Being an "A" Player in a "D" Bank

It's been a couple of weeks since my last post and I figured it is about time to post again. It is pretty much impossible to keep up with the latest news in banking and I have (almost) stopped trying. My thoughts recently have been to focus on who are the real victims in this whole crisis and I have concluded that there are lots of people that are being negatively affected and are paying consequences and it is not just consumers and borrowers. I have really been forced to look through the eyes of the banker whose job is cut due to market circumstances and the current financial crisis. I am not talking about the CEO's and CFO's of Lehman or Wachovia--I am talking about "A" players that have been integral to the growth of the banks that employ them and today have been sent packing. I talk to "A" players daily, and most of these people I consider to be the smartest people that I have the privilege to learn from. Many have been loyal to their banks, maintained a loyal customer following, provided a solid image for the bank through community involvement, and are now left scratching their head because the bank that they have been such an integral part of has now let them know that they are not going to be able to continue to keep them on the payroll through this economic downturn. Some economists would argue that this is just a part of free market enterprise and that everything will balance itself out (some of the same professionals that are now not sure where to start in their job hunt) because that is the way our economy is set up. I can agree to a point and argue that these same bankers that I am now working with to help them find strong opportunities as recently as six months ago pretty much wanted to hang up on me when I called them to let them know about what the competition was looking for. I realize that sometimes you just don't have time to listen to or talk with a recruiter, but now those same bankers are demanding my time in helping them find opportunities. I cannot predict the future and couldn't have known that the banking industry would be one of the industries most negatively affected by this crisis, but I can see that there are many "A" players out there in the market that are or were with "D" level banks and that bank name on their resume can be a huge roadblock to great opportunities. The reputation that these "D" banks carry can make it difficult to even get an interview with a strong bank. I think a lot of the public has also placed blame on bankers at every level and have associated a distrust for loan officers especially. I would urge all "A" players to hold your employer accountable for its reputation and not rely on the fact that you have been loyal to them and made them profitable. It is your career and your reputation as a financial professional to make sure that your personal philosophy and your employers mission statement are consistent. If you find yourself in a "D" organization that doesn't practice safety and soundness, you may want to find an organization that matches your personal philosophy so that you don't become an "A" player stuck in a "D" organization---or worse---no organization at all!

What's in Store for Banking in the Future?

After networking with a few senior banking executives today, one thing that popped into my head was "What is in store for banking in the future?" Banking is a business that is so unique because it is a private business designed to make a profit, yet heavily regulated--and in some cases backed and protected---by the government, so I find myself wondering how banks balance the regulation with the capitalist approach to making profit. I remember writing a paper in middle school about the future and how America will be living in a "cashless society" which I would say is definitely true today. I realize the convenience of using a debit card over writing a check, shopping online in order to just about anything I could want at my fingertips and two days later sitting on my doorstep, and the role it plays in being able to account for where it is that my money is being spent. As with everything else in the world of increasing technology, when we surpass the value of this convenience with the way it can actually do more harm to our financial state, we need to look at the issue and come up with a way to fix the problem. You would think that with all of these technical advances we have to save us time that we would have more time on our hands but it seems that people have less and less of what most of us value more than money. I feel like I am starting to sound like my grandparents, but maybe that isn't such a bad thing--they may be better off in their retirement years than my parents, and possibly myself. I think as an average American we aren't seeing banking for what it really is: a company designed to sell a product or service for a profit. It seems that it is just a part of being an American is to have a bank account, debit and credit cards, loans, and more investment products than we even know how to manage on our own. Just like any other industry or corporation in America, all banks are not created or managed equal. We have a choice in where to put our money for safekeeping, where we want to invest our money for the future, and who we want to pay to lend us money for our homes, cars, etc...How do most people choose what bank to provide them these services? I am not sure what the reasons are but I can say alot of it depends on what is most convenient and time efficient. We don't take the time to shop around for banks or research the financial stability of a company before we deposit all of our hard earned money into the place. We look at what is on paper: Bank A is offering me 5.9% interest on my loan and Bank B is offering 7.2%. Seems like an easy choice right? Well, maybe the looks are decieving. If every American realized the power that we really do have over the success of these private companies, we probably would not have ended up in this financial crisis in the first place. But nonetheless, here we are and we can complain til we are blue in the face but it isn't changing things. So if we can all use our purchasing power to make the best choices on which banks and financial institutions to get OUR business, we could stop letting the ones that operate dysfunctially rake more of our hard earned money. This will create healthy competition for all banks to step up thier lending policies and hold themselves accountable for thier business practices. We need to realize that the average citizen is in the majority and these companies need our money to thrive so we have the control and power and we are not using it! Let's make banks fight for our business by differentiating themselves from the greedy organizations that we refuse to give our money to! Banking is a service to help us gain the things we want, not a necessity to provide for the things we NEED. If we don't empower ourselves as consumers, we are not only hurting ourselves but our children and children's children because we are weakening our economy to the point that we may have no choice but to revert back to the other end of the spectrum and live in a "cash only society" We need to be aware of our power and use it to help ourselves and generations that come after us.

