Friday, October 17, 2008

Wall Street and the Big Banks Don't Deserve Your Money

Face it - the $700 billion-plus bailout plan does not, will not and isn't designed to help you. It is made to bailout the banks of the Federal Reserve of New York and other 'friends' of Treasury Secretary Paulson and the life-long pals of the Fed Chairman. Sure, you can write your elected official, but did he/she listen to constituents regarding the bailout? Nope. In the meantime, you can vote them out of office in November (both Democrats and Republicans are responsible for the horrible waste of taxpayer money we will now be forced to pay interest on). The fastest way to kick-start the shift away from a centralized economy is to stop financing the big banks—and through them, the activities they are financing—and to switch your bank deposits to a well-managed, community bank or credit union. While you're at it, fire your broker, as well. In fact, it's the single greatest point of leverage you have as a consumer. Here's how:

A. Identify Local Banks

1. Get the list of the banks and credit unions in your area from your local Yellow Pages. Delete names that you know to be large banks, including names on the US Banking Tapeworm 20 List:

The following is a list of the 20 best banks to flush from our lives in the U.S. In 2004 alone, these 20 banks reaped $89 billion in net income, while in the same year US households ran a deficit of $342 billion.

Consider what could happen if we turned the tables.

1. Bank of America
2. Bank of New York
3. Barclays
4. BB&T
5. Citibank/Citigroup
6. Citizens
7. Credit Suisse
8. Deutsche Bank
10. JP Morgan Chase
11. Mellon
12. Merrill Lynch
13. PNC
14. Royal Bank of Canada
15. State Street
16. Sumitomo
17. SunTrust
18. UBS
19. Wachovia
20. Wells Fargo

TOTAL NET INCOME in 2004: $89 Billion

2. Visit your local Chamber of Commerce and ask them for a list of all banks in your area - ask them to identify which only operate locally and/or regionally and which are owned locally or regionally, or, if credit unions, controlled locally.

A local bank is a bank that operates within your local area and is primarily owned or controlled by people who live within or near your local area.

A regional bank is one that operates in your state and a few other states and is owned and/or controlled by people based in those states.

B. Collect Information and Recommendations

1. Do Web searches to identify websites for the banks on your list and information they disclose. For banks that issue publicly traded stock or other securities, check their website or the EDGAR system to access the annual report, proxy and other filings they file with the US Securities and Exchange Commission (SEC).

2. For information not web available, call or visit the banks and ask for information regarding their area of operation, who owns and governs them, copies of their annual report (including financial statements) and information on and prices of products and services of interest to you. Also ask what % of their deposits they loan locally as opposed to reinvesting in national or international money markets and what their correspondent banking relationships are so you know whether or not they are channeling their funds to one of the US Banking Tapeworm 20. Use this % to compare to other banks in your area.

3. If they are reluctant to provide you with their financial statements or you find it difficult to persuade them to give you a copy, delete the bank from your list.

4. Tell you friends, family and trusted professionals and business people in your community that you would like to shift to a local bank and ask them for recommendations of which local and regional banks have provided them and their networks with the best service and support.

5. For the banks that emerge as the most likely candidates, you may want to check with the rating agencies or bank rating services to see what additional information is available about the bank. Another source of information on the banks history is to do Lexis-Nexis searches for both the bank and the owners, board members and top management.

6. Based on these steps, identify the 2-3 best potential banks for you and proceed to the next steps.

C. Evaluate The Banks' Leadership

1. Owners
Do they live in your community?
What is their reputation and experience?

2. Trustees/Governance
Do they live in your community?
What is their reputation and experience in banking, investments and the types of businesses, governments and other organizations that the bank serves?
Are they people of integrity and competence?
Do they represent a diversity of experience, knowledge and networks in the community?
Are they motivated and caring people?
Do they care about their business and are they proud of the principles operating in the bank?
Do they care about their customers and their colleagues?

3. Management
Do they live in your community?
What is their reputation and experience?
Is turnover low?
What is the spirit you feel when you walk into the bank?
Are they professional and proud of the organization that they represent?
Your intuition is an important guide. Talk to a loan officer or branch manager - Do they have freedom to make decisions and do their jobs or are they heavily bound to top/down
procedures? See how they handle your request. Ask what the procedures are for a loan or opening an account. There is a often a direct correlation between better service and the less hoops that customers have to go through, less paperwork to fill out and less fees to pay.

D. Profitability and Financial Safety and Soundness

What is the customer base of the bank?
Does this customer base represent a strong diversified base of deposits and lending business?

Review their financial statements

Has the bank been consistently profitable?

Do they show a strong base of equity, retained earnings or other financial reserves?

What and who is generating the profits of the bank and what are the potential risks associated with those profit flows?

