CEO Stories: Advocating for Efficient and Effective Capital Markets

Ken Bentsen
CEO and President of SIFMA

Ken Bentsen, CEO and President of SIFMA, talks about the association’s work as well as that of its sister organization, the SIFMA Foundation.

Assuming the top job at SIFMA — Securities Industry and Financial Markets Association — nine years ago seemed like a natural fit for Ken Bentsen. It afforded him the chance to use his unique perspective honed from his time in Congress, where he served on various finance committees, and his experience in the private sector. He joined SIFMA – whose mission is to advocate for efficient and effective capital markets – at a critical time for SIFMA stakeholders: just as Congress was putting together Dodd-Frank, the regulatory response to the Great Recession of 2008-2009.

According to Bentsen, an effective and efficient capital markets system allows for the allocation of capital and credit to the “best ideas,” creating jobs and spurring growth. As the capital markets have grown, so too has the U.S. economy. The depth and breadth of the capital markets have proven essential to the resilience of the economy.

The Stock Market Game, run by SIFMA’s sister organization, the SIFMA Foundation, helps educate thousands of students annually about the workings of the global capital markets through online simulation, often serving as students’ sole exposure to economic education. In its 40 years of operation, the Game has taught some 18 million students from all over the country, serving as an important educational tool not only for students but for teachers and parents as well.

This Is Capitalism: Ken Bentsen


RH: This is Capitalism. I’m Ray Hoffman. The organization known as SIFMA goes back to 1912, then and now a trade group, which was first known as the Investment Bankers Association of America. Then for many years, the Securities Industry Association and now the Securities Industry and Financial Markets Association, SIFMA, which may be best known for a game played by middle school and high school students that represents the only economic education that some of them ever get before going out into the work world, the SIFMA Stock Market Game.

SIFMA’s CEO is Ken Bentsen. He’s a former member of Congress who, in a relatively short eight years in the House, compiled a rather lengthy resume of bipartisan financial solutions. His uncle was the well-remembered U.S. Senator Lloyd Bentsen. Meet Ken Bentsen.

I assume this is your mission statement–if not, it would make a good one; I saw it on your website–“SIFMA exists to advocate that America’s capital markets operate effectively and efficiently to the benefit of all market participants.”

KB: Yeah that is our mission statement and that’s absolutely right. The U.S. has the deepest, most liquid capital markets. We have the maturest, not necessarily chronologically but by development capital market system in the world just because it’s grown so rapidly. And we believe that as the capital markets have grown and developed in the U.S., so has the U.S. economy; that they have really grown hand in hand. Our market system is a critical means to the end of our broader economic system. I would also note that it’s among the most highly regulated industries in the United States.

And while regulation is important, rules are important, to have a level playing field, transparency, and investor protection, it’s also important to understand that markets are able to operate efficiently and effectively, as we state in our mission statement. Because if they don’t operate efficiently and effectively, then capital is not going to be allocated or credit’s not going to be allocated to the best ideas. And the best ideas are the ones that are the next IPO, that are the next Apple or Microsoft, or the ability to invest in plants and equipment that create basic capital formation that creates growth and creates jobs.

RH: And creates the upward sloping chart that we have seen in terms of the growth of the U.S. economy going back 200 years.
KB: Absolutely. No question about it. We would argue that those things are not mutually exclusive. And even today if you look at coming out of the Great Recession of the 2008-2009 period, one of the reasons we believe why the U.S. came back more quickly than other jurisdictions around the world was because of our market system, that our economy is not as dependent on pure bank balance sheet but rather we have these broad markets.

They can certainly be volatile, they certainly can seize up, but they also have a great resiliency and that resiliency allows, you know, where investors match up with those who are seeking capital and credit, that resiliency allowed the U.S. to come back much more quickly and start driving aggregate demand and digging out of that recession.