"Lehman's Loot"

I just saw this boardgame that came out online today. I think this is something that should be under every banker's christmas tree this holiday!

From UPI.Com:

Firm invents board game for sacked bankers

LONDON, Sept. 22 (UPI) -- T-Enterprise says it has created a board game -- "Lehman's Loot" -- where sacked bankers score points by stealing office equipment on their way out.
"We created Lehman's Loot so everyone can take part in the global financial meltdown," said T-Enterprise spokeswoman Sadia Cishti, in London.
Thousands of bank workers in Great Britain lost their jobs in the collapse of U.S-based Lehman Brothers last week, The Sun reported, noting some of the workers were seen clearing their desks into boxes and leaving with office equipment.
Lehman's Loot gives players extra points for snatching computers, stationary and calculators, said Cishti, noting the game memorializes a "week no-one in finance will ever forget."

I love this idea.....I think we should also have a 2008 realistic version of Monopoly...execpt nobody would be able to win!

Internet Banking

I am posting on this topic because as I was looking at some of the fastest growing career paths in banking, I saw that e-banking or integrating the technical department with the sales and marketing departments of banks has become a larger need in many smaller banks. As I was on the phone with a client today I also realized that the way banking is done in the future not only lies with what is possible, but with what is demanded by customers. Although some banks that I work with have the capabilities and capital to implement technology that is being used by their competition, I see that they are not headed in that direction. Being of the Gen Y, I wondered "Why wouldn't you want gain an advantage on your competition by being on the cutting edge of technology?" The answer was one that I didn't even realize was a larger part of being competitive and that is unparalleled customer service, a friendly face that you can speak to one-to-one when you have a problem. Although I appreciate the convenience of online banking--and I do!---I also am one of the first to complain about not being able to check an account balance because a website is down for maintenence, or call a customer service line only to be placed on hold for 15 minutes and then transferred to a CSR outsourced to a foreign country because the bank has no actual brick and mortar building where tellers and loan officers can answer my questions. I wonder if this can be a niche for some banks to continue this way of banking while still being competitive with the high tech banks? I also wonder with the new generation of bankers coming into the employment market, if it will be more difficult to attract top talent into banks who prefer to do banking "the old fashioned way"

Reputation of Banks in America

I was trying to think of something positive to post about the current banking marketplace because there has been so much bad publicity within banking and I realized that every blog that has anything to do with the financial sector will be filled with rants and raves and I don't want my blog to be the same as all the others. So....what to write about? Well, I have always been one to look for solutions and look at what we can change to fix a problem that exists instead of just blaming and complaining but in this situation I am not sure there is going to be a way that bankers can come together to improve the situation as well as the reputation of the industry. Everyone will have an opinion on this subject and it feels almost impossible not to voice that opinion. So, although I tried to think of a topic to avoid "ranting" I just cannot seem to find a topic that anyone would feel is very relevent right now. So here is just some of the thoughts that have been swimming around in my head the past few weeks. I know that the mistakes made by the largest banks in the nation have negatively impacted all of the banks in the nation, if not directly then by the way Americans look at who we let manage our money. Isn't this basically the problem in every industry in America? The largest corporations control the economy and when they are unethical the government just bails them out! Of course this is the solution, it is the American way to just borrow and worry about the repayment later. Isn't that why so many American are in so much debt in the first place? I know bankruptcy laws are getting stricter every year, I can't imagine a small business owner even having the option in the future. I don't see the government bailing out small business that have failed, those small business owners are supposed to pay the consequences for their lack of business expertise. I don't see where the accountability is for these greedy corporate giant banks. I do feel for those Americans who didn't realize how the sub-prime mortgage industry works, and that they put this into the hands of "the finest financial professionals" and I feel for those who are losing thier jobs because of the declining economy, but it also causes me to wonder why if the government was capable of spending almost a trillion dollars to bail out some of its largest corporations so that many Americans do not lose thier houses, that there are still record numbers of families below the poverty line, hungry children in school, and families that literally are forced to move to the streets? It would seem that almost a trillion dollars invested in our largest resource--people--that we may not be in this situation at all. The "American Dream" that so many of us strive to live and is propoganded by the media seems only to be possible by spending more money than we earn and living with huge debt, using credit as our means emergency funds. The government seems to set the best example of this way of living.

