Reining in the excesses of Wall Street will never be discussed in the chambers of the House in Denver, but it is an issue that stirs passion in my heart. I have a lot of grey hair, and some of it was caused when the banking industry moved from a collection of many small community banks to a collection of large global banks. In fact, as that trend accelerated, and decisions moved away from the bank on Main Street to global money centers, I decided to call in WELL. I left the world of banking for the world of not-for-profits.
I called it Merger Madness. Over a five year period, the company I worked for bought small community banks and merged them into our holding company. I was part of the team that would go into the Main Street Bank and decide what price our Money Center Bank would pay the shareholders. I was part of that team because I understood good underwriting and how to analyze the books of a bank to determine where the threats to safety and soundness lurked.
As we grew, it became apparent that we were pursuing policies that threatened the safety and soundness of our own bank. I remember almost falling out of my chair one morning when a community bank showed up on my overdraft list. I had to decide if I should approve an overdraft that was larger than the entire asset base of that bank. When investigating the cause of the overdraft, I learned that the community bank had sent us a deposit that we posted to the WRONG account, and in “fixing” our error we compounded the problem by posting a credit as a debit. The bank wasn’t overdrawn with us, our operations were incompetent. When challenging the operations manager, she told me that it was less than 5% of OUR assets, so it wasn’t important.
WHAT? If I would’ve refused to approve that overdraft, that community bank could have FAILED. If a bank is too big to fail, it is too big to exist. They have no idea how their decisions impact the little guy, and they are a danger to our economic security.
Homework: http://online.wsj.com/article/SB10001424052748704509704575019032416477138.html
I called it Merger Madness. Over a five year period, the company I worked for bought small community banks and merged them into our holding company. I was part of the team that would go into the Main Street Bank and decide what price our Money Center Bank would pay the shareholders. I was part of that team because I understood good underwriting and how to analyze the books of a bank to determine where the threats to safety and soundness lurked.
As we grew, it became apparent that we were pursuing policies that threatened the safety and soundness of our own bank. I remember almost falling out of my chair one morning when a community bank showed up on my overdraft list. I had to decide if I should approve an overdraft that was larger than the entire asset base of that bank. When investigating the cause of the overdraft, I learned that the community bank had sent us a deposit that we posted to the WRONG account, and in “fixing” our error we compounded the problem by posting a credit as a debit. The bank wasn’t overdrawn with us, our operations were incompetent. When challenging the operations manager, she told me that it was less than 5% of OUR assets, so it wasn’t important.
WHAT? If I would’ve refused to approve that overdraft, that community bank could have FAILED. If a bank is too big to fail, it is too big to exist. They have no idea how their decisions impact the little guy, and they are a danger to our economic security.
Homework: http://online.wsj.com/article/SB10001424052748704509704575019032416477138.html
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