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Fri, 11 Dec 2009
Banks are in the news again, and not really for the best of reasons. Congress is just getting rolling on debating the reform of financial regulation, and we're hearing a lot about, well, unhelpful banking practices.
"Overdraft protection" for example. This is a system where the bank will honor a check that might overdraw your account, but charge you a stiff fee for the privilege. You can appreciate the beauty of this scheme with an account holding $300 and two checks, one for $400, and one for $15. Without overdraft protection, one would bounce and you'd be dinged for that one, but the other would clear no problem. With overdraft protection, the bank can charge you for both checks, because the first one makes the account balance negative, and the second makes it worse. In essence the bank is giving you a small loan, at potentially astronomical rates. Peter Wasylyk, a Rhode Island attorney, is currently trying to organize a class-action suit against big banks for this practice. (He's also a state representative from Providence.)
What else? It was reported in the Providence Journal a couple of weeks back that local banks are not participating in a part of the federal stimulus package meant for them. This provision was meant to provide very low interest loans or credit lines to area small businesses. As of the end of November, only 13 Rhode Island businesses had received loans, from only four banks. Most of the other banks complained of too much paperwork, or simply ignored the program.
And, of course, we can't forget the enormous executive bonuses paid by the big banks (including BankAmerica) straight out of federal bailout money.
But why are they doing these things? It's not because they're evil, but because they feel pushed into it. Banks are an essential part of our market economy. We can't do without them. Ben Bernanke (and many others) call credit the lifeblood of the American economy. But banks are also economic actors. They have to attract good talent, they have to have their loans repaid, and they have to earn money. The problem we all face is that there are lots of ways to do these things, and only some of them are good for the rest of us. For example, a bank could make money by getting its branch security guards to confiscate the wallets of its customers. Presumably a bank that did this would start losing customers -- unless all the other banks were doing the same thing.
17:43 - 11 Dec 2009 [/y9/cols] link
Tue, 08 Dec 2009
It seems local banks don't seem able to participate in an important part of the stimulus package. Read here.
01:03 - 08 Dec 2009 [/y9/de] link
I've lately been reading "Ground Truth" by John Farmer. It's a blow-by-blow account of the events of September 11, 2001, informed by a few bushels of recently declassified documents -- documents that either weren't available to the official 9/11 commission or they chose not to use. Farmer was counsel to that commission, so he was in a position to know what evidence was available.
What I am learning from the book is alternately depressing and enraging. Incompatible equipment and rules made interagency cooperation impossible. (And some of the "fixes" made in the aftermath have only made the situation worse.) Opportunities to capture or thwart the hijackers were ruined by bureaucratic turf warfare, poor planning, bad equipment and plans created for a cold war that was over.
Plus, most of the agencies involved lied about it after and classified the evidence of their performance, effectively thwarting any attempt to fix the problems in a rational way.
Now, I've worked in enough large corporations to know that these kinds of inefficiencies are endemic to all kinds of large organizations, not just government. I recall one company I consulted for that laid off several people from a profitable division primarily because there was a hiring freeze and they couldn't replace a business development guy who had left. Then there was the company that laid off every single engineer who worked there in order to outsource everything (key quote from the CEO: "If your job involves actually doing something, your job is at risk"). I was at another where the two chief engineers created incompatible software largely because they really didn't like each other. (One of these companies is still around and supposedly thriving.)
That said, if you yearn for good government, it's of very little comfort to know that private companies are often just as bad. So I figured this week it would be good to share some pleasant news about your state government, so you can have something to be thankful for.
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(A funny book you should own)
