How U.S. Bank Saved its Own Bacon

(Hint: It involves not making a f***ing pig out of itself)

Richard Davis, chairman, CEO, and president of U.S. Bancorp, the parent company of U.S. Bank, moved into crisis mode when Lehman Brothers failed in the fall of 2008. His three-day-a-week travel schedule, which had included public meetings with customers, came to a screeching halt.

“I can’t be in a crisis mode from the road,” Davis notes. “I have to be in the cockpit, not in the back of the plane. I needed to be in house, head down.” That fall, he began meeting with his leadership team twice daily and spent at least 14 hours a day at the company’s Minneapolis headquarters.

Like banks everywhere, U.S. Bank was facing a financial crisis whose severity none of its top leaders had ever faced. Money had stopped flowing on a global scale. Davis’s team reviewed its portfolios twice a day to identify and unload risky holdings. At night and over the weekends, they kept their eyes glued to the television and the Internet to follow the overseas markets and monitor whether the situation was worsening—and whether that would mean that access to money, the fuel of a bank’s business, was drying up.

Today, Davis says, his company is feeling “very normal.” He and his leadership team still arrive at the office between 6 and 7 a.m., but he’s typically out the door by around 6 p.m. The crisis, if not completely past, has subsided substantially, though numerous banks in Minnesota and across the country remained troubled. Not U.S. Bank. And as banks continue to falter, U.S. Bank—one of the few top-10 banks in the U.S. to report a profit every year for the past 15 years—looks stronger than ever.

Number 129 on the 2009 Fortune 500 list, U.S. Bancorp (NYSE: USB) is now the fifth-largest commercial bank company in the country, up from number six last year. (As a holding company, U.S. Bancorp is also the parent company of several other subsidiaries, notably Elavon, an Atlanta-based payment processing firm.) Total assets rose from $195 billion in 2004 to $281 billion in 2009. And the bank’s customer base ballooned from 13.1 million to 17.2 million over the same time period. Five years ago, U.S. Bank had 2,370 branches in 24 states. As of April 1, it has 3,012—in the same 24 states.

Davis readily acknowledges that he and his leadership team were not without some culpability in the crisis. But they look close to angelic compared with some of the nation’s largest banks. During the real estate bubble, Davis and his team strayed at most a few feet from U.S. Bank’s long-held conservative policies. But the bank’s old-school roots and its ability to withstand criticism and peer pressure saved it from implosion. U.S. Bancorp will emerge from the downturn without having had to sell any assets to raise capital or divest itself of any poorly performing businesses.

In fact, the company is making itself bigger—vigorously, but without overeating. In essence, U.S. Bancorp got through the crisis by not turning itself into a financial casino, but rather remaining—well, a bank.

What U.S. Bank did—and didn’t do

Leading up to the financial crisis that began more or less in the spring of 2008, Davis became uneasy over interest rates as well as the cash hoarding that began to occur. Then came the failure of Bear Stearns, an investment banking firm that dealt in mortgage-backed securities and other financial instruments that were outside the realm of commercial banking.

“It looked like an isolated Bear Stearns breakdown, and we didn’t intersect with those businesses,” Davis recalls. “When Lehman Brothers failed in September, that was the one-two punch. By the fall of 2008, the world was changing.”

Davis and his executive team did have some warning before 2008 that all was not right with their industry. “We knew that Countrywide and WaMu [Washington Mutual] were digging a hole with option ARMs, pick-a-payment, no-down-payment, and no-doc loans,” says Richard Hartnack, head of consumer banking for U.S. Bank. “What we didn’t know is that they were digging a hole under everyone’s foundation. We didn’t understand the depth to which it would affect world economies.”

Davis, Hartnack, and other top U.S. Bancorp executives got an inkling of how big the shaky-mortgage problem was as early as 2004. “Our people that come face to face with the public—the branch managers, mortgage brokers—they had customers tell them their products were not competitive,” Hartnack recalls. “They would say, ‘Why are we asking for loan documentation when no one else is?’ They were the canary in the coal mine for us.”

