Banks Became Preditors, We Became Prey

-
Banks were personal and friendly 50 years ago, just like "George Bailey" (Jimmy Stewart) in "It's a Wonderful Life. That movie depicted so well, the true relationship between depositor and banker.

• We paid a fee for every check we wrote (1¢-2¢ each), even a monthly fixed charge for each account. Checks were printed for free as a part of that fee.
• Our banker knew our name (even our parents' names).
• Deposits counted the minute you made them.
• Withdraws counted whenever the bank had to pay them.
• Banks passed the benefit of the "Float" to their customers.
• "Credit Inquiries" didn't cost anything.
• Banks paid depositors 3-4% interest on their deposits.
• They charged the "going rate" for interest on loans they made.
• At every stage of the relationship banks respected their clients and tried to help them if they could.

Today banks charge the "going rate" for interest on loans they make, (that didn't change, but everything else did).

• They pay a half-% interest on deposits.
• "Free Checking" means you pay (10¢ each) for printed checks, in advance, whether you use them or not.
• Deposits don't count when you make them, but "Debit Card Inquiries" immediately count as "withdraws".
• Resultant "Overdraft Charges" ($36 each) are artificially created. But they still count, even if the purchase was cancelled and the bank didn't have to front any money.
• First, banks give THEMSELVES the benefit of the "Float", and, ...
• Second, they chronologically reorder the sequence of your drafts in order to maximize the number of Overdraft Charges. Resultant charges are MORE than the drafts, which is 36,500% simple interest (if your deposit counts the next day).
• "Credit requests" count negatively on your credit rating, particularly if you are declined (your credit score goes down further, simply because you were declined).
• At every stage of your relationship, the "banker" no longer has the authority to change the outcome you are discussing.
• The only part of "Respect" currently available is the gratuitous "smile".

Depositors have been reduced to Prey. If we're old enough, we remember that history of being reduced to Prey

The foregoing is "prologue". Here is the point:

Now, in today's economic crisis we learn that "Banks" (credit companies, et.al.) have applied the same "reduction strategy" toward their investors.

We used to think that banks (at the minimum) respected their sources of funds, their investors, their own lenders. In short, we trusted them to exercise their policies of "caution" universally.

Instead, they've leveraged the trust placed in them from both ends of their business (from their borrowers and from their lenders), while at the same time leveraging the mechanics of the simple deposit-withdrawal system.

Banks even know our threshold of pain better than we do !

1) Banks became the perfect predators, and we didn't complain.
2) We became the perfect prey, and we still didn't complain.
3) Now, we're bailing them out because it would be TOO PAINFUL FOR US, if we don't.

If our government is going to intervene, it must hold the "finance cats" responsible for their "business losses". If we have to bail out the money market managers, lets bail them out to "preserve" their debt, not to "forgive" their debt. After all, If I have to make a "low interest, high risk" loan, I'd rather make it directly to my children, not to banks who make it directly to my children.

8:00 pm PST - 10/08/08 - CaptainEcon