Saturday, November 18, 2017

Bank Dividends: Go Ahead and Drink The Kool Aid

Dividends are no longer sexy. So says Rob Isbitts, a Forbes contributor in a recent article that he penned. Not sure they ever were sexy, but he has a point. Read the article, make your own judgement.

Or read on. Today I had another debate with my colleagues about discount rates. You know, those rates you learned in Finance class, CAP-M, or Ibbotson Build-up? Yeah, text book stuff. Don't hear much about either on CNBC these days.

I view things simplistically. If you are going to project out into the future, say in strategic plan projections, then you should discount back to present day to determine if your strategy is adding or eroding value. A key component to the calculation is the discount rate.

So here is my simple definition of what your discount rate should be: The annual capital appreciation rate expected by your investors. That differs based on business model, in my opinion. If you are executing a fast-growth strategy in a slow-growth market, you may be taking larger risks. Therefore, your investors should expect greater capital appreciation, and therefore a greater discount rate.

If you grow more slowly, and closer to your market growth, you would likely be executing a less risky strategy, and you should consider a smaller discount rate. But your investors would still expect equity-like returns. Common stock remains the lowest rung on the capital hierarchy, regardless of strategy employed. 

Absent a change in your market multiples, your stock's capital appreciation should move in tandem with your earnings growth, or possibly your book value growth, or some combination of the two. That is typically how banks are valued. So what if in executing your strategy, you're projecting 6% earnings compound annual growth? I doubt your investors would be happy with 6% annual returns. How do you deliver the returns they are expecting?

How about the dividend?

Let's look at Territorial Bancorp in Honolulu, the holding company for Territorial Savings Bank. Why Territorial? Aside from my affinity for Hawaii because I lived, worked, and went to college there, they are a highly capitalized thrift that converted from mutual to stock form in 2009. Their capital ratios are not an issue.

Territorial had an inconvenient truth in their 2016 10k, or annual report for those that don't speak in SEC forms. See the below chart.

They have under-performed bank stocks and the wider market over the past five years. They are not a poor performer though, having a year-to-date ROA of 0.89% and Efficiency Ratio of 56.5%. The challenge may be their balance sheet growth, only 4.1% per year, on average, since 2011 (see table). The Hawaii population is projected to grow 3.46% over the next five years.

One way Territorial is trying to improve shareholder returns is through dividends. Their dividend has grown at a CAGR of 22% since 2011, even though their EPS has grown at a CAGR of 8.5% over the same period. In 2016, that resulted in a dividend payout ratio of 52.3%, up from 29.1% in 2011. Quite a commitment to the dividend. An 8.5% annual EPS growth, combined with a 2.8% dividend yield, should result in a total annual return of 11.3%. That assumes no change in Territorial's price/earnings multiple. Not too shabby. 

So why don't others deliver higher dividends to stoke shareholder returns, especially if their balance sheet is growing slowly, and their EPS growth is not enough to meet shareholder expectations? Why maximize profitability only to accumulate capital?

Territorial is working their capital position down from a very lofty perch post-conversion. Clearly dividends are one part of their strategy, as well as share buybacks. The buybacks are typical for a converted thrift. Although don't get me started on the logic of issuing shares at $10 only to immediately start buying them back at a higher price.

What if, as Territorial "normalizes" their capital position as per their capital plan, they have to cut the dividend? This is a common objection I hear from bankers for not increasing their dividend and payout ratio. They don't want to cut it. And suffer the consequences. Like GE recently did.

The Board and executive management of Territorial have this covered, in my opinion, in the form of a special dividend. In 2016, their regular quarterly dividend was $0.18/share. In December, they declared a special dividend of $0.20/share, in addition to their regular dividend. They recently declared a special dividend this year of $0.30/share, payable in December. Once their capital levels return to "normal", if the special dividend reduces capital ratios, they can reduce it or eliminate it altogether, without impacting the regular dividend.