During that pre-crash period, the banking team continued steadfast in its conservative lending policies. “The debate wasn’t in the general direction of whether we should remain conservative,” Hartnack says. “We were not going to do no-doc, negative amortization, no-down-payment loans, but we had to remain competitive, so we asked, ‘Where could we loosen up?’”

U.S. Bank did give in just a little, offering adjustable-rate mortgages with teaser rates that allowed homebuyers to purchase bigger, more expensive homes by providing low initial payments. That was as far as it strayed from its traditional caution. Homebuyers still needed to qualify with the usual documentation.

“We have always had a very conservative culture,” Davis notes. “The only way a bank makes money is to make loans, [but the riskier loans] didn’t feel right to us.” As the real estate bubble expanded, lenders and customers defected to competing banks, where they could make more in commissions or get bigger mortgages with fewer questions asked.

During the exodus, U.S. Bank’s leaders say that none of them pushed for the bank to offer dangerous mortgages. “When [the financial system] started to unravel, you’d think we would have been giving each other high fives,” Hartnack says. Instead, they spent long hours monitoring the situation, cleaning out what shaky mortgages and investments were on the bank’s ledgers.

“Being careful when it would have been easier not to was one of the best things that ever happened to us,” Davis says. By the end of 2009, as the dust began to settle, U.S. Bank had gained about 1.25 million new customers through acquisitions and organic growth. Deposits in the fourth quarter of last year grew by 25.2 percent over the fourth quarter of 2008; loans grew by 8.2 percent.

True, banks in the Federal Reserve’s Ninth District, where the company is rooted, have long held a reputation for being more conservative than banks on either coast. But an irony of the U.S. Bancorp story is that Davis, Hartnack, and several others on U.S. Bank’s executive team learned the business in banking’s Wild West—namely, California.

Parallel lines meet

“We brought experience and patience from a state with very wild swings,” Davis says. Thanks to factors including a tendency for housing bubbles to inflate and pop with some regularity, the Golden State is a volatile banking market. “We learned that nothing is for sure and to always set up a contingency plan,” Davis adds. “The best skill we didn’t know we had was how to deal with a volatile economy.”

Davis’s predecessor as CEO of U.S. Bank was Jerry Grundhofer. The two had a professional relationship spanning about 25 years. In 1987, after leaving a position at San Francisco–based Wells Fargo, Grundhofer became head of retail banking at Los Angeles–headquartered Security Pacific. At that time, Davis—who started in the banking business as a teller—was heading up quality assurance for Security Pacific.

In 1993, Grundhofer left that bank—which had completed a massive merger with San Francisco-based BankAmerica, predecessor of today’s Bank of America—to become CEO of a regional bank in need of better expense management, Star Banc in Cincinnati. He asked Davis, then heading up BankAmerica’s Southern California retail business, to direct Star Banc’s consumer banking. In 1998, Grundhofer’s cost cutting helped Star Banc buy Milwaukee-based Firstar, taking the latter’s name and headquarters. Davis continued as head of consumer banking.

Meanwhile, in Minnesota, Grundhofer’s older brother John, known as Jack, was following a similar career. Jack Grundhofer had been named CEO of Minneapolis-based First Bank System in 1990.

Like his brother, Jack Grundhofer was hired to return his bank to stability. Founded in 1929 as a confederation of 85 banks in the Ninth District (mostly in Minnesota), First Bank had long been known for its conservatism— but that reputation took some blows in the late 1980s, when management pursued riskier business, notably securities trading.

Soon, First Bank was again strong enough to play in a consolidating industry. Its largest acquisition: an Oregon-headquartered regional bank called U.S. Bancorp. The deal was finalized in 1997. First Bank System kept its Minneapolis headquarters but took the Oregon bank’s name.

That same year, First Bank/U.S. Bancorp acquired Minneapolis-based investment services firm Piper Jaffray. In 2003, it spun it off, deciding that it didn’t fit U. S. Bancorp’s traditional focus.

In 2001, the Grundhofers’ parallel lines intersected when Firstar purchased U.S. Bancorp. The Minneapolis headquarters and the U.S. Bancorp name stayed in place. Firstar’s Jerry Grundhofer retained his CEO title; Jack stayed on as chairman, then retired a couple of years later. Davis headed up the merged entity’s consumer banking division.

