2010 General Membership Meeting Highlights

At ICI’s 52nd Annual General Membership Meeting (GMM) in Washington, DC, the industry explored issues of critical importance. Coverage of specific sessions at the GMM and other events is below.

May 5, 2010

GMM Chairman Fetting Welcomes Attendees to ICI’s 2010 General Membership Meeting

Legg Mason’s Chairman and CEO Mark Fetting focuses on the need to continue serving investors well and how mutual funds can lead the way forward. 
Speech, Video

ICI President’s Address at GMM 2010: “Doing What We Said We’d Do”

ICI President Paul Schott Stevens discusses funds’ role as fiduciaries to buyers and sellers, as well as the Institute’s priorities and policy agenda in today’s financial landscape. 
Speech, Video

Policy Forum 
Corzine and Lott Survey Political Landscape

Anti-incumbent sentiment will take a heavy toll on the Democratic party in the fall 2010 elections, two former senators agreed at the Sixth Annual Policy Forum, part of ICI’s 52nd General Membership Meeting (GMM) in Washington, DC.

Trent Lott, a Mississippi Republican and former Senate Majority Leader, predicted Republicans would gain between 30 to 40 seats in the U.S. House of Representatives and five to six seats in the U.S. Senate. “When Republicans are passionate and fired up, it makes a huge difference” said Lott, now a founding partner at the Breaux Lott Leadership Group.

“I suspect that the party that I have stood with will have real difficulty—not only because of the context of economic backdrop, but also because there is also a huge enthusiasm gap,” said Jon Corzine, former U.S. Senator and Democratic Governor from New Jersey. “There is a lot of unease and anger in the population, and the enthusiasm gap is real.” Corzine is now Chairman and CEO of MF Global, an international brokerage firm.

In prepared remarks and discussion, Corzine and Lott covered a wide range of topics at the Forum, held this year for the first time as part of ICI’s GMM. The two men addressed immigration, legislative earmarks in the federal budget, and financial services regulatory reform.

On the latter topic, now moving through the U.S. Congress, Corzine called for action. “Take what’s on the table and run,” he said. “There are more good things in this bill than there are bad.”

For his part, Senator Lott aired his disagreement with aspects of the bill, notably proposals on derivatives and the creation of a Consumer Financial Protection Agency. But he suggested some issues would be resolved in the legislative process.

“I see some areas where a bipartisan agreement could come together,” he said. “[Congress] can still modulate this bill and take off some of the rough edges."

May 6, 2010

The Way Forward 
Panelists Weigh Risks and Opportunities

In a wide-ranging conversation at ICI’s GMM, a leadership panel discussed the way forward for the fund industry and investors. Among the topics covered were key lessons of the recent financial crisis, the stable net asset value (NAV) for money market funds, and creating a fiduciary standard for brokers. 

Moderator F. William McNabb, Chairman, President, and CEO, Vanguard asked panelists—Greg Johnson, President and CEO of Franklin Resources, Inc.; Bridget A. Macaskill, President and CEO, First Eagle Investment Management; and John Walters, President and COO, Hartford Life—to look ahead at regulatory reform efforts and trends. The crisis, said the panelists, revealed a need for the fund industry to re-think what “downside” looks like, question whether funds are truly diversified, and realize that measuring risk is different than managing risk.

All the panelists agreed that current legislative efforts toward regulatory reform of the financial system must not result in unintended consequences for the fund industry. Tighter regulation in the areas of derivatives and portfolio trading are necessary, said Walters, but regulations should be carefully constructed to avoid difficulties when it comes to regulatory interpretation.

Johnson mentioned that in the larger financial reform debate, the stable net asset value (NAV) had been questioned. McNabb, Johnson, and Walters stressed that the stable NAV must be retained. A stable NAV provides investors with the stability they crave and funds short-term lending for corporate America.

Another area fraught with risk of unintended consequences is the imposition of a fiduciary standard for brokers. Given the differences in standards of suitability and fiduciary responsibility, any changes in this area should be done slowly and methodically, the panelists agreed.

Regarding future trends for the industry, target retirement date funds will continue to grow, the panelists said. The rise of social media was also discussed, with panelists recognizing the industry’s need to track and take advantage of developments in this area. 
Video

The Washington Report 
Panelists Discuss the Implications of Federal Legislation and Reform Initiatives

In a panel discussion moderated by ICI’s General Counsel Karrie McMillan, panelists James F. Febeo Jr., Vice President of Government Relations, Fidelity, and Richard Y. Roberts, Principal, Roberts, Raheb & Gradler, LLC discussed upcoming and past federal legislation, along with other related matters.

