Category Archives: Banks

Dump Your TBTF Bank

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What if everyone stopped using the big banks?

Back in 1977 when I’d just graduated from college, the first job I got with my brand spanking new English degree was…a bank teller. My salary was something like $600 or $700 a month. I don’t know what they pay tellers now, but back then it was a decent wage. Crazy, eh?

I remember the people in upper management being very impressed with me and offering to send me to school so I could make a career in the banking industry. The thought of working in a bank was so far from what I envisioned for myself that I thanked them and turned them down. In those days, banking wasn’t anything like glamorous, and it certainly didn’t have anything to do with writing or creativity—which was what I had in mind for myself in deciding a career. Banking then was boring, boring, boring.

Looking back and seeing how monstrously powerful the banks have become, I see that there was actually much more room for creativity than I’d ever dreamed possible. Look at the creative things the financial industry has come up with: sub-prime mortgages; hedge funds; mortgage-backed securities; derivatives. There have been some busy little minds romping around the once oh-so-boring financial and banking industries! And those once modest salaries and bonuses (hey, I got a frozen turkey for my Christmas bonus in 1977!) have grown phenomenally, in leaps and bounds!

I remember in the 90’s how banks seemed to be merging and changing hands and sprouting like cancer cells, and it didn’t make them more efficient or more customer-friendly. It seemed as if the bigger they got, and the more they changed hands, the less efficient they became. Say you had a line of credit with a bank, with an interest rate of 4 points over prime. Your monthly statement arrived at the same time, you could figure out the interest rate on Excel (or Lotus, which was the big spreadsheet at the time) and you knew exactly what your payments should be and how many you’d have to make before the balance was zero. You made your payments on the same day every month and you knew exactly where you stood. Then some larger, more prosperous bank came along and took them over. Suddenly, your statements looked different, your interest rate went up, you couldn’t figure out how the hell they were calculating it, and they seemed to be withholding the posting of your payments until the very last moment, so they could get as much interest as possible. Sometimes you’d get a notice that you hadn’t paid, when you had, and it would require yelling at people on the phone, sending them copies of canceled checks, having them tell you it was all straightened out, and then it would happen again.

Or consider the banks that raised your credit limit so you could roll over balances and pay a nominal interest rate for a period of time before the real rate hit. And a couple of months after that, they would send you a nice letter stating that you had too much debt sitting out there, so they had to raise your interest rate even more. And let’s not forget how they urge you to get insurance on your account in case you get sick or die; you don’t want your credit to just die out altogether, or leave the debt in the hands of your poor, mourning family!

Here is one thing I learned after finding myself in debt to the banks to the tune of $50K: Don’t buy their insurance, for one thing. If you get sick and can’t work, you call them up and make a deal. When my elderly mother ran up a $14K credit card debt and forgot to make a payment (she was 87), they harassed her and threatened her until my brother-in-law called them up, told them what idiots they were to force their credit card on a senior citizen with aging faculties, and explained to them that they could recover ten cents on the dollar or nothing at all; which would they prefer? They took the ten cents on the dollar. And if you die, well, you don’t have to worry about paying anyone anymore, and your family doesn’t have to pay them. The banks might try to get something out of your estate, but if there aren’t enough assets, it’s called “write it off as a bad debt, bank boys”.

When I had my money in Bank of New York and needed a new car, I called them about a loan. They didn’t even let me finish the sentence: 11%, that’s the rate, period. So, I contacted a local credit union that was affiliated with my employer. They said that they were now open to anyone who “lived, worked or worshipped” on Long Island, so you didn’t have to work for an affiliate company anymore. If there wasn’t a convenient branch near your home or office, you could bank at any other credit union on the island and it would be free; the money would go to your account regardless of which credit union you went to. They had ATMs at every Walgreen’s drugstore and free use of the Citibank ATMs at all the 7-Elevens. How did you join? Open up a savings account with $5 (that’s five dollars) and you were a member. Their car loans were 6%. I ran right over there and joined; it took less than 24 hours to qualify me for a car loan and get me a check. And there was no penalty for an early loan payoff.

When Citibank bought Bank of New York right around the same time, I closed my account there. They couldn’t understand why: “But it’s all the same people who will be working here!” Yes, but you’re now owned by Citibank. Sorry, can’t do business with you anymore. (Citibank was the biggest whiner when I did my debt reduction program to wipe out the $50K credit card debt they helped create. It took me six- or seven years, but I did it. They got 100% of their principle, just not the juice rate interest they thought they were entitled to.) I moved everything to the credit union, where I now have checking, savings and money market accounts. When I paid off my car early, true to their word, there was no penalty.

The difference between a credit union and a bank is that credit unions have a vested interest in the community where they operate. They give personal service, their interest rates are lower, and they’re not too big to fail, so they care.

So, what if everyone decided that investing in their own community was a better idea than lining the pockets of bankers, who have already proved that their interests lie with their organizations’ ratings on the stock exchange and their own bank accounts rather than in the communities where they do business? What if everyone in the whole country just said, “You know what? We bailed you out. You foreclosed on our houses and jacked us around a hundred different ways. You’re just itching to find new ways to pick our pockets, and what’s your big gripe against regulation if you’re so honest? Thanks, but I’ll just take my money–ALL of my money–and put it into this nice little community credit union over here, where you can’t touch it. Go cry to your friends on Capitol Hill. I’m just not interested in hearing your sad little story. Go away; you’re bothering me.” Wouldn’t that be fun to watch?

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