But no, bankers object because their shareholders will grow to "expect" the special dividend. As if active shareholder relations programs can't mitigate this risk. 

As a result, many keep banging the growth drum to stoke EPS and therefore shareholder returns. As if growing faster than the bank's markets can continue ad infinitum. If it doesn't pan out, we turn first to cost cutting (largely within our control). Then to buy-side M&A (less within our control). And if we fail to deliver shareholder returns by these methods... then sell-side M&A (within our control). 

And, alas, we have less than 6,000 banks.

Are you drinking my dividend Kool Aid?

~ Jeff

Saturday, November 04, 2017

Schmidlap Bank, A Division of Community Bank

"We want to keep our charter because the OCC is a more distinguished regulator." Seriously, that is what a bank chairman told me when arguing to keep his bank's charter during merger negotiations.

But I try not to judge. Perhaps, if I thought the argument weak, which I did, there was something else behind it. Something like "we've spent 100 years building the reputation of this bank and 'poof', it's gone at the stroke of a pen." Or, "my grandparents, parents, and now me served on the board of this bank and I owe it to their legacy..."

Why not just say that? Perhaps there is little evidence of the benefit of your 100-year brand, so it's a difficult argument to make. But more difficult than claiming the OCC is a better regulator? 

In more recent merger discussions, however, I have heard more refreshing arguments that it is not necessary to re-brand every nook and cranny of your bank into one. Because one key argument to combine brands is the efficiency of advertising into one or more media markets. Does this make sense today?

I think not. Take the accompanying picture, all from my Twitter, Facebook, and LindedIn streams. Three different "promoted" posts. All specific to me. Based on all the intel gathered on me. My neighbor, or even my wife, see different ads. So combining names so you can realize synergies in your billboard strategy doesn't make sense like it did 20 years ago.

More success stories of the divisional approach are cropping up in our industry. One of my favorites is the affinity brand Red Neck Bank, a division of All America Bank. All America Bank is a traditional community bank located near Oklahoma City, and has been around since the 1960's. And yes, they recently switched names from Bank of the Witchitas. But did they have to? For the traditional bank, I'm not so sure.

Aside from the traditional bank, they thought out of the box, and established a digital-only division to appeal to a specific niche. And it has done well. Marvelously well. Even though it has not reached the "critical mass" that your investment bankers insists that you need. See the accompanying table.

On a more traditional front, I point to UNSY Bank in upstate New York. This bank, unlike All America Bank, is relatively new, having been formed in 2007. It's strategy, however, is to build brands that resonate closer to the communities where they operate. For example, the $349 million bank has only four branch locations, each USNY Bank. But they operate as Bank of the Finger Lakes, or Bank of Cooperstown, divisions of USNY. Their financial performance doesn't seem to be hampered by bifurcated branding.

The divisional approach is becoming more important as relatively small financial institutions worry about keeping up with customer preference, technology, and regulatory changes. Although I mock the investment banker that always seems to think your institution needs to be twice the size you are now, regardless of the size you are now, there is merit to achieving a certain size.

Merits that include: increased stock trading multiples, greater employee development opportunities, the ability to absorb regulatory costs, and greater resources to invest in technologies to afford you a long-term future.

But you need not give up your name to get a merger of like-sized institutions done. Nor dump your local brand for a homogeneous one that spans geographies.

~ Jeff

Wednesday, November 01, 2017

Guest Post: Financial Markets and Economic Update by Dorothy Jaworski

Quarterly Financial Markets & Economic Update- October, 2017

I love this time of year.  The leaves are changing colors and soon fall will give way to winter.  I cannot say I love the cold, bitter winter, especially when the roads are bad from snow and ice.  The markets have not given way to anything, with long term bonds still trading in a tight range and short term rates having risen from Fed action.  The economy moves along at its own pace.  We saw a strong second quarter, with GDP growth at 3.1%, and we know from the recent past that the third quarter should stay strong but weakness comes again in the fourth quarter.  This year, we may see a weaker third quarter due to the effects of Hurricanes Harvey, Irma, and Maria and the destruction left in their wake.  The overall forecast for GDP in 2017 is 2%.  Actually, the forecast for 2018 to 2020 is also 2%.  What else is new?