A congressional derivatives bill currently in the works will prove to be “very troublesome for many industries and is under attack from all sides,” according to Febeo. Fellow panelist Roberts similarly disapproved of the bill, stating that “the language needs to be clearer, and the bill should undergo closer scrutiny.”

In reference to the numerous delays in the release of the President’s Working Group (PWG) report on money market funds, Febeo said that because of recent reforms announced by the SEC to Rule 2a-7, the PWG report may no longer be essential in some ways. Plus, he noted, the current climate of debate surrounding financial regulatory reform makes it unlikely that the report will be released soon, lest it “muddy the waters.”

Regarding the SEC, McMillan noted that Chairman Mary Schapiro has her hands full with new issues arising, and that examiners seem better prepared than before. Roberts praised the Chairman’s work as having changed the tone and morale at the SEC with respect to enforcement in a much needed way.

Finally, the discussion turned to reform efforts for credit rating agencies. Roberts opined that funds rely on ratings less than before. Therefore, any new requirements might not have the same impact today as they would have had a few years ago. 

Market Insights in the Current World Economy 

Although risks have not changed much over the last year, there are many promising economic signs of recovery, leading market strategists told the 52nd Annual General Membership Meeting.

Panelists, however, voiced concern about the global economic stage—particularly in China and southern Europe. Samantha Ho, Investment Director at Invesco Hong Kong Ltd., said that there “is no asset bubble in China—yet.” Leverage is still very low in China and people can still afford mortgages, she explained, but China will need to “refocus toward investment and domestic consumption” to sustain its growth.

“Banks get into trouble when loan growth is two to three times [growth in gross domestic product],” warned Brian C. Rogers, Chairman of the Board and CIO at T. Rowe Price Group. “This disconnect between GDP and loan growth is a concern for China.”

Panelists also expressed worries about the financial crisis in Greece and its implications for other countries in the eurozone. “Boston no longer wants to be known as ‘the Athens of America,’” joked Daniel J. Fuss, Vice Chairman of Loomis, Sayles & Company. “Will the Greece contagion spill?” added Rogers.

Rogers told attendees that although markets are on a path to strong economic recovery, it’s a “long and winding road.” As for market predictions, he’s positive on equity markets and particular sectors. “The wind is at the back of the financial sector.…now we have to rely on companies to deliver good earnings,” he said.

Fuss voiced concern over the investment implications of the shift in population distribution in the advanced social democracies of the world. Historically, the age distribution of most countries has resembled a pyramid, with large numbers of young people supporting a smaller cohort of the elderly. Now, he warned, “the population pyramid is becoming an oval.”

Topline revenue growth is a challenge, the panelists said. But Rogers noted that corporations and consumers are becoming more liquid and that the housing market is settling. Fuss added that the “really encouraging thing with the U.S. firms is their excitement about Asian markets and consumption.”

To address sending a message of confidence to investors, Ho reminded that people tend to be either bullish or bearish when instead they need to take a good look at the fundamentals of risk. Rogers pointed out that investors can have confidence in the protections of the industry and that “we invest along with you.” Fuss emphasized his strong belief in dollar-cost averaging.

William F. “Ted” Truscott, President, U.S. Asset Management, and CIO of Ameriprise Financial, moderated the panel. 
Video

Leadership Roundtable 
Panelists Discuss Challenges of Technology for Global Businesses

Standardization and a willingness to travel are critical components of managing operations and technology on a global scale, said panelists at an opening session of ICI’s Operations and Technology Conference. Moderated by Stuart Bowers, Partner at Finix Business Strategies, the panel covered globalization challenges, management of information technology, and the implications of evolving profiles for customers and products.

“We as a company try to standardize to the extent that we can all processes and businesses on the same systems,” said Jennifer Johnson Bolt, EVP and Chief Operating Officer of Franklin Resources, Inc. Bolt, whose firm has offices in 30 countries, added that travel is another key element of succeeding globally. “When you see people face to face, there’s no question you’re able to communicate to them better down the road.”

John Phelan, President of American Funds Service Company and Director of Capital Research and Management Company, agreed with Bolt on the fundamental importance of standardization across all technology. “The challenge is the implementation of those standards on a global basis,” he said. China, he noted, posed particular implementation challenges, given its restrictions on disclosure and use of the Internet.

