Ira Stepanian will always be ‘Big Ira’

BankBoston president practiced capitalism with a conscience

WHEN IRA STEPANIAN, then president of BankBoston, asked me to join him as executive vice president for external affairs, I told him that I didn’t know much about banking. “That’s OK,” he said. “I don’t know much about external affairs or community relations or how to communicate with employees and regulators and the press. We’ll learn together and teach each other.” He was always “Big Ira,” and to me he will remain one of the gentle giants of banking and a rare person of enormous integrity. Three quick stories frame my recollection and memory.

Shortly after I joined BankBoston, after serving as commissioner of the Massachusetts Department of Revenue under Gov. Mike Dukakis, Ira casually mentioned that he was about to identify several billion dollars of loans to less developed countries as non-performing. I suggested that he hold a press conference and explain the significance of this action, which was without precedent and had the potential to roil markets from Wall Street to Buenos Aires. Without hesitation, he took the podium, disclosed the news, accepted the responsibility and never looked back. The next day’s New York Times article sent shockwaves through banking circles and resulted in a wave of belated restated earnings from much larger banks. Ira was the rock; unflappable, smart, ethical, honest to the core.

In the depths of the recession that hit the region back in 1990, when more than 100 banks had failed and those who survived were unwilling to extend credit, we decided to make a bold commitment to lend more than a billion dollars to small and medium businesses, to stimulate economic growth and job creation. Then-Secretary of Commerce Ron Brown joined us for the announcement, which was a game-changer for the industry and the region.

Boston banks had been nailed by the Federal Reserve Bank for redlining. The chairman of the House Banking Committee, Henry B. Gonzalez, was so incensed that he decided to hold an unprecedented regional hearing in Boston. He invited the CEOs of all the major banks to testify. When I asked Ira what he wanted to do, his reply was instinctive — of course he would testify, even if none of his colleagues would answer the call; it was simply the right thing to do. When he asked me what he should say, I told him that we didn’t have a great story to tell. Yes, we had in place safeguards against redlining and outright discrimination, but we were simply complying with the Community Reinvestment Act (CRA), not embracing the spirit of the law or truly meeting the needs of the inner city and low and moderate income neighborhoods. “Then what would you propose we do?” he asked, totally open to a new approach. I suggested: “Why not view Roxbury the way we do emerging markets abroad, and why don’t we hire ingenious talent and allow them to develop customized products and services to meet the unique needs of the inner city?”

Ira didn’t blink an eye. We drafted a new strategy that approached CRA not as a legal obligation but as a business opportunity and a moral obligation. Ira didn’t change a word. At the Fed, he announced that he would create a bank-within-bank, called First Community Bank, would capitalize it with millions of dollars, empower it to design proprietary products and services, and be treated just like any other major corporate venture, anticipated over time to meet expected rates of return. Delighted, Chairman Gonzalez applauded Ira for his leadership.

Within months, Gail Snowden, a seasoned veteran of BankBoston, was named president of First Community Bank, and shortly thereafter a new branch was opened in Grove Hall, where Gail had grown up — the first new Boston inner city branch in more than two decades. Soon, more than 30 branches were added and a new inner city investment bank — “Goldman Sachs for the ‘hood,” as its president called it — was created. First Community Bank was the first of its kind and became a national model, copied by hundreds of other banks across the country. Within five years, it was not only meeting the needs of tens of thousands of previously unbanked and underserved customers, it was earning our corporate hurdle rate and making money — doing good and doing well, simultaneously.

Meet the Author

Ira Jackson

Vice Provost, University of Massachusetts Boston
By the time BankBoston received the Ron Brown Award for Corporate Social Responsibility by the Conference Board at the White House, Ira had been ousted as chairman and CEO, largely for failing to move quickly enough to merge and acquire other banks. But the honor was really meant for him. When it came to making the tough calls and to accepting responsibility, Ira Stepanian called them like he saw them and wrote the book on doing the right thing. He practiced an old-fashioned brand of capitalism — capitalism with a conscience. He was a banker with both a hard head and a soft heart. He was quiet but he was strong and his example is worth remembering and emulating at a time when morals and ethics and responsible leadership are in such short supply, not just in business but in government.

Ira Jackson, a former Massachusetts commissioner of revenue, was executive vice president of BankBoston from 1987 to 1999. He is currently vice provost at the University of Massachusetts Boston.