Fed Tightening
The Federal Reserve continues its tightening campaign.  They are expected to raise the Fed Funds rate for a third time in 2017 by another 25 basis points in December, 2017.  Why?  I suppose it is because they said they would raise rates three times this year and they are stubbornly sticking to what they said.

But raising the Fed Funds rate is not the only tightening going on.  Add to that the end of “QE,” or quantitative easing, which was the Fed’s bond buying binge that loaded up their balance sheet to over $4 trillion.  They have spent the last several years maintaining the current levels of bonds that they own.  They have seemed fairly nervous about their large balance sheet, so in September, 2017, they announced that they would allow bonds to mature or pay off in October- by $4 billion in Agency mortgage backed securities and $6 billion in Treasuries, for a total of $10 billion. But they won’t stop there.  The monthly amount will eventually rise to $50 billion.  Thus “QT,” or quantitative tightening, has begun, with uncertain consequences and disruptions to our markets, interest rates, the economy, liquidity, and the banking system.  All of this is happening while the markets widely expect the President to nominate a new Federal Reserve Chair to replace Janet Yellen, whose term as Chair ends in February, 2018.  Interestingly, her term on the FOMC does not end.

The tightening continues unabated, despite modest economic growth and stubbornly low inflation.  In fact, inflation has been less than 2%, the Fed’s presumed target, since 2009.  Neither GDP or inflation look to soar anytime soon, leaving us with Fed actions that will put upward pressure on short term and long term that will lead to lower GDP growth and lower inflation.  Something doesn’t seem right about this scenario, does it?

What Does the Economy Need?
Okay, I have been reading my economic textbooks, studying my data, thinking about the markets, and wondering about the Fed.  Why are they continuing to raise rates?  I theorize that they believe the unemployment rate is too low and will cause wage inflation.  They believe in the Phillips curve, which has an inverse relationship between unemployment and inflation.  They may also have seen an uptick in inflation earlier this year and thought they were right in raising rates.  Have they noticed that inflation was transitory and has now been falling?

The unemployment rate is low on the surface, at 4.2% in September, 2017.  The low unemployment rate in and of itself does not indicate that 7.6 million workers have multiple jobs to make ends meet, that the labor force participation rate of 63% is near a 40 year low, the pool of available workers is at 12.4 million persons, and that baby boomer retirees have given way to workers of less experience.  The Fed worries about wage growth soaring and driving higher inflation expectations.  I don’t think they have to worry too much; median household income in 2016 was $59,039, while in 1999 it was about the same at $58,655.  That is seventeen years!

I was fortunate to see a presentation this summer by Dr. Lacy Hunt.  He showed an enormous amount of historical economic and market data including real interest rates, debt levels, money supply, the velocity of money, GDP, inflation, productivity, and employment measures.  High debt levels compared to GDP, low velocity of money, low productivity, and low savings rates have conspired to keep GDP growth lower than historical averages, both on a real and nominal basis.  Downward pressure on inflation has been the result and Fed actions are only pushing inflation lower.  Tightening will bring higher short term rates, but may push GDP growth and inflation even lower.  We really don’t need either one to move lower right now.  Dr. Hunt demonstrated through his research that the extremely high debt levels are keeping GDP at low levels, keeping inflation at low levels, and keeping long term interest rates at low levels.  He believes we will remain in this situation for the foreseeable future.

