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Arrington Hearn Mixon delivers speech on banking at UMW to local business community Date published: 4/1/2009
BY BILL FREEHLING
The U.S. economic cycle has come full circle during Arrington Hearn Mixon's 27-year career with Bank of America. Mixon, a senior vice president with the Charlotte-based bank, was in Fredericksburg the past two days for the University of Mary Washington's Executive-in-Residence Program. She spoke to area business leaders at a luncheon yesterday at UMW's Jepson Alumni Executive Center. Mixon, who grew up in Fredericksburg and attended the University of Virginia, began her speech with a look back on where the U.S. economy stood when she started her career in 1982. Mortgage rates were at 17 percent, the Dow Jones Industrial Average fell 25 percent, and unemployment rates were in double-digits. "I started my career at the absolute bottom of an economic cycle," she said. When she started, banks were highly local and practiced the simple business model of taking in deposits, loaning them out and keeping the loans on their own balance sheets. Over the next 25 years, banking evolved into a giant interconnected industry, in which "local problems became global ones." Banks consolidated and grew into mammoth firms, their stock prices soaring along with the organizations. Low interest rates ensured that ample capital flowed into hedge funds and other firms. Banks bundled together mortgage, credit card and commercial real estate loans, and sold them to Wall Street firms, which offered the securities to investors. She said that model enabled consumers and businesses access to loans, but the innovation went too far. What began as a subprime crisis spread into the broader economy, taking down some of the nation's oldest firms and leading to a recession. Still, Mixon said, the U.S. remains the strongest economy in the world, and she's confident that the banking industry will recover. "As with any cycle we will learn from it, and we will get stronger," she said. Mixon noted that banks are now returning to basics. She expects some economic recovery by year-end, but sees only slow growth from there as individuals and businesses work their way out of debt. She called for more transparency in capital markets and said some of the most complex products that contributed to the boom won't continue. But, she noted, there needs to be a market where investors and borrowers can meet. "While there were clear excesses," she said, "we should not become so conservative in our actions that we impede future growth." UMW's Executive-in-Residence program started in 1989. It brings business leaders who address UMW students and local leaders. Bill Freehling: 540/374-5405
It seems that the country enjoyed a fairly viogous economy
based on the old model of regional banks - why can't this
be the new model? - it seems much more stable and less susceptible to crashes.
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