The Miracle of Our Financial Ecosystem

By Tom Petro

Ron Barchet, the founder of Victory Brewing Company in Downingtown, Pa., was one of about 100 students who studied the craft of beer-making at the prestigious Technical University of Munich at Weihenstephan. As Ron tells it, his classmates—who hailed from Germany, Austria, Belgium, France and other European nations—all aspired to find work in one of the many well-established brewing companies in their homelands.

Ron’s classmates were shocked to learn that he intended to return to America and open his own brewing company. For his classmates, even the thought of such a venture was unattainable. It was beyond their wildest dreams. Why? Because it is very difficult in those countries to germinate an idea for a new, capital-intensive business venture and see it through from concept to production line.

Meanwhile, Ron came home to Pennsylvania and, with his business partner and childhood friend Bill Covaleski, launched his new brewery. Victory Beer is one of the few U.S. breweries to use whole flower hops, which enhance the flavor and aroma of its more than 20 beers. Since Ron co-founded Victory in 1996, the business has grown to 60 employees producing over 125,000 barrels each year and distributing them worldwide.

Ron’s experience was craft beer revolution in America, with the number of U.S. breweries doubling from 2008 to 2014 and skyrocketing from the low single digits in the early 1980s to more than 3,000 today. Europe has been slower to catch up in this growth, and while craft beer is catching on there too, the rate of growth in breweries from 2008 to 2014 was less than half of that in America.

One reason, I believe, is that little of the infrastructure that we enjoy in America—the resilient and diverse network of regional and community lenders that is required and necessary to support new business formation and growth—exists in those countries. It is something we bankers should not take for granted. It is at the heart of the miracle of the American economy.

The freedoms we enjoy as entrepreneurs and business people are unique to our American culture—unique to the American determination that is the hallmark of the miracle of the U.S. economy. It simply doesn’t exist in other nations. Our financial ecosystem is complex and highly interdependent, comprising many diverse players, in many diverse roles, in many interdependent industries.

It includes banks of all sizes and every charter type and spans many diverse banking business models. It is what makes our capital markets the envy of the world. It is why America’s financial markets are the deepest, broadest, strongest, most transparent, most liquid and safest capital markets anywhere on the planet.

It is this ecosystem that we bankers know and understand, perhaps better than any other players, because we are often central to its smooth, effective and efficient operation. We find ourselves in nearly every aspect of it. It must be protected at all costs.

While our financial ecosystem has been severely damaged by Dodd-Frank, the damage is not irreparable. But we bankers have urgent work to do. We must become vigilant “tree huggers” to protect this fragile ecosystem from the assaults of those who are hostile to it, who inappropriately pin on it the ills of others and who place no value on its hidden but powerful role in making the American economy the envy of the world.

The aim of ABA’s Agenda for America’s Hometown Banks is to reverse deeply flawed public policy and to nurture our financial eco-system back to health. The prosperity of our home towns and our nation depends on it. The futures of our children and grandchildren depend on it. They depend on us to get this right.

Tom Petro is president and CEO of Fox Chase Bancorp in Blue Bell, Pa., and vice chairman of ABA’s Government Relations Council. This article is adapted from his remarks at the GRC’s recent meeting in Washington, D.C.