Fiscal Policy
We are not seeing activity from Washington DC.  There have been several failed attempts to repeal and replace Obamacare.  Tax cut and tax reform proposals have been floated.  I really didn’t hear much about helping small business in them.  There isn’t much mention of infrastructure projects.  We are at a standstill when it comes to fiscal policy.  I believe that tax cuts will spur economic growth, but only if they do not increase government borrowing and the federal deficit.  As Dr. Hunt would indicate, increased government borrowing would only exacerbate the debt-to-GDP ratio, which has been greater than 100% for the past six years, and further weaken economic growth.   

Many other good ideas have been presented, including ones to improve education, job training, and worker skills to better match the job openings of today and the future.  We have seen the elimination of several regulations; the lifting of burdensome regulations will help everyone.

The Kilonova
Did you see the major announcement by astronomers on October 16th?  NASA captured pictures of an extremely huge collision of two neutron stars.  This occurred 130 million years ago, but the signal didn’t get to Earth until August 17th, which was only a few days before the solar eclipse in the US on August 21st.  (We managed to score some of the eclipse glasses and observe the 80% eclipse here in PA).  The collision is called a “kilonova,” and it led scientists to see bright blue debris and massive amounts of platinum, uranium, and gold being created.  In fact, there was an estimated $10 octillion in gold created!  That is $10 billion, billion, billion.  Now that would create some economic growth!

Thanks for reading!  DJ 10/17/17

Dorothy Jaworski has worked at large and small banks for over 30 years; much of that time has been spent in investment portfolio management, risk management, and financial analysis. Dorothy has been with Penn Community Bank and its predecessor since November, 2004. She is the author of Just Another Good Soldier, and Honoring Stephen Jaworski, which details the 11th Infantry Regiment's WWII crossing of the Moselle River where her uncle, Pfc. Stephen W. Jaworski, gave his last full measure of devotion.

Monday, October 23, 2017

Bankers: What's Your Art of War?

I will occasionally quote Sun Tzu from his seminal book, The Art of War. I am not trying to imply that winning battles and winning in a competitive marketplace is the same thing. One leads to lessons learned, perhaps a loss of wealth, but never death and conquest.

But Sun’s wisdom cannot be ignored. He was a Chinese general, strategist, and philosopher that lived over 2,000 years ago. His book is a must read at military academies and business schools alike.

One such quote I would like to share and discuss practical application is:

If you know the enemy and know yourself, your victory will not be in doubt.

I use this quote as it relates to a financial institution’s situation analysis, environmental scan, or whatever you choose to call it. What I believe Sun meant: the general that knew his enemy’s weaknesses, and exploited them, and knew the enemy’s strengths, and avoided them, wins.

And I believe this to be the case with your competition.

I am moderating a planning retreat for a client this week. And in so doing, we have prepared a peer group financial condition and performance analysis for the bank’s strategy team. But it doesn’t go far enough. Executive Management’s personal knowledge of, and research into the strengths and weaknesses of their competitors is essential to building a strategy to expose their weaknesses and dodge their strengths.

Some information will be based on competitive actions in the marketplace. Much of it, however, can be gleaned from publicly available information.

Let’s go through the data with one such competitor.

FFKT Farmers Capital Bank Corporation (the “Company”), Frankfort, KY

FFKT is a financial holding company which had four wholly-owned bank subsidiaries at year-end 2016. The Company provides a wide range of banking and bank-related services to customers throughout Central and Northern Kentucky. It had four bank subsidiaries including Farmers Bank & Capital Trust Company ("Farmers Bank"), Frankfort, Kentucky; United Bank & Trust Company ("United Bank"), Versailles, Kentucky; First Citizens Bank (“First Citizens”), Elizabethtown, Kentucky; and Citizens Bank of Northern Kentucky, Inc. (“Citizens Northern”), Newport, Kentucky. In February 2017, the Company merged United Bank, First Citizens, Citizens Northern, and FCB Services, Inc. (“FCB Services”) into Farmers Bank, the name of which was immediately changed to United Bank & Capital Trust Company (the “Bank”).