RH: You’ve had an interesting journey to this position. I believe you started out in municipal finance at Drexel Burnham?
KB: If you had asked me in college if I was going to end up working on Wall Street or investment banking, I would’ve said probably not likely. I actually left undergraduate to go to graduate school to study public administration with the idea that I would become a career, senior-level bureaucrat.

And getting into that after a couple of weeks, I decided that wasn’t what I wanted to do but I finished my masters and tended to focus more on economics and finance and was working as a congressional staffer on the Hill and was sort of the low person in the office. And so they said, well look, we’re interested in armed services policy because we have a big military base in the congressman’s district. You can take care of banking and taxes and trade, which I knew nothing about, but ended up following those committees, one of which my boss served on and became very interested in that.

And after a few years of doing that, finishing my masters, I was talking to a former state colleague of my boss at the time, and said I didn’t want to stay on Capitol Hill forever and was maybe thinking about enrolling in one of the bank training programs back in Texas, back when they had those. And he said no, what you need to do is you need to go into public finance. And so I quickly looked that up and then ended up landing a job up in New York and never looked back.

So I spent seven years doing that and then went back into public service and did that for a number of years. And ended up being involved, while I was in Congress, not necessarily by design but in a number of pieces of financial legislation, sat on the Primary Financial Services Committee and…So I went from being a banker to being involved in financial services legislation and policy and by extension, regulation.

Then nine years ago, after having left the Congress and doing some consulting work and then running another trade association in the commercial finance space, my predecessor reached out to me and said, “why don’t you come over here and run our Washington office?” And this is just as Congress and the administration were putting together a response to the financial crisis, Dodd-Frank.

And I looked at the guy and I said, “I’ve been in the business, I’ve been on the policy- making side in Congress, I have never been on this side of the business going into what looks like it’s going to a massive piece of regulatory legislation.” And I said, “this could either be really interesting or a fool’s errand. But I’ll go with it could be really interesting.” And it has been very interesting and very rewarding over the last nine years to work on this angle for an industry that I really care deeply about and have a lot of skin in.

RH: You served what, five terms in Congress?
KB: I served for four terms from Houston. And all four I served on first it was called the House Banking and Financial Services Committee and then the Financial Services Committee and also served on the House Budget committee.

RH: And that was really essentially two decades ago when you were involved in those things. I’m wondering, do you think the general public has a better-informed overall opinion of the American economic system today than it did when you were engaged in all sorts of town hall meetings and constituent meetings 20 years ago? And I hope you can say yes to that.
KB: I think so. I mean, I think there’s always different pressures that come on. And so back in the ‘90s, the economy was still going through a transition. This is more about maybe trade policy than financial policy but my old congressional district in Houston and Harris County included part of the nation’s largest petrochemical complex, and this is right about the same period that the U.S. petrochemical industry overtook Germany as the largest exporter of petrochemical product.

NAFTA had gone through and then we were in the process of working on WTO and getting China to enter the WTO. And it really was an opportunity to create really good jobs. You would be in these plants and you could see the anxiety among workers that had great opportunity in front of them but were really concerned that trade was not to their benefit but to their detriment when the contrary was really true.

I think the equilibrium has been hard to find. Certainly people feel pressure of costs, whether housing costs, general cost of living issues, healthcare, and the like. At the same time, when you consider the goods and services and the price of goods and services available today compared to what they were just 20 years ago, or the role of technology just 20 years ago, and even its impact on productivity, and our productivity numbers haven’t been great of late but seem to be getting better, it’s mind-boggling when you go back and look at it. You know, what’s available, what people can get for their dollar today that didn’t even exist 20 years ago.

So on the one hand you can say boy that’s a glass half-full or more. On the other hand, you can see where there’s anxiety and tension because the economy has been through a lot of transition. And I think that’s an area where people, even if they don’t personally feel it, maybe someone they know feels it or they look at their kids and they say “are my kids feeling it?”. I think policymakers have to be cognizant of that.

But the most important thing we can do on any of that is to make sure we’re growing the economy. Because if we’re not growing the economy as much as we can, we’re not going to…it’s going to be much harder to solve those issues, let alone our fiscal policy issues.

