Editor’s Note: Amazing Outside Directors are people who invest in the success of the community banking industry by contributing skills, insights and analysis to bank governance, all while helping financial institutions develop new relationships. BankBeat thanks program sponsor Eide Bailly for helping us tell the stories of these amazing individuals.
When asked to distill the farm crisis down to a single image, attorney Howard Hagen steps back inside the Davis County courthouse in Bloomfield, Iowa, circa September 1983. “There were about 100 people and at least 15 to 20 highway patrolmen there,” recounted Hagen, who was Assistant Attorney General and General Counsel for the Iowa Division of Banking at that time. The IDB had just closed Exchange Bank, a private bank that took non-FDIC-insured deposits. It had been a drought year and many of the bank’s “handshake loans” had gone south. State Banking Supervisor Thomas Huston and his team, including Hagen, had arranged a public meeting within 24 hours of the closing. There were people at the meeting who’d banked at Exchange for years, Hagen said. Many had lost their life savings. “They were clearly upset,” he said. “You don’t forget those images, especially the people who had retired.”
Hagen, now 70, is chair of the banking group at Dickinson Law in Des Moines. And, he is one of the preeminent voices on banking issues in a state where “all of its wealth comes out of the ground.” Hagen is also a public director at Shazam, the Johnston, Iowa-based payments processor. It is in that capacity that Hagen is being recognized by BankBeat as a 2019 Amazing Outside Director. Most importantly, perhaps, Hagen is a banking attorney who understands that a banker’s work is centered on the success of customers.
After the ag crisis waned, Hagen began to travel around Iowa speaking on issues that were putting Iowa banks at risk, including an over-reliance on asset-based lending and the need to have cash flow in order to service loans. Hagen not only conveyed to bankers what the current situation was, but he started to look at what the future of banking might hold. Industry consolidation, at least in Iowa, he said, is rooted in what happened back in the 1980s.
“Howard has a unique perspective on the industry,” said Paul Waltz, who became president and CEO of Shazam about the time Hagen joined its board. Waltz said he’s been impressed by Hagen’s ability to see the industry’s role in the economy from top to bottom. “He’s one of those guys who can bridge the industry and the community financial institutions all the way down to the consumer.”
Progressive and proactive
Hagen was drawn to economics as a young man growing up in the Amana Colonies, a collection of seven villages set on 26,000 acres in east-central Iowa that was founded by German-speaking European settlers fleeing religious persecution. His mother was Amanian; his father grew up adjacent to the Colonies. In 1932, the Colonies transitioned from a communal structure to a corporation, with all members receiving shares. Amanians had always been forward-thinking, education-focused people, Hagen said.
After earning his bachelor’s degree from Grinnell College, where Hagen said he received a solid introduction to Keynesian economic theory, he headed to the University of Chicago School of Law on scholarship. The University of Chicago School of Law, arguably the first to marry the study of law with economic theory, was largely influenced by Milton Friedman’s free-market monetarism. “I got to see the other side of the ledger at Chicago,” Hagen explained. Throughout his education, Hagen’s interest in economic matters deepened.
Hagen’s first job out of law school brought him inside the office of the Iowa Attorney General — who was, and still is, Tom Miller. But things began to heat up over at the IDB and Hagen got involved with the closing of at least a half dozen Iowa banks. As he studied the forces that led to the farm crisis and began speaking around the state, his star rose, catching the attention of folks at Dickinson Law.
Hagen also has an interest in technology, which fits his governance role at Shazam. “They’re forward-thinking, they listen, and their directors are actually their users,” Hagen said.
“Howard is the most active member of our board,” Waltz said. Hagen sends fellow directors and team members industry literature and articles of interest. “He’s very well read; that’s how he looks ahead and sees things that are going to be changing,” Waltz added.
A focus of change impacting Shazam is in the payments arena, which is increasingly dominated by the biggest players. With technology, Hagen said, “scale is advantageous,” yet he also believes Shazam is doing exactly what it should be doing to get its voice heard in the payments arena — fighting for equal access. “They provide a voice for these smaller community banks on a collective basis,” Hagen said.
Hagen’s role, he said, is to share his insights and to make others understand why the preservation of equal access to technology, regardless of size, is so important. “The banks are intermediaries between all these potential services that fill the financial needs of customers,” he said. With so many app-based services vying for consumer attention, he said there’s a danger of facing a Tower of Babel scenario where there are too many languages to facilitate effective processing. “We’ve got to be able to find a central voice for the consumer.”
Charged with leading a member-owned network under competitive pressure from the industry’s largest players, Waltz said he appreciates Hagen’s perspectives, especially on the issue of antitrust. “Howard reminds us that all litigation is not solely about the outcome,” Waltz said. “Sometimes litigation is a way to promote issues.”
While Shazam has a general counsel, Hagen provides outside counsel to the company; he also has been general counsel to the Community Bankers of Iowa for more than two decades.
Hagen is also chair of the board of directors for the Amana Society and Amana Farms, the latter being a complex operation that includes 12,000 acres of cropland, 7,000 acres of timber and another 4,000 acres of pastureland. Hagen inherited shares in the Amana corporation and considers his board leadership to include a caretaking component — one of protecting the franchise.
“Howard talks a lot about franchise value, how if you have the public behind you, you can strengthen the message on trust and understanding and make it local,” Waltz said.
Hagen explained that the Amana Colonies “was a group of individuals who got together to reach a goal.” There are parallels to be drawn between what the Amanians created and the collective that led to the creation of Shazam. It’s exactly that unique perspective that Waltz values in Hagen.