He currently serves as a managing partner at Lindsay Goldberg and as chairman of Blend’s Advisory Board.
Tim and Jack had a wide-ranging discussion: what financial services executives have learned during the coronavirus pandemic; what the federal government should do to shore up the U.S. economy; how lenders can do a better job of serving the unbanked population; and why public service remains a noble profession despite partisan divide in Washington. Watch part one below — watch part two exclusively on our YouTube channel.
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Explore four takeaways from part one
1. Lenders gained confidence by learning to reinvent themselves during COVID
“Financial institutions now have a lot more confidence that they can accelerate technological change — that they can actually pull it off,” said Tim.
The coronavirus pandemic changed life in so many ways, forcing businesses to quickly embrace a work-from-home model while moving more of their products and services online. The mortgage business was upended as many traditional practices became difficult or impossible to complete due to social distancing guidelines. As Tim pointed out, “people just didn’t want to show up at closings and exchange pieces of paper in a crowded room.”
Facing a surge in refinance and purchase applications due to low interest rates, lenders learned to reinvent themselves and, in the process, reimagine the customer journey. At the core of their adaptability was a strong commitment to digital agility. More self-serve options and digital touchpoints for consumers became the norm, while lending teams continued to provide personalized financial guidance along each step of the customer journey.
“Some of it was like battlefield decision making,” said Jack. “They had no choice. They had to make decisions in real time. If the financial system had not been able to respond in a flexible way to meet the needs of the moment and the preferences that people have, things would have been much worse.”
2. No matter the outcome of the election, fiscal stimulus will be needed into 2021
“When you left your position as Treasury Secretary with the inauguration of President Trump,” said Tim, “I doubt you thought that within four years the country would be facing another Great Recession with the pandemic and all the economic consequences.”
Tim and Jack spoke at the end of August as lawmakers continued to negotiate over another coronavirus relief package, months after authorizing an initial $3 trillion in assistance. Federal Reserve Chairman Jerome Powell, as well as many economists and CEOs, have all advocated for more federal spending.
No matter who wins the White House in November, Jack believes more government aid will be needed well into 2021, based on his firsthand experience putting the U.S. economy back on strong footing after the Great Recession.
“I’m looking at an economy that is not all that different from where it was at the worst point of the Great Recession in terms of unemployment,” he said. “It’s about what it was when we thought it was intolerable. This is not the time to stop putting resources into this economy. As a veteran of the last recession (I think) we stopped too soon. In 2011 and 2012 the economy still needed more gas. That’s going to be true well into 2021. I’ve told both sides that you’ve got to get something done.”
3. Broadening credit criteria can help lenders reach and serve the unbanked
“How do we get to the point,” asked Jack, “where through technology — through the different ways of underwriting and knowing who a person is — we can create the possibility of access to capital for disadvantaged communities that are all too often locked out of the banking system?”
As the number of physical U.S. banks has declined, Tim and Jack want to help ensure that financial inclusion is not adversely affected by the diminishment of brick-and-mortar locations.
Continued access to community banks is critically important, especially for consumers and small business owners who may not have a long credit history or are saddled with poor credit. “If a banker knows you, he or she is going to take a different risk than if you’re just an anonymous customer,” observed Jack.
In addition, broadening credit criteria can help lenders do a better job of reaching and serving the unbanked. Technology can lead the way by facilitating the increased use of verified data.
“When I was at Treasury one of the innovations that we pressed on was developing an alternative FICO that would look at more characteristics, all of which could be statistically correlated with a high degree of financial soundness,” said Jack. “We wanted to look at other ways of measuring creditworthiness so you could make good underwriting decisions on a broader population.”
4. Despite partisan divide, public service remains a noble profession
“I remember calling my mom when I was appointed OMB director the first time, and there was silence on the other end of the phone,” said Jack. “I expected her to say ‘I’m proud of you’ or something. I said, ‘Mom, why are you so quiet?’ She said, ‘Because now you’re in a place where people are going to try to hurt you.’ That was in the 1990s. I thought she was being just a protective mom, but there’s a lot of wisdom in that.”
Partisan divide in Washington has been taking a toll on those who choose to serve in government. “It’s discouraging a lot of talented people from serving and choosing instead to sit on the sidelines or focus on making money,” said Tim.
Jack started his career during a different era in Washington. He landed a job in 1979 as a senior policy adviser to former House Speaker Tip O’Neill, a gregarious Massachusetts Democrat. Jack remembers the personal and professional relationship O’Neill forged with President Ronald Reagan, a conservative Republican who was elected in 1980.
“It was never the kind of personality conflict that we have today,” he said. “Ronald Reagan and Tip O’Neill could sit down and talk to each other cordially and respect each other, even like each other, and still disagree on everything.”
Jack thinks that a big part of what’s changed is due to the relentless 24/7 news cycle, plus the constant scrutiny and second-guessing on social media channels.
“If you study American history, you’ll see it (partisan politics) was there from the beginning,” said Jack. “So it’s not new. The medium is new. The fact that it’s instantaneous, the fact that every time you open your mouth, every time you say anything, somebody comments on it. I mean, I was astounded. I used to commute between Washington and New York and people tweeted about the Treasury Secretary eating an apple on the train.”
Curious about what Jack Lew tells young people who are considering a career in government?