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It could be a “wonderful life”

In some ways, a casual visitor to this site could skim post titles and navigate away with the overall impression having been made that this is just another “gripe site,” focused on banks’ bad behavior.  I would have to acknowledge that this critique would be fair, on the surface, at least.

Nevertheless, what motivates me is the idea that people can have better lives.  Our economy at large could be vastly improved if banks were the personal and business account “relationship partners,” that they claim to be.  Jimmy Stewart was not that far off the mark in “It’s a Wonderful Life,” in other words.  Financial capital plays an important role (though it is given more credit than it deserves, i.e., social capital is critical also) in entrepreneurship, and we certainly need more small business start-ups, a healthier small business environment (growth), and more jobs would be the result.

We’ve got major problems, and one of them is that a lot of the creative thinking and innovation going on in the banking industry is associated with finding new ways to take money from small business accounts and consumers.  Much of the furor has died down, but at the height of the bailouts, banks were giving out bonuses while at the same time changing terms so fast that they lost the trust of millions.  I have not forgotten my own personal experiences, but suffice it to say that were I to be presented with a marketing research (brand identity) question, “Among large national banks, which one or ones would you trust with your credit card processing account [auto loan, personal or business checking account, credit card account, any type of account]?,” I could name many of the top brands, but I could not say that I trusted a single one.  Since I think that my sentiments above are consistent with those of millions of other small business and consumer account holders, I think that’s a pretty fair indication that our banking system is broken.  There’s not much about dealing with banks that’s “wonderful.”

Unfortunately, I think millions of hard-working Americans would have the very same lack of trust for the lawmakers and regulators that govern them generally, and as it pertains to creating an environment that is conducive to growth and prosperity (including the regulatory environment for banks).  Let me take and reword the first sentence in the paragraph above to further illustrate my point:  We’ve got major problems, and one of them is that a lot of the creative thinking and innovation going on among lawmakers at the federal, state, and local levels, is associated with finding new ways to take money from ALL businesses and citizens.  (Presently, the aim seems to be for purposes of redistribution to recipients who take more than they are willing to give back to society.)  Since I think that my sentiments above are consistent with those of millions of other small businesses of all size and consumer account holders taxpaying citizens (those who are paying for the upkeep of persons who are not paying or planning to pay as long as they can “get free government money”), I think that’s a pretty fair indication that our banking system government is broken.

I wrote a while back offering some thoughts about how we could made great strides towards fixing the housing market.  I have more ideas, although I don’t proclaim to be an economist, about other aspects of our economic mess.  All of the economic advisers, the FED, TV talking heads, and others who endlessly pontificate haven’t seemed to come up a way to “fix this mess,” so I have no choice but to think about issues and the economy myself!  For instance, remember when we were bailing out GM?  We could have instead placed a purchase order for government vehicles with demands for curb-jumping innovation such that they were super-energy efficient (or at least no gasoline burners).

A distant colleague of mine asked me what I thought of a Ford Fiesta a couple of years ago, and I really didn’t know much about them (other than I haven’t had a great track record with Fords, my most recent, a Ranger truck, needed a head replacement for “no good reason,” and despite excellent maintenance–that’s a long story).  I did a little research online at the time, and I found out that there are other versions of the Fiesta around the world that get 65 mpg that are not available here in the U.S. (they run on diesel, and the tax rate on diesel impedes the feasibility of selling the cars here — so a double whammy: taxes prohibiting fuel efficiency and innovation).  Instead of bailout money, we could have invested in that technology or even better technology.  I know, it’s widely believed that Ford didn’t take bailout money (but there is a back-story).  The point I’m making, however, is not car-brand specific.  Rather, instead of bailout money the government could have issued purchase orders directly and created powerful incentives for consumer purchasing of very high-efficiency vehicles that a lot of people could really use right now in light of being fleeced at the pump on a regular basis.  This would have been easier than a moon shot as better designs are already on the drawing boards.

Presently, we have one of the highest corporate tax rates in the world.  But at the same time we (according to political rhetoric) want businesses to start, flourish, and hire people.  Since businesses can’t do that, we have to ask ourselves a question: “Do we feel lucky?  Well do we?”  Suppose we elected people who were really creative and innovative, and they passed laws that would ensure that corporations paid low taxes, or horrors, no taxes for a while, at least to jump-start the economy?  OMG, how could we afford that?  One way would be to stop spending billions on supporting people who can’t find jobs because businesses, rightfully so, are in no mood to hire.

By the way, a little accounting lesson for those who believe that corporations “eat the taxes” (so there’s no downside if they pay more):  Corporations pass on the taxes in the form of higher prices for their products and services, to you.

I’m almost out of time for today, but I would conclude by adding that with all of the arguing about middle class tax rates going up or down, taxing the “wealthy,” or not, focused on federal tax rates, people need to consider the embedded taxes and fees in everything we buy.  I just wrote three checks to my daughter’s public high school for courses that she is taking (course fees, I thought I already paid with my growing property tax bill, vehicle tax bill, sales tax bill, etc., Huh?).