For Robert Baillargeon, Executive Vice President and Chief Risk Officer at State Street Global Markets, a particular challenge for operations came in the form of new products. “Over the last several years, there’s been a growth in doing global ETFs, which have much, much more complex servicing requirements,” he said. He also called active ETFs “incredibly complex,” given the information demands brought about by portfolios that may change considerably over the course of the day.

On managing information technology, Bolt mentioned her enthusiasm for software-as-a-service, also known “cloud computing.” While noting the practical difficulty of moving older, proprietary systems into the cloud, she did recommend the software-as-a-service approach for applications such as customer relationship management or expense reporting. 

Game Change Author John Heilemann Draws Portraits of Candidates in ‘08 Presidential Race 

In a keynote luncheon speech peppered with keen observations, author John Heilemann discussed his book, Game Change, in which he sought to portray the candidates in the 2008 presidential race as “fully fleshed-out people” and to capture how their strengths and weaknesses affected the election.

“At the core of Game Change is one relationship, and that is the relationship between Barack Obama and Hillary Clinton,” Heilemann explained. Heilemann has known Obama personally since the president’s days as a Harvard Law School student and said he was able to draw on that relationship in writing the book. Mark Halperin was the book’s co-author.

Although Obama did not serve for long in the U.S. Senate and “did not particularly like the Senate,” he liked then-Senator Hillary Clinton and “they became relatively close,” Heilemann recounted. Prior to the ’08 presidential race, Hillary and Bill Clinton had been strong supporters of Obama, Heilemann noted. Eventually, against the counsel of some of his advisers, Obama selected Clinton as his Secretary of State, urging her to accept because he believed she would help to determine the success of his administration.

Heilemann said that interestingly, “behind Hillary’s back,” then-Senate Minority Leader Harry Reid (D-NV), Sen. Chuck Schumer (D-NY), and others had joined in a “conspiracy of whispers” to encourage Obama to run for president. However, when Hillary launched her campaign, she was convinced that she had the Democratic party behind her,” Heilemann said.

Turning to the McCain-Palin ticket, Heilemann said that only a few days before the Republican convention, John McCain’s staff picked Sarah Palin out of a clip on YouTube. McCain “literally discovered” Palin that week and there was “no time for vetting.” Heilemann concluded: “The process by which Sarah Palin got on the Republican ticket did not serve her well, and it did not serve John McCain well.”

John Edwards, then-Senator from South Carolina, brought to the fore voters’ concerns with the “gap between public image and private reality” of political candidates, Heilemann said. In the case of Edwards, this became a chasm.

Heilemann suggested that, in the campaign, Obama’s “allergy to artifice” translated to his efforts to “have a serious conversation with voters,” an approach that was not effective. The turning point came in November 2007 when Obama “learned how to be a better candidate and became an outstanding candidate.” Heilemann also observed that Obama as president has not yet had to make a “midcourse correction” in his strategy. The president’s tendency to stay the course has served him well on several occasions during the campaign and, notably, in the debate over healthcare legislation, according to Heilemann.

Distribution Changes and Challenges 
GMM Panelists Emphasize Importance of Investment Solutions

Financial advisers are increasingly focused on delivering more comprehensive investment solutions for clients’ needs, said participants in a panel on fund distribution at ICI’s GMM.

“Advisers aren’t looking for products,” said Andy Saperstein, Managing Director and Head of Wealth Management, at Morgan Stanley Smith Barney, which has 18,000 advisers in the United States. “They’re looking for a storyline, they’re looking for solutions. The way I would describe it is that it’s not what you’re investing in. It’s what you’re investing for.”

Dan Timm, General Partner at Edward Jones, agreed. “We continue to evolve toward a solution-based and advice sort of relationship,” he said, adding that “we want to stop selling drill bits and focus on what kind of holes our investors want.”

The focus on relationship-building and delivering solutions has an impact on the role of the investment adviser, suggested Peter Cieszko, President of Fidelity Investments Institutional Services Company. “We have found in our business that investment advisers are increasingly willing to outsource the asset allocation decision,” he said.

Technology also has an impact, and all panelists acknowledged the promise and potential that social media services such as Twitter, Facebook, and LinkedIn have for financial advisers. “It will change the way we do business,” said Saperstein.