At year-end 2016 the Company had the following wholly-owned nonbank subsidiaries: FCB Services, a data processing subsidiary located in Frankfort, Kentucky; FFKT Insurance Services, Inc., (“FFKT Insurance”), a captive property and casualty insurance company in Frankfort, Kentucky; and Farmers Capital Bank Trust I & III, established to issue Trust Preferred Securities (“Trups”), a hybrid Tier 1 Capital instrument.

How do I know this without having inside information about the Company and Bank? It’s in their Annual Report. FFKT is not a client, and I do not know any non-public information about them. 

The Company had asset quality problems, which they appear to have beaten. In 2013, their non-performing asset/asset ratio was near 5%, down to 2% today. Still high relating to other financial institutions, but the trend is very favorable.

The Company did two things to increase profitability either at the end of last year, or early this year. One was to consolidate bank charters from four to one, the cost of which was accrued mostly during 2016 and was executed in February of this year. The other was to restructure its balance sheet by pre-paying senior debt, deleveraging its balance sheet and increasing its net interest margin.

And it has worked. Investors' patience paid off in a second quarter ROA of 1.08% and a 9.40% ROE. Where will the Company turn to keeping the positive trend? Since investors have been patient for the Company to rebound, it is fair to assume that there is little appetite for strategic investments that don’t have very quick payback periods. And upon review of the balance sheet, there is opportunity to improve today and impact financial performance in the very near term.

The Company’s yield on earning assets was 3.92% for the second quarter, placing it in the 25th quartile amongst its peers. The culprit is a low loan/deposit ratio that has been as low as 67% in the past five years, but has grown to 73% in the second quarter. Although the loan portfolio has not grown much. The increase in loan/deposit ratio was mostly attributed to sparse loan growth combined with deposit decline. Commercial Real Estate ("CRE") loans grew from 29% of total loans in 2013 to 38% in the second quarter.

So the bank is growing CRE loans to improve its yield on earning assets.

I discerned all of this from public information either in their SEC (Annual Report) or FFIEC (Call Report) filings.

But there’s more. In their Annual Report, the Company disclosed its CRE underwriting criteria as follows:

Commercial Real Estate
‘Commercial real estate lending made up 41% of the loan portfolio at year-end 2016. Commercial real estate lending underwriting criteria is documented in the lending policy and includes loans secured by office buildings, retail stores, warehouses, hotels, and other commercial properties. Underwriting criteria and procedures for commercial real estate loans include:

● Procurement of Federal income tax returns and financial statements for the past three years and related supplemental information deemed relevant;

● Detailed financial and credit analysis is performed and presented to various committees;

● Cash investment from the applicant in an amount equal to 20% of cost (loan to value ratio not to exceed 80%). Additional collateral may be taken in lieu of a full 20% investment in limited circumstances;

● Cash flows from the project financed and global cash flow of the principals and their entities must produce a minimum debt coverage ratio of 1.25:1;

● For non-profits, including churches, a 1.0:1 debt coverage minimum ratio;

● Past experience of the customer with the bank;

● Experience of the investor in commercial real estate;

● Tangible net worth analysis;

● Interest rate shocks for variable rate loans;

● General and local commercial real estate conditions;

● Alternative uses of the security in the event of a default;

● Thorough analysis of appraisals;

● References and resumes are procured for background knowledge of the principals/guarantors;

● Credit enhancements are utilized when necessary and/or desirable such as assignments of life insurance and the use of guarantors and firm take-out commitments;

● Frequent financial reporting is required for income generating real estate such as: rent rolls, tenant listings, average daily rates and occupancy rates for hotels;

● Commercial real estate loans are made with amortization terms generally not to exceed 20 years; and

● For lending arrangements determined to be more complex, loan agreements with financial and collateral representations and warranties are employed to ensure the ongoing viability of the borrower.’

So the bank has rigorous underwriting criteria for CRE loans done within policy. I have found this typical for banks emerging from credit problems.

