5/6/11

Big US Banks Afraid of Derivatives Rules

Reuters reports that some bank balance sheets could nearly double if a draft rule proposal takes effect. More here.

In a worst-case scenario, S&P 500 companies might have to bring nearly $7 trillion in derivatives onto their balance sheets...About 97 percent of that would come from five big banks: Bank of America Corp(BAC) , JP Morgan Chase & Co , Citigroup Inc(C) , Goldman Sachs Group Inc(GS) and Morgan Stanley(MS).
What a surprise.

5/4/11

Closed My Chase Business Account, Opened TD Account

I had a Washington Mutual business checking account for several years. As that bank made a ton of money on subprime and other questionable loans, even making money on foreclosures during the booming housing market that most thought would never end, they were able to provide exceptional service. I miss them.

When WaMu collapsed and was swallowed by JPMorgan Chase, I became a Chase customer. Despite praise from many blogs, the service gradually got worse. A few months ago I got a kick in my complacent butt when Chase started charging my business monthly fees. The prospect of paying Chase $216 a year for nothing finally motivated my business partner and me to go through the tedium of waiting in line and talking to a customer service representative.

The first woman we spoke with logged in to her computer to check whether the fees were being charged. As she did so, an ad for a Chase credit card popped up on her screen.

Seriously? Chase is advertising to its employees?

After confirming that the fees were being charged, the woman excused herself. After a ten minute wait we were directed to another woman, for whom the entire fee story had to be retold. After logging in to her computer and looking at a couple of Chase ads she explained that Chase finally incorporated the old WaMu accounts.

It was great news, she said. The reason for the fees was that our account was upgraded! Isn't that awesome? What did we get with the upgrade? Fees. Everything else remained the same.

The customer rep explained what we could do to minimize the fees. We could pay a bigger monthly fee for extra stuff that we don't need, deposit more money, or link our personal accounts to the business account. I heard "piercing the corporate veil" in my mind even before my partner said it.

When we told the woman that we would prefer to close the account instead, she halfheartedly attempted to persuade us to stay. This involved swiveling in her chair to point at and read from the poster in back of her, advertising services that all other banks also offer. When we indicated this to her, the customer rep came up with one more reason: we should stay with Chase because if we apply for an SBA loan we can fill out a shorter form. At other banks, she said, we'd have to fill out a longer form.

After hearing these very persuasive arguments we were finally able to close our account.

We walked down the street to a TD Bank. They charge monthly fees too ($25 a month), but these are waived for the first year. The minimum daily balance required after that is currently $500. So, we have a year to decide whether we want to stay. So far I have no complaints and was impressed with a few things: checks clear faster, the bank is open on Sundays, and we got our ATM cards at the bank right when we opened the account. I haven't opened a bank account in a few years, so I don't know if this is now standard practice for all banks, but it's much better than having to wait for the cards to come in the mail. Our checkbook came via UPS in under a week.

On a related note, what is wrong with us (the American people in general)? Why do we put up with banking fees?

Our bank deposits are loans. We are the banks' creditors. Banks take our deposits and lend them out. That's how they make money. In return, we're supposed to get some interest on our deposits. What happens instead, however, is that we lend banks money and pay them for this privilege! Imagine your friend asking you to lend him a couple of bucks and then charging you a fee for doing so. You'll tell him to get lost, and rightly so. But when the banks do it, we just pay or lend them more money.