The Contrarian

US Bank Home Mortgage President and CEO Dan Arrigoni cost his company some easy profits during the subprime mortgage run-up, but he saved the bank billions when it all collapsed.

By David Gee

When I first went to see Dan Arrigoni, he wasn't where I expected him to be.

Although he does occupy the requisite corner office with a commanding view, it is of downtown, not from it. It is a view with a twinge of self-inflicted exile. It is a view contrary to his peers and he likes that.

When Dan Arrigoni looks out his window, he sees the Mall of America, the airport and and straight into the windows of the neighboring Radisson Hotel. Minneapolis, to Arrigoni, is a speck.

No, Arrigoni certainly does not look down upon the well-coiffed bustle of Nicollet Mall, the place one might think the President of US Bank Home Mortgage would gaze, seeing as that's where the company's self-titled headquarters sits.

Arrigoni is not there, which I learned when I showed up for our interview.

And, once I actually did arrive at the right place, I expected something more along the lines of your stereotypical corporate CEO. After all, this was a man who had spent years successfully running a portion of one of the largest banks in the country. But, yet again, no. Arrigoni had a casual manner, a conversational style and was indeed a pleasant surprise.

However,  it was only a few years ago that his bosses were pressuring him to swim with the current and make the risky loans that other lenders were making billions from. From his perch far away from the pressed suits, Arrigoni resisted and eventually saved his bank billions by trusting his entrepreneurial spirit and decades of mortgage experience to deliberately not lead his company into subprime territory.

What follows is a Q & A with a knowledgeable and refreshingly open business executive whose trust, instincts and leadership we might all learn a lesson from.


Q: Tell us a little bit about your professional journey and how you landed in the corner office of a big division of US Bank.

 A: I always had an interest in real estate. My father was a real estate broker in St. Paul so I grew up with him buying and selling homes and so forth. But I really didn't care for that side of the business so I instead went to work at Twin City Federal as a loan officer. I had some success, becoming one of the youngest vice presidents TCF ever had and opened a branch office for them in Maplewood Mall. I then began working exclusively in the mortgage business when I joined Northland Mortgage in 1977. A few years later, I left Northland to manage all St. Paul origination for United Mortgage.


Q: Was that when your entrepreneurial endeavors began to happen?

A: I met a guy by the name of Mike Chamberlain. We started our own mortgage company called North American Mortgage in 1984. Two years later, we sold the company to a national mortgage company, what is now J.P. Morgan Chase, and we continued to work for them while we satisfied a five-year non-compete.


Q: Though they offered you a home office slot out east, you stayed here and branched out again, so to speak, on your own.

A: I knew a group of gentleman that started a small bank by the name of Investor Savings Bank, which was in downtown Wayzata. They asked me to take over the mortgage side of the bank and we built the assets of that bank to a billion and a half dollars. Then we sold it to Firstar, a $20 billion bank out of Milwaukee, and I was named the president of Firstar Home Mortgage. Through another series of acquisitions, Firstar grew to be an $80 billion bank. Finally, in 2001 Firstar bought US Bank in Minnesota which was also about an $80 billion bank, so now we have a $160 billion bank. We kept the US Bank name because we did a marketing survey and that seemed to resonate with more people than Firstar, which we dropped.


Q: When it came to due diligence, a lot of people dropped the ball in the run-up to the mortgage meltdown. Once the subprime lending began in waves, what was your reaction?

A: At the time this started I had 36 years of experience. Wow, I don't feel that old! Anyway, you learn a lot and you see a lot in that time. I watched people who were loan officers for a year open their own mortgage companies thinking they had all the answers. And Wall Street was attracting all of these investment dollars so they were gobbling up the paper. I think mortgage regulation at that time was weak and the entrance into our industry was not very difficult. It simply wasn't sustainable.


Q: What kind of pressure were you under at the bank to venture into the subprime sector where $1.38 trillion in subprime loans were made from 2005 through 2007?

A: I would get calls from corporate saying, "Geez Dan, what's going on? I mean you are doing well and you are holding you own but we don't see the same growth in you as we do in others." I'd say, you know what? They are growing the wrong way. This whole thing is a disaster waiting to happen. I just call it experienced intuition. 


Q: Still, with all of your experience, at some point you must have thought maybe it was you; that you were just going to be plain wrong about how this would all turn out?

A: I remember a conversation I had with our CFO. I said, we have a decision to make; we can either stick to our guns, trust our judgment and get fired for lack of market share and giving up some profit, or we can make the loans everybody else is [making] and get fired when this thing runs its course and collapses. When you put it those terms, when you simplify it to that point, I think all of us would take the road we took.


Q: How hard did your parent press you?

A: I was prepared for them to say, "You know Dan, you are just not the brightest bulb on the tree, and you're behind the times, and out you go." But they never did. If I were them I would have been applying some pressure on me too, though. I would say, "Are you sure we are not leaving anything on the table? We are publicly traded, we are employed for our shareholders and we need to be positive that we are not just making dumb decisions here." So they pressed me like they should and it was a lot of pressure.


Q: We are all, of course, well aware how the story concluded. Do you feel vindicated?

A: I must be honest, I manage a team and I of course can't take credit for every single decision made. I have a lot of autonomy within our organization and I love that because I manage that autonomy. I have this vision at the top of the mortgage company and I steer the decision making but my team has to concur. It does feel good to know though that we are strong and thriving today due to the fact we did not make the subprime lending mistakes. We have the highest credit rating of any major bank in America and I think we made the right decisions for the right reasons.


Q: We might be able to guess the answer to our last question, but how do you feel about the future of the housing market in this country?

A: I have always owned real estate and it has always been a great investment. Maybe for the first time in the history of our country some people may not be speaking that way but I still believe in it. I have been able to reap the benefits of being a real estate investor and I love helping people buy houses. So real estate has always been my thing and still, to this day, I feel very strongly about it.  MB