Anger Against Big Banks - Something Useful From OWS

I'm not an OWS guy by any measure.  From what I've seen, the vast majority of attendees at OWS rallies are people that live to march for anything.  I used to see these people in college on a regular basis, just waiting for some, even semi-controversial, topic for which to launch a crusade.  They were thrilled to be marching for something, anything.  The conclusion I reached back then was that these people really had little else in their lives on which to focus.  The rallies gave them some measure of temporary purpose they were never going to get from a career, family, or other life component.

Not Because You're Rich, Because Your a Thief

But one theme coming out of the OWS "phenomenon" with merit is the visible anger against senior managers of large, poorly managed financial institutions, especially those that took taxpayer bailout money and even more especially those that mismanaged millions, if not billions, of other peoples' dollars.  The corporate excesses of recent years is well documented but that era is anything but bygone.  Last week, for example, we learned financial services company MF Global Holdings Ltd. filed for bankruptcy.  The company did not take bailout money but can't account for over $600 million of clients' funds.  CEO Jon Corzine, former governor of New Jersey that also led that state to the brink of bankruptcy, parachuted out with a cool $12 million.

Government-controlled mortgage giant Freddie Mac last week was forced to request another $6 billion in taxpayer aid after posting a $4.4 billion loss from July to September of this year.  Outgoing CEO, Ed Haldeman, will receive at least a $3.9 million parachute for his two year tenure with the insolvent and nationalized housing entity.  Under his leadership, FRMC has taken $14.5 billion in taxpayer-funded government support, not including the newly requested $6 billion, the largest since early 2010.  Hence, during Haldeman's tenure, Freddie Mac's bailout addiction has taken $20.5 billion in taxpayer capital just to keep behemoth breathing! And for this stellar performance, the man at the head of the government-owned snake gets to walk away with $4 million?

How can this be?  Financial companies fail miserably and yet their leaders earn multimillion dollar bonuses.  While the company and clients go broke, the executives run away much richer, often with taxpayer money.

So, OWS fringe, I get it.  Something tangible has, in fact, come out of your mostly mindless, wandering, self-pitying, destructive drivel.

What can be done about corporate abuse?  Two primary options:

• Increase the government's ability to control executive pay within publicly-held financial institutions.   Gotta tell ya...I can't believe I'm going to say this because I'm a free market guy but corporate governance has failed so miserably in the past fifteen years, there's really no choice.  A formula needs to be derived at the federal level to control executive compensation for publicly held financial companies.  As much as I hate government control of anything, financially-related corporate executives have proven time and time again that they cannot be trusted to act in anyone's best interest but their own and Boards of Directors are a joke.  It's one big buddy convention without constraint.  This topic is big enough to be its own discussion and will be treated as such.
• Reduce the importance of major financial institutions.  We, consumers, give the big financial houses their power by keeping our funds with them and using their financial instruments.  Quite honestly, we're to blame for over-empowering these entities with our money.

This second point, empowering big financial entities with our money, is something we, as consumers, need to try to change.  These huge businesses couldn't care less about us.  Like other big businesses, they're out for profits, which is the foundation of capitalism and, quite honestly, a good thing when pursued honestly and ethically.  However, large banks have proven themselves to be irreversible corrupt.  They create and sell new, risky investment vehicles with no regard for the investors.  They treat their executive staffs to lavish travel packages, bloated bonuses, and monster golden parachutes they often deploy only after they've destroyed shareholder and customer equity.

How can we affect this?  By moving our money out of the big banks and into smaller local banks for credit unions.  We won't be able to shut down any one bank, but we could send a major signal that we're fed up.  

What's the trade-off?  The most noticeable pain points in going with a smaller institution are often accessibility to ATMs without paying a fee and/or branch locations.  When choosing a new bank/credit union, first verify their financial viability at http://www.bankrate.com/rates/safe-sound/bank-ratings-search.aspx?t=cb and then look into ATM and branch locations that work for you.  Never select any financial institution without first understanding its financial strength, related fees, etc.

Some will argue that pulling deposits from big banks will actually help them because banks have been taking in more in cash deposits than they can loan out and are required to carry FDIC insurance on the difference.  This may be true, but pulling deposits will also cut into margins, lowering profitability and, if significant enough, reducing big banks' ability to negatively impact our lives. If those banks become less profitable, they become less interesting investments and share prices drop.  Will this lead to smaller executive bonuses and parachutes?  Not likely on its own, which is why we need the financial sector government oversight, but yet I digress.

What guarantee is there that some local bank or credit union will be better?  None.  There is no complete isolation from financial risk or misappropriation.  But we do know it's the large banks that consistently provide the big parachutes, overdone benefits, and ridiculous, unearned bonuses while shareholder equity heads south and fees skyrocket.  Again, check out any institution in which you put your money.  Make an informed decision.  Many people don't.  This inherent trust and lack of accountability as as bank client is part of what's over-empowered and made them fat and careless.

The bottom line?  Should we really reward companies that have a proven track record of screwing us over?  If I have problems at a retailer, I shop somewhere else.  Massive push back on an ATM card fee resulted in its reduction and, in some cases, its removal at many large banks.  Individual consumers can make a difference when working en masse.  If ever there was a time to do so, it's now.  We can't just let the big banks keep cheating us using our own money.  

In the spirit of full disclosure, I've closed  accounts at a large bank in the past two weeks and will close others before the end of the year.  I do, indeed, employ that which I hope others do.  I'm not telling you what to do with your life, just explaining options.  If you'd rather reward people that would sell you out in a nanosecond, so be it, but don't complain if you don't try to change it.