Big Banks Suck -

Welcome to the real world, Mr. Dimon. They finally found a blemish on Wall Street’s golden boy. The banker who could do no wrong just lost $2 billion due to his rogue trading department. And, yes, he’s the same guy who went to Washington on several occasions whining that proposed regulations (Volcker rule) will change Wall Street forever and make his bank uncompetitive in the global financial environment.

I hate regulation as much as the next bird, but for the price of some occasional public scorn, the big banks, in return, continue to abuse and deceive the public and, guess what, America is still at their mercy. Remember “too big too fail”? Well, they’re still too big to fail, and there’s not a damn thing we Americans can do about it. I loathe big banks and it got me thinking, what good are these big banks now?

Back in the day, most bankers worked in local institutions and loaned money to folks who belonged to the same clubs and whose kids went to the same schools. Even the large commercial banks knew us as corporate executives or small business owners. Banks were more like  utilities than investment banks. But in the 1990s, Congress, the Fed and the President suddenly knew more than the men who lived through and experienced the depression. They knew better, saying “These are different times with antiquated rules” and  “We are so much smarter than the old conservative fools.”

So the law separating investment firms from commercial banks was rescinded. Banks now could make money in trading and company takeovers, and they could buy and sell any investment they choose. In the old days we had restrictions and limits. Now there are no limits.  Banks can build esoteric investment contracts that no one understands–including the employees who created them–create a market for them, and hope for the best. That’s what happened with this Chase mishap. They created a synthetic investment hedge, took absolute control over this market, assumed they knew what they were doing until, of course, they didn’t. We just went through this crap in 2008.

Banks do almost nothing positive for our economy. You may say, no way, banks protect my checking and savings accounts and give me the satisfaction of knowing that my funds are safe. But do the banks make your funds safe or is it the FDIC that protect them? Let’s put it this way: are you opening an account at a bank without FDIC insurance? I don’t think so.

And do we really think the banks are a positive influence on housing and mortgages? By offering a mortgage to anyone with a pulse, the banks created a housing bubble that made Donald Trump blush. So Americans paid twice as much for a house that they couldn’t afford. The clock struck twelve and the bubble burst, which sent housing prices tumbling and borrowers into foreclosure. The banks were left holding the bag, but the Fed gave them loans and allowed them to not show hundreds of billions of dollars of losses on their balance sheets. When was the last time you heard about bad mortgages? Trust me, they didn’t just disappear or get paid off.

Try getting a loan now. Only the top customers can get mortgages from the big banks. The U.S. government through Fannie Mae and Freddie Mac are making the housing loans. Big banks are not helping Americans buy houses.

But banks make other loans to consumers and businesses, right? I’m starting to sound like a broken record, but Americans who need loans have little chance of qualifying for one. This applies to car loans, personal loans and also to home equity loans. Home equity loans are essentially a credit card on the equity of your house. Everyone had them 10 years ago and it was a big profit maker for the banks. Once housing went into the crapper, banks told these hard-working Americans to get lost and find some other loan alternative. And, oh yeah, if you had an open home equity loan, you had 60 days to make good on the balance. Just when you needed it, they yanked it away. Similar to the practical jokers who attach a twenty-dollar bill to a fishing line waiting for the next sucker to reach down and attempt to pick it up.

We need insurance companies, mutual fund families and discount brokerage firms. (Don’t get my started on the wirehouses.) And we need local banks and credit unions because they know their clients and are committed to making their town a better place. We have relationships with locals and credit unions. But enough of these fee-sucking-good-for-nothing vampire banks. You think I’m crazy? Start paying attention to their ads and newspaper articles. What are they doing to make America a better place? Absolutely nothing.

Pay-it Forward:

It’s graduation season, and the kids will be inspired by many a speech. In my opinion, the most important message they can hear now, besides work long and hard and never give up your passion, is to think outside of that cliche-ridden box. Or maybe a better way to say it now is: do things differently. Work at the Starbucks near the ad firm where you want to work so you can get to know the employees. Volunteer at local charities so you can meet influential people. It takes time and dedication, but work hard at being different.

Earl E Bird

I'm Earl E. Bird and I am very concerned about saving for my senior years. I am amazed at the stumbling blocks that exist when saving for retirement. That's why I take my time when making decisions on building my nest egg.

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