Have you read your power company or phone company bill, your cable bill, your gasoline pump notice (about taxes on each gallon of gas)?  Did you know that government fees are another way of charging you, taxes?  Have you taken a taxi or flown on an airline (taxes and fees are really loaded up in those fares)?  Indeed, the bookkeeping and collection costs for all of the taxes and fees are so numerous and bloated (redundant), that there is huge waste in the thousands of little decentralized systems located everywhere in the United States, aimed at collecting a few pennies, dollars, or thousands of dollars, from each and every person or business.  No wonder we’re broke, our systems are very poorly designed such that there’s less and less efficiency.

Things could be far more “wonderful.”  We could change all of this, but we’re going to need to work together and be more creative.  The really wonderful news, is that I know we can do it.


Another abusive practice, targeting students; are higher education institutions “partners” or “pushers”?

Yet another example of banks doing what they do best: targeting segments of the population that can be more easily tricked and trapped by unfair practices.  According to an August 8, 2012 FDIC press release (partially titled “Unfair and Deceptive Practices”):

“Among other things, the FDIC found that Higher One and The Bancorp Bank were: charging student account holders multiple nonsufficient fund (NSF) fees from a single merchant transaction; allowing these accounts to remain in overdrawn status over long periods of time, thus allowing NSF fees to continue accruing; and collecting the fees from subsequent deposits to the students’ accounts, typically funds for tuition and other college expenses.”

In a Bloomberg article, attribution was given to Mark Volchek, Higher One’s chief executive officer for saying the company “is fixing its practices as required in the settlement and has credited affected account holders.”  Isn’t that nice?  After a legal/regulatory action, forcing the company to give students their money (e.g., tuition refunds) back, Higher One is going to issue “restitution” to the approximately 60,000 students (FDIC) it was willing to trap in a circular pattern of being overdrawn, in which they continued “racking up fees” (Bloomberg).

One detail in the list of changes that are to be made on the part of Higher One’s practices stood out, to me: “[Higher One is required to] not charge more than three NSF fees on any single day to a single account.”  So, one merchant transaction leads to three NSF charges, a day…is that what they were doing?

In my role as an educator, I think I have developed a greater appreciation than I ever did in the past (before becoming an educator) for some of the challenges faced by academic institutions.  Nevertheless, I do assert that banks are very good at dreaming up new ways to engage in fleecing people, and the debit card phenomenon is one of them.  Debit cards have been sold to government officials, administrators and others in the public sector as a convenience.  But at what cost?  Students may have gotten their deposits faster (that’s a questionable claim–is an account holder really able to draw against deposits before those deposits have actually cleared?), however, they also had their money unfairly taken from them faster, and repeatedly, too.

From a search engine results page, I spent a few minutes perusing a few of the web pages that served as a partial inspiration for the title of this post; “partners” or “pushers”:

HACC has partnered with Higher One

Kentucky Community & Technical College System (KCTCS) proclaims “Smart Money Starts Here!” and promotes a $50.00 (MasterCard) gift card (link on bottom left):

KCTCS Higher One account landing page screenshot

Simplify Your Life With The Valencia Debit Card

University of Montana: “services that provide the ultimate convenience and ease of use

Last I heard, statements like those above are called “benefit appeals” in marketing.  I suppose that if I had the time to drill down, I could assemble an exhaustive list of Higher One’s university clients (sounds like a good project for a member of the media: RESEARCH YOUR STORIES!).  According to this article, “Higher One holds card agreements with 830 campuses nationally that enroll 6.2 million students, according to testimony at a May Department of Education hearing by Higher One attorney Robert Barbieri.”  This is an excellent backgrounder on the larger issues surrounding campus debit card programs.

One remark about the PR “spin.”  You’ve gotta love it.  Volchek was also quoted by Bloomberg to suggest that the “relatively low civil money penalty imposed reflects how seriously we take our commitment to our customers.”  Since when have banks and their executives individually suffered large penalties or at all for engaging in their abusive practices?  Most settlements appear to me to be: “You got caught.  You have to stop doing that and give back what you took.”

Has anyone gone to jail over the mortgage meltdown?  At least according to this article in American Banker, nope, and it’s “unlikely” (that anyone will).  Apparently, as an executive it’s okay to create a culture of greed, corruption, fraud and abuse, as long as one does not personally fill out the paperwork that is associated with immoral or illegal behavior (executed by underlings).

So much for Higher One’s, “we must not be that guilty, look at the small fine,” excuse.

And, yes, even though I manage to make ends meet, it sure as heck isn’t getting any easier.  I still carry my own student loan (a big one that’s been a “ball and chain” around my neck, for years).  I have no appreciation whatsoever for those who profiteer on the backs of those of us who are trying to better ourselves and the world around us by seeking to educate or become better educated.  Therefore, in my opinion, Higher One’s actions are not a new low for the banking industry as a whole, but they have certainly been loathsome.


Just to be clear…I do think there’s a difference between SunTrust and some other banks

Just to be clear regarding some of my recent commentary speaking out against SunTrust’s move to raise minimum checking account balances, I do think there’s a difference between SunTrust and some other banks.

I certainly appreciated the captured remarks and headline, “SunTrust CEO Calls JPMorgan a `Black Eye’ for Banks” in the video from Bloomberg embedded below (although in the end he is “politically correct as a member of the banker’s club” in commending Jamie Dimon for his handling of Chase’s trading loss debacle).