The following year, U.S. Bancorp was ranked as the nation’s eighth-largest bank company, with $174 billion in assets. Davis became CEO in December 2006—not too long before the global financial tsunami began to crest.

Bigger and stronger

“Three to five years ago, analysts were critical of U.S. Bank for not growing its portfolio fast enough,” says Jon Arfstrom, a banking industry analyst with RBC Capital Markets in Minneapolis. At that time, U.S. Bank was cleaning up a risky portfolio of transportation loans, mostly to the once-booming airline industry, that ran into problems following the September 11 terrorism attacks.

“They put their focus on reducing risk and getting back to basics,” Arfstrom says. “Are they lucky, or good? I think you can say they are good.”

Arfstrom notes that the current financial crisis has improved substantially over the past year or so; the industry no longer talks about solvency or the nationalization of banks. “We are now seeing the separation of those banks that were careful and those that were not,” he says. “U.S. Bank continues to make money every quarter. U.S. Bank is one of the strongest, if not the strongest, of the regional banks today.”

U.S. Bank was one of the first banks to pay back Troubled Asset Relief Program (TARP) funds. The four-step process, according to Davis, was arduous and required that U.S. Bank pass the government-administered Supervisory Capital Assessment Program stress test, which it did on May 7, 2009. The bank had to show it could attract capital; four days later, U.S. Bank raised $2.5 billion in a common stock offering and $1 billion in non-guaranteed debt issuance.

On June 17, U.S. Bank redeemed the $6.6 billion in preferred stock exchanged for TARP funds in the fall of 2008. And on July 15, 2009, it repurchased the TARP warrant for $139 million, leaving it free from ongoing stipulations—including restrictions on executive pay—placed on banks still operating with unpaid TARP loans.

As Arfstrom notes, “U.S. Bank’s strength has also allowed it to acquire attractive companies that other competitors have not been able to take advantage of, expanding its franchise and adding value to the company.” Since late 2008, U.S. Bancorp has acquired four banks with the assistance of the Federal Deposit Insurance Corporation and one without the FDIC’s help. (See page 34. All acquisitions were rebranded as U.S. Banks.)

U.S. Bancorp also has picked up credit card portfolios from Citigroup and Texas-based Town North Bank, several merchant-processing portfolios (services that help merchants process credit and debit card transactions), ATM-related services (which allow customers not only to get and deposit money, but also buy stamps, phone minutes, and other “products”), a wholesale bank (which provides services to large corporations and other banks), and several trust businesses.

Davis plans to continue to infill his company’s territory by purchasing banks with 50 to 100-plus branches. “There will be very few of them,” he says. He also plans to divest U.S. Bank of any branches it acquires that aren’t in its 24-state region. The company shed the Texas branches of one 2009 acquisition, for instance. Also in the works: new branches in supermarkets to lure new customers without having to build costly standalone branches.

Home truths

Before the crisis, U.S. Bank ranked between 18th and 22nd in terms of its share of U.S. mortgage lending. As the financial foundations of flashier mortgage lenders crumbled, U.S. Bank’s share of a smaller market has grown. It was the sixth-largest mortgage loan originator in the country in 2009. In the fourth quarter of 2009, $45 billion of U.S. Bank’s loan portfolio—about 23 percent of the total—was in residential real estate.

“We all learned that a home is not a Wall Street investment,” Hartnack says. “The middle-class working family who didn’t go off the deep end in housing or in taking on debt, and who, for whatever reason, did not have changes in employment status, represents somewhere between 40 and 60 percent of the families in America, and has been relatively untouched by this recession.”

Others, who took on too much or poorly structured debt, continue to learn difficult lessons—through foreclosure, higher interest-rate credit cards, and bankruptcy. But whether a family’s finances have been troubled or stable, Hartnack believes that “we are seeing a sea change in consumers’ refusal to take on more debt and an effort to increase their savings.”

In response to the change Hartnack speaks of, U.S. Bank has been rolling out new savings products. One is its S.T.A.R.T. program: Customers who set up recurring transfers every month or pay period (or with every credit- or check-card purchase they make) into their U.S. Bank savings account are eligible for a $50 U.S. Bank Rewards Visa card once they have saved $1,000.

“There are two ways to make money,” Hartnack says. “We can lend it out at a nice spread, or take it in at a nice spread.” The key to continued success will be continuing to offer a full line of services, whether customers are saving or borrowing. And U.S. Bank is in a position to lend.

“Part of what went wrong was the banks didn’t have diverse portfolios,” Hartnack says. “Many were over-concentrated geographically and by product type.” Think of the entities that lent out billions of real estate dollars in, say, Arizona, Florida, or Nevada, using those bubble-inflating loans, for instance. U.S. Bank is sticking to conventional mortgages for qualified consumers and to products like car loans, home equity loans, and small-business lines of credit.

You know. Old school. Like a bank.

http://www.southparkstudios.com/clips/222634/plastic-cards-and-paper-money

[Wall Street, the New York Stock Exchange. It's a busy day. Stan walks into view from the left]

Stan: 'Scuse me. 'Scuse me! I'd like to return this Margaritaville, please?
Stockbroker: Margaritaville?
Stan: My dad bought it on a payment plan that was set up by a finance company which got their principal investors from somebody here.
Stockbroker: Oh, that makes sense.
Stan: It does?
Stockbroker: You see, son, we lump thousands of these Margaritaville installment plans together into Margaritaville-based securities, then chop those securities up in a way that we could sell them to banks.
Stan: So I can return it to a bank?
Stockbroker: Nope, because a bunch of people like you are defaulting on their Margaritavilles so the government had to buy the Margaritavilles assets from the banks.
Stan: What?!
Stockbroker: Just talk to the Treasury Department in DC. They're the ones who really understand how all this works. [notices some activity on his stocks] Oh, sell sell sell sell sell sell sell!
Stan: Aargh! [walks off with the Margaritaville]

http://www.southparkstudios.com/clips/222624/the-importance-of-saving-money

Stan:     Do I really have to do this, Dad?
Randy:     Stan, now more than ever you need to understand the importance of saving money.
Stan:     But Grandma said I could use this money to buy whatever I want.
Teller:     Okay, next please.
Randy:     Go on, Stanley. [Stan walks up to the teller's desk and takes a seat.]
Teller:     How can I help you, young man?
Stan:     I got a hundred dollar check from my grandma, and my dad said I need to put it in the bank so it can grow over the years.
Teller:     Well that's fantastic, a really smart decision, young man. We can put that check in a Money Market Mutual Fund, then we'll reinvest the earnings into foreign currency accounts with compounding interest aaand it's gone. [they look at each other for a long time]
Stan:     Uh, what?
Teller:     It's gone. It's all gone.
Stan:     What's all gone?
Teller:     The money in your account - it didn't do too well, it's gone.
Stan:     What do you mean? I have I have a hundred dollars.
Teller:     Not anymore you don't. POOF.
Stan:     Well, wel what can I do to get back my money-?
Teller:     I'm sorry sir, but this line is for bank members only.
Stan:     I just opened an account.
Teller:     Do you have any money invested in this bank?
Stan:     No, you just lost it all!
Teller:     Then please stand aside for people who actually have money with us. Next please. [an elderly woman steps up and bumps Stan out of the chair.]
Stan:     Hey!
Teller:     Hello Mrs. Farnicle, how are you today? Making a deposit are we? Great, we can just put that into your retirement account and make it go to work for you aaaaand it's gone.
Elderly Woman:     What??
Teller:     Sorry, yeah, that's gone. Please step aside for people who actually have money with the bank. Next please.
Stan:     Dad?!
Randy:     Hey I'm trying to teach my son the importance of savings. You already lost his money?
Teller:     Oh, Mr. Marsh, uhd-don't worry. We can just transfer money from your account into a portfolio with your son aaand it's gone! This line is for people who have money with the bank only please step aside. [both Randy and Stan are dumbstruck.]

Good morning readers, and happy Columbus Day!  While equities are trading, most bankers like myself are enjoying the day off.  And what better way to "enjoy" the day off than study for the CFA!

My first post was rather short, so I'd like to take the time to give a bit of background on my situation.  I took and passed Level I in December 2010.  Upon learning of my success, I promptly began studying for Level II in late February.  It gave me a little over three months to cram.  For some people, this is the norm, but after failing Level II in June 2011, I came to the realization that I am not one of those people.  With the short deadline to digest the material, tensions were high.  My girlfriend at the time began to despise the mention of CFA.  It was my best effort, but not good enough.

CFA Level II Take Two

Over the weekend, the Chicago Marathon took runners past my condo.  It reminded me that this CFA thing... it's a marathon, not a sprint.  I'm putting my money on a new strategy: starting earlier and using Allen Resources materials for my preparation.

In all marathons, runners must stretch before they swagger up to the starting line.  My stretching was reviewing the Quantitative Methods video from Allen.  This section on the exam absolutely slaughtered me last time.  I've never been good at stats, so I figure this is the best place to start.  The video was helpful, and provided a great refresher on the basics of statistics.

Today, I pulled out Volume 1 and tackled Correlation Analysis.  While it's not the most intense topic, it was good to get the juices flowing.  It's CFA time!  The marathon has begun.

I’m not really sure what just happened between September 25^th and today (October 19^th 2011) because I feel like I’m emerging from a black-hole of absolutely no CFA progress. While I would normally suspect laziness on my part, I’m reminded by friends that I just survived 3 grueling weeks of midterm exams and projects for Stochastic Processes in Finance, Systems to Support Quantitative Finance (C++ Programming), and Management of Financial Institutions at Georgia Tech. Be this as it may, I was still able to complete all of the Quantitative Methods reading in Study Session #3.

Departing from my usual study plan of simultaneously completing the readings and practice questions, I decided instead to work the Quantitative Methods practice questions towards the end of my study program in April / May 2012. The reasoning behind this decision stems from the fact that the miniscule details (just like with Ethics) will benefit me more on the back-half of the program since they’ll be fresh in my mind for the June 2012 CFA Level II exam.

Note to self – make sure to revisit these practice problems.

My undergraduate degree is in Statistics from The University of Tennessee, so many of the readings on Time-Series Analysis (special thanks to Dr. William Seaver, Ph.D. ) and multivariate regressions (Special Thanks to Dr. Hamparsum Bozdogan, Ph.D. and Charles M. Cwiek ) was a review from my Red Bull sponsored undergraduate days.

Within the next few weeks I’ll be loaded down with coursework for my MS-QCF degree, but I’m planning to make way for the Economics section within the next 1-2 weeks. This way I can finally put the first of six CFA Level II volumes into the curiously empty designated area for “work completed”.

One thing is for sure, the Christmas and New Years break from school is going to be filled to the brim with CFA Readings. I have a feeling I’m going to be stuck in a Delta SkyClub lounge reading CFA materials over the Christmas holidays just like I had to do this summer. At least now, with my Delta SkyMiles Silver Medallion Status, I have a slightly higher probability of doing the readings from the first-class cabin.

Following this post is my revised timeline and completion status of CFA Level II readings.

This past month I've been focusing on knocking out derivatives and portfolio concepts. Derivatives are always fun. However, I'm not quite sure how useful it is to learn FRAs or CDSs. But anyway, options are my favorite part even though the CFA curriculum focuses way too much on the theory as opposed to real life application. It's good to have a better understanding of the Greeks and the BS Model though.

Portfolio management a heavily tested area. The problem is, no one's gonna use CML, SML or the efficient frontier when allocating your investments. Yeah, it's good to have a diversified portfolio but really, in this market, how about more on how to construct a portfolio during a volatile market, how about less on Beta or APT. The theories are sound but there's a reason why it's called a theory because it's remotely applicable.

Overall, this part is not hard at all. A lot of formulas and some overlap with level I. 8 more months, moving on to book 4-Alternative Investments and Fixed Income.

I’ve always heard “All good things must come to an end”. If by “good things” we mean “easy-to-read material without the need to break-out the trust TI BA II Plus calculator”, then by all means nothing could be more on-point. As predicted, I was able to speed-through the Session #2 Ethics Case reading in one evening last week. I've since spent the last week, after finishing Session #2 early, relaxing and doing homework for my Quant Finance classes at Georgia Tech.