The panel—moderated by Guy Moszkowski, Managing Director, US Equity Research, and Head of US Financial Services Research at Bank of America Merrill Lynch—addressed several questions posed by the audience, including one on 12b-1 fees. “12b-1s pay for servicing that has to be done,” said Mark Casady, Chairman and CEO at LPL Financial. “We think they’re mislabeled—they should be called ‘servicing fees.’” 
Video

The CCO’s Relationship with Directors 
Cooperation, Collaboration, and Communication

At a joint session of the Directors Workshop and Compliance Programs Conference, a distinguished panel discussed the importance of cooperation, collaboration, and communication among a fund’s chief compliance officer (CCO), management, and the board of directors.

The compliance function within any fund is like a marriage, said Paulita Pike, Esq., Partner at K&L Gates. A fund’s management, the CCO, and the Board must all rely upon and trust each other. As with any relationship that is important, maintained Anita M. Zagrodnik, Chief Compliance Officer of Ariel Investments, you must establish trust by continually investing in and establishing it through communication. A team culture, the panelists agreed, was crucial. Susan C. Mosher, President of Compliance Services Foreside Fund Services, LLC, indicated that another key to a successful relationship with the CCO is that expectations are clear.

As established in the recent IDC task force paper, Board Oversight of Compliance, a clear tone of compliance at the top is also crucial. It is now recognized that good compliance means good business, said Ashok Bakhru, Independent Chair of Goldman Sachs Funds, who also chaired the paper’s task force. “Good compliance means less policing and more enlightening,” said Virginia Stringer, Independent Chair, First American Funds.

The panel also talked about whether it is better to have separate CCOs for the adviser and the board, or if one CCO is sufficient. As with a conversation about compensation for CCOs, the panel agreed that the best arrangements varied from fund to fund. Finally, the panel discussed the rising tension over CCOs being asked to fulfill risk oversight responsibilities when their correct responsibility is to oversee compliance risk. Panelists reiterated the importance of keeping the CCO focused on the compliance function only. When CCOs are asked to take on roles outside of compliance, the panelists said, it leads to problems. 

May 7, 2010

SEC’s Buddy Donohue Speaks About Muni Market, Array of Mutual Fund Issues 

Andrew “Buddy” Donohue, Director of the Division of Investment Management at the SEC, called for improvements to municipal market transparency and discussed critical issues for the mutual fund industry in a May 7 address to ICI’s General Membership Meeting. He delivered a speech prepared for SEC Chairman Mary Schapiro, who was unable to come due to her duties related to the market plunge of May 6.

Following his prepared remarks, Donohue indicated that the Commission may be waiting for the President’s Working Group on Financial Markets to release its long-awaited report on money market funds prior to proceeding on further regulations: “We think [the report] will help initiate dialogue around some of the issues.” In January, when the SEC adopted amendments to Rule 2a-7 governing money funds, Schapiro said staff had begun to consider several additional changes for a potential second round of reforms , including considering moving from the standard of a stable $1 NAV to a floating NAV for money market funds. The industry strongly opposes such a change, arguing that it would eliminate money market funds.

Donohue also addressed Rule 12b-1, expressing the hope that the SEC will issue a rule proposal on fund fees under that rule very soon. “We have done a fair amount of work on 12b-1,” Donohue said. “We want to make sure we get it right.” In recent months, Donohue has spoken in a variety of forums about an approach that would treat 12b-1 fees as a deferred sales charge and limit the period of time over which an investor could be charged such fees.

Donohue also addressed the staff’s review of derivatives use by ETFs and mutual funds. Recently, the staff suspended processing exemptive applications by exchange-traded funds that use derivatives, pending completion of this review. While this may create an unlevel playing field for ETFs and mutual funds using the same strategies, Donohue said, the staff does not want to be “in this position for a long time.” The derivatives review is focused on leverage, diversification, and concentration issues. “We could use some real help from the industry in terms of getting it right,” he said.

The investment management staff at the SEC is working on a proposal to revise mutual fund shareholder reports in a fashion similar to the summary prospectus. Calling this is an important issue, Donohue said the staff has received valuable ideas and input from the industry. “We hope to move this year,” he said.

Donohue declined to comment on target date fund regulation that may follow the joint investor alert on TDFs issued May 6 by the Commission and the Department of Labor.

Discussing the shortcomings of current disclosure in the $2.8 trillion municipal market, Donohue declared that it is “surprising that this market is subject to such limited regulatory oversight.” In 2008, there were 136 defaults, totaling $7.5 billion dollars, by state and municipal issuers, including the prominent Jefferson County, Alabama debacle. There is, in general, a need for more clarity about issuer funding, less reliance on credit ratings, and more independent analysis, Donohue said. Municipal issuers do not have to file audited financial statements until six months or more after the close of their fiscal year, and these financials are not always in accordance with generally accepted accounting principles.