Do the bank financials indicate a sustainable flow of business that would be sound even in difficult economic periods?

Would the bank be safe and sound in a scenario where we could not depend on FDIC deposit insurance?

What is the ratio of their loans to deposits? Do they have extra cash reserves above what is required by law? This shows a conservative "loan to deposit'' ratio.

Does the bank avoid high risk financial practices such as too much debt and large derivative portfolios?

Who are their correspondent banks and other strategic relationships?

In the course of asking for recommendations, are there ever any instances of customers being delayed in accessing the cash in their account? Delays in getting your money out are a bad sign.

E. Locations & Services

What are the main office and branch locations and what are the days and hours when they are open?

Make a quick list of the products and services you now use as well as the products and services you would value -- items such as checking and savings accounts, wire transfer services, safe deposit boxes, ATM cards, credit availability and affiliated investment services.

What are the products and services available through the bank and their affiliates?

Compare this to the list of products and services you need and value.

F. Fees, Costs & Interest

Review the fees and costs of either switching your account or simply creating a new account.

What are the interest rates and payments they provide to depositors or investors in certificates of deposits?

If they are a credit union, what is their history of distributing profits?

G. Confirm Federal Deposit Insurance

If you want to confirm that the deposits at your new bank are indeed federally insured you can contact:

United States Federal Deposit Insurance Corporation (FDIC)
550 17th Street, NW
Washington, DC 20429-9990 USA
Tel: +1 202 736 0000
Fax: +1 202 898 3772

National Credit Union Administration (NCUA)
1775 Duke Street
Alexandria, VA 22314-3428 USA
Tel: +1 703 518 6300
Fax: +1 703 518 6660

H. Make the Switch

You can either close your old account(s), or open your new account as your old account runs down. Some depositors prefer leaving the old account open to the extent they have automatic transfers and/or deductions in the old account and it may take a while to change or they consider it too risky to change them. Other prefers to do this ahead of time to avoid the expense and complications of having two accounts.

When you close or withdraw from your prior bank, if you are comfortable doing so, explain why you are moving your account. This type of customer feedback can have a significant impact on bank policies - particularly if enough people do so.

When you open your new account, make sure you communicate with your new bank about why you selected them. It takes a lot of hard work over many years to create and build such a bank. Your new bankers will appreciate knowing that you appreciate their efforts to build and manage a safe and sound business that supports your community.

If you are interested in doing so, let your new bankers know that you would like their help in understanding what you can do to help them support local business and your community and to help the money in your area "come clean.'

As you make the switch, set aside some time to check and make sure the process of working with a new bank goes well. Change is a learning process. There may be glitches. Take the time to work them out -- to feed back -- and work with your bank to ensure that their products and services are working in an ideal way for you. Remember, they want to do a great job for you.

Good banking relationships are like all banking relationships -- they grow and succeed as we invest in them and hold them to the highest standards.

I. Feel Good About Your Efforts to Come Clean

Once you are confident that you have moved to a bank that you are really happy with, sit back and feel good about your efforts. While decentralizing our financial system is a life long process, you have taken a very important first step!

Enjoy your accomplishment!

J. Questions and Answers?

How Long Will This Take Me?

Depending on how many banks you want to consider and whether you can access good recommendations in the normal course of living without taking a lot of time, identifying and moving your bank account could take anywhere from 4-15 hours over a period of 1-4 weeks. If you team up with close friends and share the research, it can go even faster! The key to speed is to winnow the list down to the most likely candidates.

Take your time if you want to use this process to learn how the money works in your community and to build your skills in accessing and using financial information.


Sources: Thanks to my dad and sister - financial whizes in their own right - for this. Also Catherine and Albert.


Avatar said...

Look at the annual reports from the companies that the government is forcing them to sell shares to the government and the Federal Reserve. They have either fudged their books or they really don't need the money. Seems like a nationalizing program or is it something different.

Walter said...

Thanks for your comment!

The books for the Federal Reserve (and the member banks of the NY Fed) have not been open to the public (for review) for over 25 years and there is a reason: they have many things to hide, such as where all this money missing money over the past 40 years has been going (incidentally, you do know we have no gold at Ft. Knox - no explanation has been offered as to where it went). By Congressional mandate, the books have to be reviewed, but they haven't been even cracked.

Also, the bailouts we're seeing in the U.S. and in the UK are the first steps toward nationalization (Britain has pretty much completed phase one of nationalization), followed by a one world economic government. Don't believe me? Then why are all the governments of any given continent forming 'unions'; without much fanfare, the president signed into law the forming of the AU - that's the American Union. It's usually under the guise of balance of trade and to be be more competitive in foreign markets. If that's the case, then why no border control under the new policy-to-be-implemented? And why the replacement of the dollar with the Amero?