Monday, April 27, 2009

Victims of their own greed

by Don Klein

The guest speaker addressed the annual meeting of a group of women bankers about 20 years ago. "You guys should be ashamed of yourselves. You have the easiest job in the world. You take my deposits and pay me 4 percent interest and loan my money out to borrowers at 10 percent. How can you not make money?"

He went on: "It’s like taking candy from a baby. There is no risk to you. How could you ever fail?"

What the speaker didn’t take into account was that bankers would soon reach the apex of greed that some of them will make bad loans that seem lucrative in the hopes of increasing profits through speculation. The speaker, by the way, was me, and I was so wrong that day.

I had been invited to speak at a luncheon of Maryland professional women bankers (I don’t recall the actual name of the organization) in suburban Baltimore. I thought my opening line would stir up the audience of about 100 women and by these words they would remember me since most of their guest speakers delivered dry kitsch when they got up to talk.

Instead of shocking the crowd, it was I who was stunned. First of all, they roared approvingly with laughter when I made the remark. And after the speech they gathered around me and expressed how humourous they thought my talk was. In their haughtiness they did not take what I said seriously.

At the time banking was considered sanctified and bankers were sacred cows. They knew all the quirks and pitfalls of money lending and it was unlikely that any borrower, and certainly not large numbers of them, would affect the solvency of the rock-ribbed institutions of long standing. Wrong again.

I recall the arrogance of bankers when my wife and I sought a loan for a small business we planned to open. These pompous loan officers would sit behind their oversized desks, look at our application, ask a few unctuous questions and then rule that we were not qualified for the loan we sought. That was years before these very same ravenous masters of monetary manipulation started giving out half-million dollar home loans to school bus drivers and supermarket cashiers.

They went from one extreme to another and wondered why they needed billions of taxpayers’ funds to save them from eradication. There is a five-letter word that describes bankers. It is: GREED. Profit was not good enough. Super profits were what their ravenous hearts demanded. When you match that attribute with lack of government controls, you end up in Wizard of Ozland where all you do is push buttons and move levels to get an outcome no thicker than onion skin.

Don’t think I am writing this because I am bitter about those banks which refused to give us loans. Eventually we got the start-up money we needed from a small neighborhood bank which recognized the value of our business plan and we did quite well with our small enterprise. We paid the loan back with interest, which is more than can be said of the horrible loans the big banks gave to unqualified borrowers decades after they turned us down.

One of the reasons it is absolutely essential that banks be regulated is because they never deal with their own money. They take your money and mine and play awful gluttonous games with it. They make large profits on OPMs (other people’s money) but they are often not very smart about it. They turn down good deals likes ours of relatively piddling amounts and fall victim to their own avarice by making bad deals for lots more money than we ever thought of asking for.

Here’s another instance of bank imbecility. I dealt with the same bank for more than 30 years when one of their own executives, working under the noses of top bank management, was stealthful enough to embezzled some $60-to-$70 million dollars. It was the bank’s stupidity that allowed the corrupt high executive to pull off the theft. And it was the bank’s ineptitude not to discover it for years.

The following weekend when I entered my branch of this bank to withdraw a trifling $100 the teller who had worked with me all these years and knew my name when I stepped to her window suddenly demanded personal identification. They were duped by one of their own so now the little depositors became the target of a crackdown. The teller apologized when I not only refused to show her ID but scolded her for acting like she didn’t know me.

Her answer was plaintive: "Oh that’s the new policy. We must ask for ID from everyone withdrawing cash, even long-time customers." They never demanded ID from me again. That bank soon was bought out and no longer exists.

Making sweeping policy without considering specific circumstances reminds me of the time I was carded in Los Angeles International Airport when I ordered a beer. The bartender demanded I show him ID. I looked at him in bewilderment. I was in my seventies at the time, and looked it, but that didn’t dissuade him. The policy at that saloon was to card everyone.

The American banking system and that silly Los Angeles bartender have many things in common. They are, besides being greedy, pompous, out of touch with reality, disrespectful to the community they serve, and stupid -- and deserve all the negative assessments they get.

As a result of these experiences I swore that I would never fly into Los Angeles International again if I had a choice and if a bank official who knows me ever asks for identification I will respond with, "Who among the bank’s loyal staff stole money this week?"

No comments: