Webconsuls Blog

Saturday, February 28, 2009

My Rear View Mirror of the Banking Industry

Comptroller of the Currency logo
I don't know about all of you, but I find the current state of affairs of the banking industry exhausting. So today I thought I might offer you my personal perspective on this subject, that is: my rear view mirror of the banking industry.

Most of you know that I worked in the banking industry from 1969 through 1989. I started my banking career as a clerk and in my final position I was a Vice-President for Fleet Bank. It occurred to me today that over that 20 year span, I observed a lot of banking industry milestones. Some of these are comical and some very serious. For example:
1. In 1970, while employed with Wells Fargo, I watched as they installed some of the first ATM machines in two San Diego branches. What was comical about this process was the fact that there really was nothing automatic about these machines. Actually, they installed impressive looking equipment in the wall of the bank and issued cards. People would come up to the machine, insert their card and receive money. What the customers didn't realize is that behind the machine, inside a little room was a real live person who would retrieve a paper transaction from the back of the machine, type on a non-electric typewriter a debit or credit to the person's account. Then this employee would walk across the lobby and hand the typewritten transaction to a teller. Yeah! An automatic teller machine was born.
2. Also in 1970, Wells Fargo opened a branch in the Grossmont section of San Diego. They were very proud of the installation of their first pneumatic tube system which operated between the customers car and the drive up window.
3. I think the first time I remember a bank being closed by the Comptroller of the Currency was in 1973. This was U. S. National Bank of San Diego and when the Comptroller of the Currency shut it down it was the biggest bank failure in U. S. history. At the time depositor's funds were insured up to $20,000! The bank was purchased by Crocker National Bank for $89.5 million. At the time Crocker more or less agreed to keep most of the USNB's employees, but they did not agree to honor the pension plans that had been set up by USNB. Having later worked with some of these USNB employees when I served as a AVP for Crocker Bank, I can attest to the fact that these employees never financially recovered from this decision and they carried a resentment against Crocker. This made for a great working environment.
4. In 1978 shortly after I was hired by Crocker to be a Consumer Lender, I remember when Citibank (think Citigroup) decided to issue credit cards to what seemed like hundreds of thousands of consumers across the United States. It seemed we all received one. Every card had the same effective date. And on that date consumers were in line at their local banks to get cash advances from these cards. I remember that day, as we ran short on cash at the Wilshire-Hauser branch of Crocker Bank! Keep in mind none of these consumers actually applied for the cards. The invitation came in the mail from a banking company that none of us had heard of prior to that time. Great!
5. I believe it was around late 1979 or early 1980 that the banks across the United States decided to lure consumers with home equity lines of credit. Many consumers prior to this time avoided even the thought of a second mortgage being recorded against their home. But we all went down that road and I became so proficient at explaining this product to consumers I was actually featured in a Time Magazine advertisement for Indian Head Bank of New Hampshire! I am not kidding.
6. In 1989 I watched from afar the establishment of the Resolution Trust Corporation which was formed to deal with the savings and loan crisis of the 1980s.
7. Just about the time that Fleet Bank was winding up their takeover of Indian Head Bank (1989)they decided to offer incentive pay for Mortgage Loan Officers. I remember remarking to my immediate boss at the time, "This cannot bode well for the banking industry." He questioned my reasoning and I explained when a Mortgage Loan Officer becomes a commissioned sales person this is bound to affect their lending decisions.

The bottom line is this: even with all of my banking experience and all of the audits that I lived through with the Comptroller of the Currency, Federal Deposit Insurance Corporation, and the Federal Reserve, I am shocked at where we find ourselves today. Did these federal agencies and state banking agencies, as well, just stop performing audits? Did they just look the other way when the lending decisions seemed to be based on "fluff"? Or were these toxic loans packaged and sold so quickly on the open market that the examiners never really saw the worst?

Today as I thought about this post I went to the website for the Comptroller of the Currency, the administrator for national banks (think Wells Fargo, Bank of America, CitiGroup, etc). Their tag line on their website says: "Ensuring a Safe and Sound National Banking System for All Americans". Are they kidding me? Visit their site: In 2007 the OCC was listed as one of the best places to work in the Federal Government. And...they say: "The OCC offers one of the best benefits programs in government. Our health and life insurance and retirement programs are among the best in government and compare well to private companies."


Final thought for the day: "I am glad the taxpayers can afford to offer such wonderful benefits to an agency that is ensuring a safe and sound national banking system for all Americans; however, when will all Americans be assured access to the same quality health insurance coverage?"

Any thoughts?

2 comments:

  1. Since you know the system, you also know that the Office of the Comptroller of Currency is not funded through taxpayer funds. It is funded through licensing fees assessed to national banks.

    ReplyDelete
  2. Dear Anonymous,
    Yes, I do understand that the Office of the Comptroller of the Currency is not funded through taxpayer funds. This I understood from my banking experience and as their website states clearly: “The OCC does not receive any appropriations from Congress. Instead, its operations are funded primarily by assessments on national banks. National banks pay for their examinations, and they pay for the OCC's processing of their corporate applications. The OCC also receives revenue from its investment income, primarily from U.S. Treasury securities.”

    However, you stated it is funded through licensing fees assessed to national banks. I think you have combined to different issues: licensing fees and the semi-annual assessment fees. The general assessment fee is based the bank’s balance sheet assets and is paid in semi-annual installments. The licensing fee is based on the application type and according to the OCC website, “All licensing fees have been suspended for calendar year 2009. This change was effective January 1, 2008 for calendar year 2008 and will continue to be in effect for calendar year 2009.”

    I agree that my statement: "I am glad the taxpayers can afford to offer such wonderful benefits to an agency that is ensuring a safe and sound national banking system for all Americans; however, when will all Americans be assured access to the same quality health insurance coverage?" implied that the OCC is funded by the US Taxpayers. I apologize for the implication. Indeed, the OCC is to be self-sustaining from assessment fees, application licensing fees, and investment income.

    But…since many national banks are now TARP Fund recipients…could it be that OCC employee benefits are now partially and “indirectly” paid for by the US Taxpayer, as some taxpayers are national bank fee-paying customers and all taxpayers are footing the bill for the TARP bailout fund?

    ReplyDelete

Thanks for your comment!