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Raymond James chief remains optimistic

Raymond James CEO Tom James poses with the sculpture Wall Street Journal in front of the company’s St. Petersburg headquarters.

JOHN PENDYGRAFT | Times

Raymond James CEO Tom James poses with the sculpture Wall Street Journal in front of the company’s St. Petersburg headquarters.

He says the federal bailout of Wall Street is the right thing to do and not as onerous to financial capitalism or taxpayers as people may think.

He believes Wall Street and mortgage regulators failed miserably by letting subprime loans get out of control.

He's got great faith in U.S. Treasury and Federal Reserve leaders to pull off this rescue, but concerned that so few legislators have a clue what's happening. And he urges investors to be patient and persevere.

He is Tom James, 66, who since 1970 has run St. Petersburg's regional investment firm Raymond James Financial. He remains one of this area's most seasoned and respected business leaders.

As Wall Street's Bear Stearns is forced to sell itself, as Fannie Mae and Freddie Mac are taken over by the government, as Lehman Bros. fails, as Merrill Lynch asks Bank of America to buy it, as AIG gets federal emergency loans, and as Goldman Sachs and Morgan Stanley agree to swap investment bank status to become less risky banking companies regulated by the Federal Reserve, Tom James has managed to steer his firm clear of most shoals that damaged Wall Street's giants.

"We're still here, which I guess is a positive statement given the recent events in the financial services industry," says James in a Monday interview. "This is a tremendous shock to the system."

Fixing this crisis will take awhile, he says. Look for a still-volatile but improving stock market in 2009 despite a still slow economy. And Florida's housing market? Well, it won't stabilize until 2010.

Raymond James is a survivor but its stock is still taking shrapnel. Shares dropped over 19 percent on Monday to close just under $31. That's not too bad these days since that's about where the firm's stock was when 2008 started.

Tom James adds that Raymond James soon will forgo its investment firm model and apply to become a bank holding company under Federal Reserve oversight. But Raymond James is not simply "following" in the weekend steps of Morgan Stanley and Goldman Sachs, he insists. It was planned long ago.

The chief executive argues the feds had to step in to prevent the stock markets from freezing up, corporations from going belly up, and investors from losing too much confidence.

Where were regulators as far back as Alan Greenspan's era as Federal Reserve chairman, he asks, when subprime mortgages (lower quality loans) rose from 5 percent to 30 percent of the mortgage business?

A key strategy that helped Raymond James avoid the pain felt at other Wall Street firms, Tom James says, was a decision not to get over-leveraged.

Many Wall Street firms highly leveraged themselves by acquiring $20 to $30 worth of assets for every $1 owned. Leverage at Raymond James remained at half that much.

"When times are good, leverage is wonderful," he says. "When times are bad, it's a disaster. It's an important lesson."

Had someone asked him last year where the market would be with a subprime crisis, the failure of large financial institutions and oil prices as high as $148 a barrel, James would have said 9,000. It closed Monday at 11,015.69.

Says the still bullish CEO: "It's amazing how resilient parts of the economy are in spite of all this."

Robert Trigaux can be reached at trigaux@sptimes.com. Read more of the Tom James interview at blogs.tampabay.com/venture.

Raymond James chief remains optimistic 09/22/08 [Last modified: Thursday, September 25, 2008 3:24pm]

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