They should also reflect the practices they embrace. The thrift and banking crises of the 1980s and early 1990s taught us the importance of a proper level of cash flow as a basis for lending, as well as the importance for proper documentation of loans, for enforcement of covenants, and, in general, for maintaining a prudent degree of control in a lending relationship. It is important for you to observe a sound credit culture in your vigorous competition with each other. Disregard for proven banking principles may appear benign now, but when the economic cycle turns, those of you who have tended to the fundamentals and the basics will meet the challenges. In that regard, maintaining a proper allowance for loan and lease losses is a well-founded principle of the lending business.
Transparency is important.
But the allowance for loan and lease losses serves a safety and soundness purpose as well. Loan loss reserves are estimates and are often ranges. We at the FDIC believe it is important and very appropriate to be at the high end of those ranges. Things certainly seem to be going well for banking. Last year was the first year ever that the commercial banking and the thrift industries both had returns on assets of more than one percent.