The next two week will be spent reading Session #3 on Quantitative Methods. This particular session looks like it’s going to be a bear, so I’m going to make sure I make note-cards as I go along.

Here’s my updated CFA Level II progress and study plan:

Binomial Method & Black-Sholes Options Pricing in C++

The following is a program I've written in C++ to price European Call / Put Options using both the Binomial Options Pricing model (via Cox Rubinstein) or the Black-Scholes model.

Please note that the program is separated into four separate source-code files:

• BSF.cpp > Contains Black-Scholes Options Pricing Functions and Cumulative Normal Distribution Approximation Function
• BT.cpp > Contains Binomial Options Pricing model (via Cox Rubinstein) Functions
• MAIN.cpp > Contains User-Interface for calling Black-Scholes and Binomial Options Pricing Model Functions and displaying output
• HEADER.h > Contains C++ libraries required to run the program as well as function prototypes.

Sooo, I'm a little behind my blogging buddies.  Yes, I waited to officially register for Level II June 2012 Exam.  But there was a purpose!  For anyone reading this, here's your official reminder that the first deadline to receive the maximum discount for June 2012 Exam registration is September 21!  Yesterday, I laid down the $670 for Level II print curriculum.  Don't wait, because the fee jumps almost $100.

Regardless, I am really looking forward to tackling this exam.  Random thought: I wonder if they've updated the material to include recent sovereign downgrades.

Aaron Glover, Evening MBA Student at Georgia Institute of Technology in Atlanta GA, completes the Listener Limerick Challenge on the May 7 2011 broadcast of NPR's Wait Wait Don't Tell Me (Link to NPR Transcript)

PETER SAGAL, host:

Coming up, it's Lightning Fill in the Blank. But first, it's the game where you have to listen for the rhyme. If you'd like to play on air, call or leave a message at 1-888-Wait-Wait, that's 1-888-924-8924. Or click the contact us link at our website waitwait.npr.org. There you can find out about attending our weekly live shows, right here at the Chase Bank Auditorium in Chicago, at our upcoming shows in Charleston, South Carolina, May 26th and Nashville, June 30th. Tickets are still available for both.

Hi, you're in WAIT WAIT...DON'T TELL ME!

Mr. AARON GLOVER: Hi, this is Aaron Glover, calling from sunny Atlanta, Georgia.

SAGAL: Hey, beautiful Atlanta. How are things there?

Mr. GLOVER: Oh, it's pretty nice. We just had finals at Georgia Tech, so very peaceful.

SAGAL: Oh really, are you a student there?

Mr. GLOVER: I am. I'm studying for my MBA.

SAGAL: Oh really, so you're going to go into business. What are you going to do with that degree? What do you want to do?

Mr. GLOVER: Not crash the economy.

SAGAL: All right, that would be good. You might be the first with that ambition, as far as I know. Aaron, welcome to the show. Carl, of course, is going to now perform for you three news-related limericks with the last word or phrase missing from each. Fill in that last word or phrase correctly on two of the limericks and you will be a winner. Ready to go?

Mr. GLOVER: Sure am.

SAGAL: Here's your first limerick.

CARL KASELL, host:

At hirsute Hindi soldiers they thrust cash. Hairy lips show we're many, not just brash. To show that we're brave, we're paid not to shave. Extra cash for a big, curly?

Mr. GLOVER: Moustache.

SAGAL: Right.

(Soundbite of bell)

SAGAL: A police chief in India believes police with moustaches get more respect. In law enforcement, that's know as the Magnum PI theory.

(Soundbite of laughter)

SAGAL: So he's paying his cops to grow 'staches. While the public reaction to the mustachioed force has been positive, they're reporting a 10,000 percent increase in incidents of police officers being mistaken for strippers dressed as police officers.

(Soundbite of laughter)

Mr. MO ROCCA (Correspondent, CBS Sunday Morning): It has to be a particular kind of mustache. It can't be like a handlebar mustache.

Mr. BRIAN BABYLON (Comedian/Host, Vocolo.org): Yeah, it can't be a hipster curlicue.

Mr. ROCCA: Right, or like a...

SAGAL: A manly mustache.

