Tuesday, January 26, 2010

Take it from the Bank

Of course, the bank president will just laugh at the loss of our business, if by some strange quirk of fate it comes to his attention. But our action will be symbolic. We are going to transfer Sandy’s checking account from a big bank to join mine at a little credit union.

Shortly after we made that momentous decision, several commentators pointed out that we will part of a national trend. Quite a few people are fleeing the huge banks that dominate the U.S. and world financial systems. They are transferring their accounts into local banks, savings and loans, and credit unions.

We little guys aren’t moving our business out of greed, although often we can get better rates locally. We’re doing it because we’re mad as hell at greedy big bankers.

We ought to be. In 2008, the median U.S. household income was $50,303. It no doubt will be lower when the numbers are in for 2009. The average professional employee (broker, sales staffer, trader) compensation at JP Morgan Chase was $279,000 in 2008. The bankers gave themselves a raise in 2009, upping average compensation to $379,000. Wow! The average Morgan staffer got an income increase double what the average American family must subsist on.

JP Morgan Chase was given $25 billion dollars of taxpayer money in the fall of 2008 to ensure the firm would be healthy. (Wouldn’t it follow that the guys who were making a quarter million or more a year were the same bozos who were making the firm unhealthy?)

The medicine worked. Morgan paid back the $25 billion. The taxpayers even earned some profit on the deal. Unfortunately, although the patient survived, it didn’t start doing what the doctors envisioned. The idea was that the propped-up big banks would lend cash to stimulate business, which in turn would save or create jobs.

The bankers quickly engineered a payback to avoid government control of their compensation packages. They made the money to do that in investment banking, and continued a lot of the risky stuff that got us into a financial crisis in the first place. Instead of ramping up typical business lending they tightened things up in that area. They gave the surplus funds to each other, rather than helping their country out of recession.

Isolated case? Goldman Sachs got $10 billion from Uncle Sam to stay in business. It was one of the first to make a full repayment. It should be better managed than some competitors, because at Goldman average professional compensation was a mind-boggling $317,000 in 2008. It increased to $498,000 in 2009. Meanwhile, nationwide unemployment moved above 10 percent.

In contrast to the Wall Street bankers, Ben Bernanke’s salary in 2009 was $186,600. Bernanke is Chairman of the United States Federal Reserve. A Bush appointee, his bold actions probably were the biggest factor in keeping the world financial system from collapsing during the depths of the “Great Recession.”

The fact that Bernanke's salary is considerably less than half the average broker compensation at Goldman Sachs says something bad about our values. It also says something good about Bernanke. The brilliant economist surely could make a lot more money on Wall Street than he does in Washington. Apparently, there still is a certain amount of satisfaction in government service as a career despite the best efforts of a long line of demagogues to vilify federal officials.

It is true that Bernanke dawdled for quite a while as the financial crisis unfolded. He believed, as did many others, that his mentor Alan Greenspan had the right approach. Greenspan thought financial markets had some magical inherent ability to regulate themselves. When the error of that position was revealed, Bernanke went to work to fix things. He ought to be supported for his positive actions, not penalized for inaction before the seriousness of the situation became clear.

Bernanke is one of the few good things Bush left for Obama. Despite that, some Democrats who, along with his fellow Republicans, solidly supported the economist a few months ago now are turning against him. Some Republican Senators are joining the opposition. Bernanke may not be reconfirmed as Reserve Chairman, even though Obama nominated him for another term weeks ago. This is a case of misplaced wrath.

The big bankers are the ones who deserve our ire. Some even admit it. At a recent hearing before the Financial Crisis Inquiry Commission, Brian Moynihan, Bank of America chief executive officer and president, said, “Over the course of the crisis, we as an industry caused a lot of damage.” That’s right on.

Politicians, both Republicans and Democrats, over the past twenty years stripped away needed regulations or looked away as questionable activities were taking place. But, just because politicians gave financiers a license to steal doesn’t mean the liberated bankers were forced to plunder. They could have applied their own ethical standards--if they had any--to daily practices.

Come on, Senators. Keep the good guy who rescued us. Clamp down hard on the bad guys who betrayed us. Democrats will lose the support of a lot of voters if they simply continue running around yelling “yes, we can” make financial institutions work for all Americans. They need to do it. And Republicans need to identify some common sense reforms they can support and get with the program.

Thursday, January 07, 2010

Bitter Berries

Promoters extol Acai berries as the greatest thing for our health since the Mayo Clinic. So, when we spotted a webpage ad offering a free month’s supply of Acai in pill form, we thought it would be a great way to try the substance. We agreed to pay only shipping and handling costs, which were less than two dollars.

We were flim-flammed.

The day the pills arrived our VISA card, in addition to the shipping charge, had another charge of $88.64 by the Acai Berry Tropic Company. We phoned the firm. They said the charge was for our “membership,” which would ensure continuing shipments of their wonderful products. After a long discussion about the fact that we had not applied for any membership or authorized a fee, Acai Berry Tropic’s agent agreed to cancel our “membership” if we returned the pills, which we did. We then had to dispute the charge with VISA.

By coincidence, the September/October AARP magazine, which arrived while all this was going on, has an article titled “The Scam Stops Here.” It states that a company called Central Coast Nutraceuticals paid $1,375,000 in fines and restitution in an Acai fraud case. The article described the scam as: “You go for the free-trial offer online. You pay for shipping and handling with a credit card. Then, when the bill arrives, you find the trial was anything but free—you’ve signed up for an ongoing supply of the product at a hefty price.”

Sound familiar? The “sign-up” in our case was buried deep in some fine print that only the most dedicated reader would ever find.

If you must sample Acai berries, you might be wise to fly down to the Amazon country where they grow, pick some, and consume them on the spot. That actually could be a cost saver. AARP reported that some victims of Acai scams have been ripped off for several hundred dollars. And, at least you would know you were eating the real thing.