Investors deserve “disclosure and transparency that produces relevant, timely, and accurate information,” Donohue said. Highlighting limits to the SEC’s regulatory authority, particularly over state and municipal issuers, he stopped short of calling for legislation to further empower the agency.

Despite these limits, the SEC has taken steps and is acting to expand required disclosures by municipal dealers. The Commission is also considering mandating scenario testing by municipal issuers and an array of other possible actions. Donohue called for greater regulation of the conduct of municipal financial advisers—something addressed in pending legislation.

Donohue also announced that Commissioner Elisse Walter will lead an SEC outreach through field hearings in various cities to take in “a wide range of ideas from people who have experienced the municipal market through many different perspectives.” 
Video

Retirement Experts Discuss the Way Forward for Retirement Saving 

The Department of Labor’s goal for retirement policy is to give Americans more choices, backed by the tools they need to make those choices well, Phyllis Borzi, Assistant Secretary of Labor, Employee Benefits Security Administration, told ICI’s GMM as she kicked off a vigorous panel discussion on retirement issues.

Borzi indicated her hope that the Department’s revised regulation on investment advice will be finished in the coming months. The Obama Administration recalled the regulation approved by the Bush Administration and sought new comment on a reproposal. Borzi noted that the reproposal drew a high volume of comments.

DOL has also closed the comment period on its request for information on lifetime income options for participants and beneficiaries in retirement plans. Borzi noted that her office received more than 700 comments, including many from members of the public challenging the initiative as an attempt to convert Americans’ retirement savings into assets to fund the government. She dismissed that notion, saying that the Department was instead trying to find out why plan sponsors weren’t offering lifetime income stream options and why so many people take lump sum distributions instead of an income stream, among other things.

Borzi also discussed the guidance on target date funds issued on May 6 by DOL and the Securities and Exchange Commission. The document, aimed at investors, focused on risks, fees, and basic background information. The investor guidance will be followed, Borzi said, by a checklist of best practices for plan sponsors and fiduciaries to use in selecting target date funds for their plans, especially at small to medium-sized firms.

A general part of DOL’s agenda is to examine numerous regulations that were passed shortly after the Employee Retirement Income Security Act of 1974 (ERISA) to see what needs to be “refreshed.” Borzi said, “We know that going back and looking at long-standing regulation can cause angst among people who have been doing business a certain way, but we are obligated to protect participants and beneficiaries the best we can.”

A panel of retirement experts joined the discussion and addressed automatic enrollment, target date funds, and the distribution phase of retirement.

Automatic enrollment has increased the participation rate in 401(k)s drastically by using “inertia” as a way to encourage retirement saving, said Ralph Derbyshire, Senior Vice President and Deputy General Counsel, Fidelity Investments. He noted that many participants who are being automatically enrolled are being enrolled into target dates funds. The panelists agreed that increased participant knowledge about TDFs is essential.

Steve Utkus, Principal, The Vanguard Group, believes that there has been a shift from education only to education and advice. So the way advice is given—and who is giving that advice—is much more important today. He noted that prohibitions on service providers from giving advice has shifted some of the advice-giving to plan sponsors, who may potentially have conflicting interests, such as increasing their own fees. Anna Rappaport of Anna Rappaport Consulting cautioned that some people take advice from non-expert sources such as neighbors and friends. This presents a danger, especially since many people cannot afford fee-based advice.

Finally, the panelists emphasized the important need to raise financial literacy, especially for retirees planning to draw-down their assets. Rappaport noted that there are many useful resources out there, including the Social Security website, among other third-party neutral sources. Both Utkus and Derbyshire agreed that people undervalue lifetime income streams and that more financial literacy, particularly in this area, could help retirees make informed decisions. 
Video

Operations and Technology Panel Explores Benefits and Challenges of Social Media 

Use of social media such as Twitter and Facebook comes with considerable business and compliance challenges, said panelists at a breakout session of ICI’s Operations and Technology Conference. Steps can be taken, however, to overcome those challenges and to realize the benefits of communicating with customers and others via social networks.

Panelist Lawrence Stadulis, Partner-In-Charge at law firm Stradley Ronon Stevens & Young, LLP, set forth the most prominent regulatory difficulties. “The biggest one is probably recordkeeping,” he said, referring to the requirement that broker-dealers and other distributors keep all records related to their business. “In the case of social media, where you have interactive content, you’re required to keep all that stuff.”

