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Banker sees recession's silver lining
Though the U.S. is in the midst of a recession, Lyle R. Knight, an adviser to Federal Reserve Chairman Ben Bernanke, predicted that one day most people would wish they would have invested their money at today's prices. Knight spoke Thursday at Montana State University.

BOZEMAN - Though the United States is in the midst of a recession, this is actually a time of opportunity, says Lyle R. Knight, president and CEO for First Interstate BancSystem Inc. in Billings and an adviser to Federal Reserve Chairman Ben Bernanke.

Knight made the comments to a capacity crowd gathered at Montana State University on Thursday evening.

"It's hard for us living in times of recession to see these as times of opportunity," Knight told about 250 people gathered at the Procrastinator Theater. "But clearly, it's a time of opportunity."

Knight also predicted that in five years, most people would wish they would had invested their money at today's prices.

"If I could convince all of you to meet me here in five years, we'd say, 'Why didn't we buy bank stocks … or that surf-side condo in Miami?' " he said.

Financial crises are all different, with different causes and solutions, said Knight, who has been in the banking business for 38 years. "If you've seen one financial crisis, you've seen one financial crisis," he said.

Recessions are a natural part of an economy's normal business cycle, Knight said.

Rather than being surprised by a recession, people should realize that the economy always becomes stronger because of them, Knight said. Weak businesses are outdone by stronger businesses during a recession, when they are forced to re-evaluate and be creative about their work, he said.

To put the current recession in perspective, Knight said it pales in comparison to the crises of the 1930s and the 1980s.

During the meltdown in the 1980s, 1,000 banks failed, Knight said, while another 1,000 were on the Federal Deposit Insurance Corp.'s watch list.

So far during this recession, 19 banks have failed and another 107 banks are on the FDIC's watch list.

Knight also talked about a so-called moral hazard. With the government bailing out investment houses, he worries that there will be no way to penalize companies for behaving badly.

"I'm worried we're creating such large institutions that they're too big to fail … because they'd harm the economy," he said, adding that people and companies that make mistakes should be punished.

Knight blamed Wall Street itself for the money lost there, and said it was not the responsibility of the Federal Reserve to fix Wall Street's mistakes.

The real problem is how to support retirees, he said, and predicted that it won't be solved in his generation.

Social Security was founded when people were only supposed to live to be 67, he said. With people now living into their 80s and 90s, the system is simply not viable.

Knight said people who could afford their own insurance in retirement should be required to buy it. And he said a basic change - such as not giving Social Security benefits to people until they're 75 - might have to occur for Social Security to work.

Still, Knight remains optimistic about the economic future.

"I would never bet against the U.S. economy," he said.

As First Interstate's president and chief executive, Knight oversees 50 First Interstate branches in Montana and Wyoming and 18 in South Dakota. He has a degree in banking and finance from the University of Utah.

Knight was visiting MSU as a guest presenter at the College of Business' annual David Orser Executive Speaker's Forum. The forum is named for David B. Orser, a 1966 MSU graduate who started funding the program in 1988 to inspire MSU business students to pursue careers as innovative, responsible and ethical business leaders.

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