Your Bank's Horoscope: I See a Bailout in Your Future

If banks had their own Chinese Horoscope it may read something like this: 2008--The Year of The Bailout. It seems as though every time I pick up a financial magazine, read the business section of the newspaper, or flip through the national news networks I read more doom and gloom regarding the financial strength of the American Banking Market. How many more bailouts can we afford? That of course is a very silly question because we should all know that the answer is that we couldn't afford any in the first place! Here is a quick recap of "2008--The Year of the Bailout"

1. Bear Stearns.

Cost to taxpayers: 29 Billion.

This was apparently a small price to pay to prevent "a meltdown" in the financial markets. This is just the beginning of a scary trend, and as I see it, not an insulator for our financial markets.

2. Fannie Mae and Freddie Mac.

Cost to taxpayers: 200 Billion

Worth it because interest rates fell? Or because the mortgage market didn't completely collapse?

3. IndyMac and 10 other banks.

Cost to taxpayers: Nothing!

O.k, nothing is probably a stretch, but thanks to strong banks that pay FDIC insurance, taxpayers aren't footing the bill directly but the FDIC is likely to raise these premiums which I am guessing banks aren't going to swallow that cost without increasing the fees charged to customers. We should be able to sleep o.k at night knowing that our money is safe and sound because the FDIC is there to protect us.....right?

Total cost and counting....: About 400 Billion, Poor Lehman Brothers should have jumped on the bailout bandwagon a little earlier and perhaps the government would have been willing to bail them out too.

The last time we saw bailouts like these were in the late 1980's.

Cost to taxpayers in the late 80's: 130 Billion


400 Billion is only about 1/10 of our country's annual spending. We can afford it, because surely the alternatives to not bailing these companies out would have far worse consequences. I am not sure on that, there may be evidence--"statistics" that support this, but in my lifetime I have learned that being bailed out of a bad situation rarely leads to learning from my mistakes because I haven't really had to pay any consequences. It looks like we are paying the consequences (to the tune of 400 Billion dollars) for the mistakes of our country's finest financial professionals.

It might be too soon to mark 2008 as The Year of the Bailouts because there are more in the works! Some of them include:

The Detroit automakers.

Cost: Yet to come... The bill is set to pass through Congress would commit up to $6 billion in low-interest loans to General Motors, Ford, and Chrysler. This number could go up to $50 billion.

We are supposed to be in support of this though because it is a loan program and not a bailout, that is until the loans aren't able to be reapaid because as we know, the auto industry is not poised for a recovery any time soon. Essentially the government is doing the exact thing that is putting smaller banks on the FDIC watchlist by making loans to a company thats profits are sharply declining.

100+ Banks in America.

Cost to taxpayers: Yet to Come........

The FDIC is closely watching 117 problem banks. Combined these banks have about $78 billion in assets that the FDIC will have to insure. Being watched by the FDIC isn't exactly good for business in the case of banks. Consumers will be quick to pull thier deposits out of a bank that is shown to be losing money. Loan officers are also going to be on the lookout for new opportunities with stronger institutions. When these banks lose key decision makers, they are not able to be competitive in attracting the best in the industry and many times are not allowed to make new hires because of the declining profits. This is an equation for failure not only for our banks, but for the ways that the government is failing business in this country.