Other challenges include running afoul of investor suitability rules, knowing what content needs to be filed, supervising all online communications, linking to necessary disclosures, and managing third-party communications, such as user comments.

“None of these are insurmountable,” said Stadulis. “They can be typically addressed through policies and procedures—and through supervision.”

Amy Dobra, Principal, Marketing at Vanguard, agreed that challenges were manageable through the adoption of policies. She also suggested that asset managers could take a gradual approach to adopting social media. “You can start out a little bit more conservative,” she said.

Another key to managing social communication is centralizing and formalizing approval processes as various business units explore using social media. “I was having to shut down Facebook pages that employees were creating on behalf of Northern Trust,” said Sheryl Larson, Northern Trust’s Vice President of Corporate Online Marketing. Larson said that Northern Trust has formed a steering committee with representation across the company to deal with such issues.

The panel, moderated by Pat Allen, Principal at Rock the Boat Marketing, agreed that overcoming the short-term challenges of social media would likely be worth the effort. “If you look at return on investment in social media, I would suggest that you take a long-term perspective,” said Vanguard’s Dobra. “Compare it to launching your websites in the mid-’90s.” 
Video

Business Ethics 
A Survival Guide for Intense Times

In a dynamic presentation for the Mutual Fund Compliance Programs Conference, Jack Marshall, President and Founder of ProEthics, Ltd., discussed business ethics and said that being ethical has to go beyond mere compliance. “If something is wrong, it’s wrong, whether there’s a rule against it or not,” he said. Audience members voted on the best ethical solutions to various dilemmas in this interactive session. The scenarios—humorous at times and based on real events—involved divulging information to clients, all-expense paid conferences, and job performance. After getting a count of votes, Marshall asked audience members to defend their votes, especially focusing on those who voted, “I have another answer.”

Marshall spoke of the impediments to ethical decision-making, including the “cognitive dissonance trap.” Generally, individuals look for consistency among their beliefs and use those beliefs as a guide for appropriate behavior. When experiencing cognitive dissonance, there is a disagreement between one’s belief and one’s behavior. To resolve the conflict, one allows a change of attitude in order to accommodate one’s behavior. Because this trap is so alluring, Marshall said, it is crucial that a strong ethical core starts from the top in any organization. The 10 most dangerous rationalizations, he said, include, “it’s compliant,” “it’s for a good cause,” “no harm, no foul,” and “I have no choice.” Marshall outlined “six pillars of character”: trustworthiness, respect, responsibility, fairness, caring, and citizenship. 

Finally, Marshall spoke of “ethics alarms,” which are bells that go off in one’s head when an ethical problem arises. Marshall maintained that these alarms need to start working when an issue might turn into an ethical problem, not when one is in the midst of an ethical problem. He encouraged the following approach in dealing with ethical issues: define the problem, analyze the options, evaluate the consequences, decide the course, implement the decision, adjust to new information, and monitor, modify, and learn from the result.

Politically Speaking: An Insider’s View
Joe Scarborough Delivers His Analysis of the Current Political Landscape

Joe Scarborough, host of MSNBC’s Morning Joe and former U.S. Congressman, closed out ICI’s 52nd Annual General Membership Meeting with an engaging analysis of the current U.S. political landscape, advising that our leaders need to find courage and cooperation.

“The parallels between 1994 and this year are absolutely remarkable,” said Scarborough after describing his election during the 1994 Republican takeover of the U.S. House. “We had a Republican Congress that loathed the president and a Democratic president that loathed that Congress just as much. But think about how much we accomplished over six years.…We figured out how to work together. That’s what is missing in Washington today.”

Turning to his thoughts on our national leadership, he advised that we need leaders with the courage to cut spending at the national level. “The future is not going to be owned politically by the party that promises new federal programs. We’re out of money. But currently there aren’t any leaders out there who are willing to tell Americans the truth.”

He predicted that the Republicans will take over the House of Representatives in this year’s midterm elections and that Democrats will keep the Senate. But he delivered a caution to the Republican Party that this is their “last chance, and if they fail, they will go the way of the Whigs.” He also predicted that there will be a president elected who is not affiliated with either party “sooner rather than later.”

He closed with assurances that the U.S. “will be fine” and that we don’t have to worry about other countries eclipsing America’s economy. “We are still the land of opportunity.”