Mr. ROCCA: Yeah, not like a Snidely Whiplash.

Ms. AMY DICKINSON (Columnist, Ask Amy): Like a...

(Soundbite of laughter)

Mr. ROCCA: No, I mean I like Snidely Whiplash but and you'd think he's a bad guy and not a good cop.

SAGAL: It's got to be a good guy mustache. All right.

(Soundbite of laughter)

SAGAL: Here is your next limerick.

KASELL: My companion is whom you have met. Don't demean him or he'll start to fret. He's small, soft, and furry, but he'll start to worry if you merely call him my?

Mr. GLOVER: Pet.

SAGAL: Yes, pet.

(Soundbite of bell)

SAGAL: Just because your pets have no idea what you're saying doesn't mean you should continue to offensively refer to them as pets. Animal rights advocates now say pets are from now on to be called animal companions and you are their, quote, "human carrers." Get it right. But why stop there? If we're going to be really sensitive about this, we should start referring to dog walks as conjoined strolls.

(Soundbite of laughter)

Mr. BABYLON: Peter...

SAGAL: Leashes as obedience scarves.

Mr. BABYLON: I want my country back.

SAGAL: I know.

Mr. BABYLON: I want my country back, man. What's going on here?

Mr. ROCCA: Animal companion is very 1950s. Shouldn't it be animal partner?

Mr. BABYLON: Yep.

(Soundbite of laughter)

Mr. BABYLON: Yep.

SAGAL: All right, here is your last limerick.

KASELL: We monkeys are forced to conclude that the way you mix flavors is crude. It's got bland mouth appeal, and the plating's surreal. We're refined when we talk about?

Mr. GLOVER: Food.

SAGAL: Yes, food.

(Soundbite of bell)

SAGAL: When you think of a hairy ape savoring its food, you think of Mario Batali, not actual apes.

(Soundbite of laughter)

SAGAL: But a team of Scottish biologists has found that bonobos, those are related to the chimpanzee, they have a set of sounds devoted solely to reviewing food. Low pitched yelps means "oh mundane, why bring this unimaginative morsel to my mouth? It's a waste of opposable thumbs."

(Soundbite of laughter)

SAGAL: A high pitched bark though, well that's a four-star review on Ape Yelp.

(Soundbite of laughter)

Mr. ROCCA: I was trying to think of some sort of simian that rhymes with Zagat or something like that.

(Soundbite of laughter)

Mr. BABYLON: So bonobos are the ones with the big snozzes, right?

SAGAL: No, actually, bonobos...

Mr. ROCCA: This sauce is a little too orangutan-gy.

(Soundbite of laughter)

SAGAL: There you go.

(Soundbite of applause)

Mr. BABYLON: There you go.

Ms. DICKINSON: Woo.

SAGAL: Carl, how did Aaron do on our quiz?

KASELL: Aaron, you had three correct answers, so I'll be doing the message on your voicemail. Congratulations.

SAGAL: Well done.

Mr. GLOVER: Yes.

(Soundbite of applause)

SAGAL: Thank you so much for playing.

Mr. GLOVER: Thank you.

SAGAL: Bye-bye.

If you've been poking around on the site this weekend, you might have noticed a few minor design changes. While these changes are pretty obvious, some of the most important "under-the-hood" changes remain to be seen. This weekend, I modified the site's Apache Server .htaccess file to use custom files when errors are encountered on the website. This means that instead of getting 1,000 pop-up advertisements when accidentally typing-in an incorrect / non-existent URL on TheGlover.net (otherwise known as an 404 Not Found Error), you'll instead get to see a humorous image.

Presented for your enjoyment, a sample of the many error pages now enabled:

Ladies and gentlemen, er, we've just lost the picture, but, uh, what we've seen speaks for itself.  TheGlover.net server has been taken over -- "conquered", if you will -- by a master race of high-frequency trading machines. It's difficult to tell from this vantage point whether they will consume the captive market centers or merely enslave them. One thing is for certain, there is no stopping them; the high-frequency trading machines will soon be here. And I, for one, welcome our new robot overlords.  I'd like to remind them that as a trusted Internet personality, I can be helpful in rounding up others to toil in their underground colocated data center caves.