Growing the portfolio fast enough to improve near term performance, and being mindful that they don’t want to revisit their credit problems of the past, indicates that this Company may be willing to sacrifice price for quality, therefore making them aggressive pricers in the market to get deals done. What I term the “it’s better than we’re getting in the investment portfolio” philosophy.

Competing banks should take note, and position themselves to win business accordingly, either on speed, service, structure, or deeper relationships with borrowers.

All of this information and more are publicly available about your competitors, even if they are not SEC filers. All must be Call Report filers.

Could I be wrong? Of course. But the combination of publicly disclosed information on a competitor, plus your bankers’ knowledge of how they act in the marketplace, can give you a competitive advantage over them should you invest the time into the research, and respond accordingly.

Know your enemy.

~ Jeff

Wednesday, October 11, 2017

Bank Lending: Shifting Emphasis from CRE to C&I

Although bank commercial real estate (CRE) lending has been more profitable than commercial and industrial (C&I or Business Loans), both now AND immediately after the financial crisis, regulatory CRE guidelines are causing financial institutions to consider a switch of emphasis to Business Lending.

Here are my thoughts on how to do so.

Your thoughts?

~ Jeff

Sunday, October 01, 2017

Bank Products: Blah Blah Blah

At a recent banking conference, Ray Davis of Umpqua Bank took center stage to tell of his journey from a small, Oregon community bank to a regional powerhouse. He mentioned products only briefly. And product was not part of the bank's success. I thought, Why?

Stuck on the topic, I jotted down the products that I remembered from when I landed my first banking job in 1985 while Davis spoke. I never claimed to have a great attention span. And I used those hotel notepads. Someone has to use them. Here was my list:

Products Circa 1985
Mortgage loan
Car loan
Personal loan
Home equity loan (?)
Business loan and line of credit
Commercial mortgage loan
Construction Loan

Checking account (business and personal)
Savings account (business and personal)
Certificate of deposit (business and personal)

Merchant services (?)

Then I wrote down how that list has changed.

New Products: Circa Today
Money market accounts (although could be classified as hyped savings)
Sweep accounts/cash management

The hedging and options might be categorized as features of business loans, versus products in and of themselves. But let's not quibble over insignificance.

What do you notice about the above lists?

What I notice is there is little difference in the products of today and the products when MacGyver developed improvised explosive devices with his shoes.

Bank products, at their base, have not changed. So, perhaps, instead of developing complexity in our product set, we should look to develop simplicity. Wouldn't we all benefit from more simplicity?

What sparked this post was a recent article in written by Mark Gibson and Kevin Halsey of Capital Performance Group in Washington DC. It was a precursor to a presentation they gave at the ABA Marketing Conference in New Orleans titled "How to Build Remarkable Products". One of their slides from that presentation is below.

This slide, and another I was privileged to see, dubbed as one of the most popular by the authors, speaks nothing of product. In fact, I will confess to you that when I hear bankers talk about products, product management, product design, etc., I have no idea what they are talking about. Bank products have been the same since I've been in banking.

Yes, there are different features to products, such as high interest rates for checking account customers that engage in specific behaviors, or option-based CD's as developed by Neil Stanley of The CorePoint. Still a checking account. And still a CD.

Distribution is different. Back to my notepad, I penned the 1985 distro points as person-person, in-branch, telephone, and ATM. Today we could add online, mobile, and social (for customer service). As a list, not very impressive.

However, in terms of customer utilization, distribution has been massively disrupted.

Sure, bankers can tick off all of the new features added to that standard product list, as mentioned above. But new products? Hardly.

So why not simplify? Like Southwest did when they went with one airplane model. Why not have a personal checking account, that is non-interest bearing up to a certain average balance, which could differ based on customer utilization that could easily by solved by AI, and bears interest above that level. Same with business checking, now that we can pay interest on those accounts. 