RH: And that’s the responsibility of the capital markets.
KB: Definitely a role in that. My own view, and I think my members feel this way, is we’re not the end, we’re the means to the end.

RH: What a wonderful solution to a number of related issues in terms of understanding the U.S. economy, how it works and grows, understanding the financial markets, and spreading economic literacy to have something called, and to have SIFMA supporting it, the Stock Market Game.
KB: Absolutely. The Stock Market Game is something that’s run by our sister organization, the SIFMA Foundation, that has been in place in now for 40 years. And in fact the Stock Market Game is their premier program that they do in thousands of schools across the United States every year, touching hundreds of thousands of students. And it’s something that we at SIFMA are very proud to be supportive of but I want to give all the credit to the SIFMA Foundation for doing it.

And they built upon that program over the 40 years to do a number of other programs in the schools, like Invest Right, Invest It Forward. And it’s just amazing to see the results that come out of that. They just had their annual dinner and not just the statistics of how they’re reaching kids, what the impact is on middle school to high school kids but also on the teachers and the parents who are affected by it.

And then to see some of these kids, sixth, seventh, eighth grade, who are talking about research reports that they’re doing or things that I certainly wasn’t doing when I was in that grade–I wasn’t doing it when I was in high school or college, for that matter–is really impressive and something that is important not just from the standpoint of financial literacy. But again it goes to the structure of the American economy built in part on our financial system, which makes our economy, we believe, stronger by comparison to other economies because of that. So we think that’s a win-win program and we’re glad to be supportive of it.

RH: How many kids participate in the Stock Market Game?
KB: Twelve thousand schools every year in all fifty states participate in it. Six hundred thousand students, fifteen thousand teachers. And over the last forty years, eighteen million students have gone through the program. That’s a lot. We’d love to see more and again this is the foundation that does that and they’re working harder every year.

We do a program with the foundation every year where we do a competition with the schools and we bring the top 10 schools to Washington to meet with their representatives and senators. And it is just amazing, it underscores, you know, just like the Congress itself, one, how big and diverse this country is…and so not everybody is from New York or Chicago or my hometown of Houston but they’re from Montana or North Dakota or wherever it may be.

And you see these kids from all walks of life who come in and start talking to you about how they put a portfolio together, where things worked, where they may have made mistakes, and talking about going everyday and looking at price reports and the like and research reports. It’s just amazing.

RH: I was looking at the press release from this past summer’s awards reception for the student winners of the Stock Market Game Capital Hill Challenge. And I was looking at the winners and where they came from around the U.S. and at a time of extraordinarily deep political divisions, I think deeper than when you served in Congress. The top 10 schools were almost perfectly divided between areas represented by Democrats and areas represented by Republicans, and that has to be an encouraging sign.
KB: I don’t want to say the Stock Market Game is the only thing that does it but it is really refreshing to see what it does with these kids from all walks of life.

RH: To the benefit of all market participants, to quote the mission statement of SIFMA. And in the truest sense of the U.S. economy, we are all market participants.

This Is Capitalism. I’m Ray Hoffman.

About the Series: Featured stories from the intersection of the free market and entrepreneurial success. Here we speak with leading CEOs, academics, philanthropists and up and comers on their contributions and perspectives on the American economy.

About Ray Hoffman: Ray Hoffman, a veteran business journalist, is highly-regarded for his news and analysis features and insightful CEO interviews. Representing BusinessWeek on air for twenty-one years, Mr. Hoffman was the morning business news voice on the ABC Radio Networks from 1995 to 2006. Mr. Hoffman also represented The Wall Street Journal, on air, for eleven years. His daily WCBS CEO Radio feature was recognized by the New York Press Club as best radio business news report in both 2012 and 2015. In this podcast, Mr. Hoffman invites some of America’s most dynamic CEOs to share their stories as business builders and perspectives on free enterprise.