Savings accounts could easily have sub-accounts. Like the proverbial envelopes in the night stand drawer that tucks money away for certain things such as Emergency, Vacation, and Holiday. I believe PNC did this with the Virtual Wallet account. To me, Virtual Wallet is nothing more than a practically thought out savings account. 

I recently commented to a bank's strategy team that I thought the days when bankers could rely on sleepy money are coming to an end. The 13-month CD special trick, where the CD reprices at the lower 12-month CD when it matures, is over. A business model that relies on the stupidity of your customers will die. Imagine a customer getting a text from a financial management app that says "your bank is screwing you". It may not say that, but it would say that a CD is maturing and the rate it will role into is below market.

No, we can no longer rely on sleepy money. But perhaps we should focus Marketing on touching the customer in every phase of the buying journey instead of concocting schemes to complicate products, tinker with pricing, and rely on Rip Van Winkle customers. This is what I believe my friends at Capital Performance Group were emphasizing.

If I were a marketer, I would focus on simplicity in product design. And sophistication in the customer acquisition or relationship expansion funnel.

But I'm not a marketer. 

~ Jeff

Sunday, September 17, 2017

An Open Letter Calling For The Establishment Of The Consumer Beverage Protection Bureau (CBPB)

I'm fed up and not going to take it anymore! So I am proposing to my state's Senators to submit legislation to form the Consumer Beverage Protection Bureau (CBPB).

Dear Senators Casey and Toomey:

I am a citizen of your fine state and am writing to strongly encourage you to submit legislation to establish a Consumer Beverage Protection Bureau. The establishment will serve to protect the citizens of our fair land from the aggressive and deceptive practices of the beer industry.

For too long, the beer industry has been praying on our citizens. Luring us into beverage centers with cardboard cutouts of attractive young women or the likes of Kevin Harvick and Dale Earnhardt Jr. Such marketing tactics have had a disparate impact on those that fancy attractive women and NASCAR fans. Note that I made no reference to the identity of those clearly in the beer industry's cross hairs as I now have adopted political correctness in my protest letters. And don't get me started on Busch beer clearly targeting plaid shirt-wearing mountain folk. smh

Once the beverage centers lure you in, past the attractive woman or Earnhardt Jr. cutout, what do they feature? Expensive, high margin craft beer. Not the more reasonably priced Busch. We are bombarded with images and smooth marketing schemes of Troegs, Harpoon, and Flying Dog. The deception gets worse. Anheuser-Busch fools us into believing craft beers such as Elysian, Breckinridge, and Goose Island are brewed in small batches by people with long, scraggly beards. Not so. They are owned by Anheuser-Busch, who is in turn owned by beer conglomerate InBev. From Belgium! 

Gentleman, this is our new Battle of the Bulge!

Here is what I propose. Form the CBPB, that is within the Federal Alcohol Administration, yet is not accountable to the FAA or the President of the United States. In addition to investigating such deceptive practices, the CBPB should have examination authority over large beverage wholesalers to ensure that their practices are "fair", whatever definition they drum up for that term.

Give the CBPB the power to:

- Rescind or reform contracts;
- Demand monetary refunds;
- Disgorgement of violators' assets;
- Return of property;
- Restitution;
- Compensation for unjust enrichment;
- Payment of damages or other monetary relief;
- Public shaming of a beer distributor's violation;
- Limits on the activities or functions of a person;
- Civil monetary penalties

In this way, the CBPB can stop the practice of beer distributors from upselling a Hoppy Ending Pale Ale to the college student that just wants a PBR. The added compliance costs may put the small beverage distributor out of business in favor of their larger brethren, limit beer drinker choices, and raise prices. But let's face it, those small operators are not likely to support lifer politications anyway, and who wants that?

No, creating a government bureaucracy accountable to nobody creates jobs, and is a great gig for smart people like Jeopardy winners that can solve complex problems in the form of a question, such as "What is Fair?"

This madness must end! Support the CBPB!

Sincerely, your faithful servant that believes the government can solve what "ales" us...

~ Jeff Marsico