To all the folks so angry at the banks, let me ask you:

How many of you refused your stimulus check last year or this? How many of you refuse to use your home mortgage interest and property tax deduction to reduce your tax liability? How many of you, if you buy a first home this year, will refuse the $8,000 refundable credit? How many of you plan to decline your Social Security checks (assuming it’s still around)? How many of you would decline FDIC insurance on your deposits, if you could?

When politicians decide to throw money at people, is it really that outrageous that the people it is thrown at choose to catch it? Granted the moral high ground would be to decline it, but we have allowed our politicians to create a system that threatens to make suckers out of anyone who isn’t in line for a hand-out. Nay, more than allowed, many have demanded it. In the last four years, Americans have consistently elected the politicians who promised to give them the most “free” goodies, and in the primaries of both parties for many more years than that, we’ve consistently chosen the candidate who did that.

ObliviousInvestor is right that it would have been a breach of a bank’s fiduciary duty to its shareholders to refuse the bail-out money and allow itself to go under, and it is under no moral obligation, other than for public appearance’s sake, to alter its business strategy because it received the money. (And let’s not forget, a lot of the banks were forced to take it and/or tried to pay it back very quickly and were not allowed to.)

The banks are not to blame for taking the money or even for lobbying for it, the American voter is to blame for electing politicians who would give it. I also don’t blame the banks for lobbying for the laws and regulations that would most suit them. Everyone, including banks, should be allowed to advocate to the government for their own self-interest, especially as government becomes all-powerful. I blame the American voter for electing politicians who are so craven and lacking in principle that they can’t say “No.” With the American voter electing politicians based entirely on how closely they promise to resemble Santa Claus, it stands to reason that the whole country will be devoting most of its creative energies to gaming the system rather than taking personal responsibility.

I’ve had a perfectly decent long-term (20+ years) non-exclusive relationship with Bank of America and feel that I’ve received exactly the services I’ve required from it at a fair price (and sometimes, a price that seemed almost too good – it’s been many years since I paid a bank fee for anything). The Bank of America employees at my local branch live in my local community, shop at our local shops, eat at our local restaurants, use our local professionals and say “Hi” to me by name when we run into each other at our local grocery stores.

I also have banking/mortgage/credit/investing relationships with Capital One, U.S. Bank, Schwab, ING, Chase, and from time to time, others. I have the same loyalty to each of them that they have to me – we’ll keep doing business as long as it suits us both. They won’t get to judge my reasons for dumping them, if I do, and they should have the same right.

Would that I could say the same for my relationship with my President, Senators, and Congressman – none of whom I voted for and all of whom are committed to playing Santa Claus with my money, messing with my health care, and and otherwise interfering in my life.

I respect your opinion/viewpoint, and believe me, I’m cheering you on on your journey to get free of debt.

That said, I’m quite happy with my big bank (BOA). They charge no fees, have a great online interface, and I don’t feel abused in any way whatsoever. I’m a satisfied customer. If others have used BOA’s services in ways that were harmful to their own finances, that was their own choice.

Also, one of the fundamental truths of finance, dating back to the foundations of monetary systems, is that which you mentioned.

“The rich ruleth over the poor, and the borrower is servant to the lender.” – Proverbs 22:7

Lastly, the posture held in the post is shared largely irrelevant to financial position… which can be evenly gleaned from the comments above.

I have accounts with each because each has a nice benefit that they offer. BofA has the best website for a general purpose checking account and online bill pay (plus it is a ‘no fee’ checking account) — plus the ATM availability is unbeatable. My credit union has the best rates for personal loans and home equity loans. Vanguard for it’s mutual funds and IRAs. Ally for its online savings and CD rates (and the innovative ‘no penalty’ CD).

Could I move 100% to my local credit union? Yes, but I would hate it.

My credit union’s website is pretty horrible: when using a checkcard at a merchant, it does not even tell you the merchants name (only the address) on the CU website — that is a show stopper for me since I use statements for tracking my spending — ATM availability is pretty much non-existent. Also, the savings account rates (and CD rates) at the credit union have fallen drastically in the past few months, not even close to Ally.

A 1-year ’share certificate’ at my CU only pays 1.4%, and that is available if you are buying the biggest $100k certificate — if you had less than $10k to invest then the rate is 1%. Ally has a no-minimum 1-year CD paying 2% right now.

Matt: your working to get out of debt is a good thing, and I applaud your efforts. Perhaps your views are different from mine because your relationship with banks is that you are making them money (by paying interest), and my view of banks is they are making me money (by paying me interest).

The Debtor is truly a slave to the Lender.

To them I say this… go do all your banking with the big boys and be happy. I choose to get out asap because I can see through all the sophisms.

Cheers.

Why everyone is conveniently forgetting that many of these “bailed out institutions” neither needed or wanted the money and were told by Paulson to take them (http://blog.taragana.com/n/pau.....rm-62704)? If you are forcing someone to take the money does it give you a right to dictate anything to this person? Sure, Citi needed the money later on, but Godman or Morgan Chase didn’t. They haven’t asked for the money.

Moreover, banks paid billions in interest and repurchased stock warrants. So what moral right do you have telling the banks that were forced to take the money what they can or cannot do? Does your mortgage company have a right to tell you if you are allowed to repair your kitchen or that you aren’t allowed to make profit until you repay the money?

As to B of A – yes, they needed the money. Do you know why? Two words – Merrill Lynch. Just a few days ago Paulson testified under oath that he told B of A CEO that he’ll have him fired if he doesn’t buy Merryll Lynch (http://online.wsj.com/article/.....51765.html). “Mr. Paulson acknowledged that he warned Mr. Lewis that Bank of America management could be ousted if they walked away from the Merrill Lynch deal.” If government was one of main reasons B of A is in trouble, why shouldn’t it have bailed out B of A?

Also as Jim said -a lot of banks paid back the money. Plus, the government is getting interest and has stock warrants. Do you know what it means — it means that if banks do well, government stands to make money. If banks don’t do well – the government may lose money. So you want to take your business elsewhere so that taxpayers don’t get interest or don’t get their money back? Now this is smart.

Incidentally, what makes me angry the most is that people think about banks as a single entities which they identify with CEOs that made bad decisions. Newsflash. The majority of banks’ employees had nothing to do with this crisis. Some investment advisors didn’t deal with credit default swaps or CDOs or lending but actually made money for their clients; some IT personnel – programmers, network administrators, system administrators, DBAs just kept doing their jobs as did cashiers or other personnel. When bank isn’t getting profits it’s these people who suffer the most. Then there are bondholders – this includes anybody who has money in retirement funds or bond index funds. Index funds include these big banks too.

AND…my credit union enriches my community. It’s socially and economically “green.”

Check out this chap in New Zealand who got fed up with his bank: http://www.stuff.co.nz/nelson-.....n-20-bills .

Sadly, due to mutual behaviors & events that have transpired as of late, it appears rather obvious that the feds are in cahoots with big business… thus the enormous scam that has been pulled off over the last year (the Socialistic gov’t takeover of private business).

I wish I could say the same for my relationship with the federal agencies that took money from all of us and gave it to the banks and called it a bailout. I am not sure why the banks are getting blamed more heavily than the feds.

What ever “deals” we may get out of big banks, it’s clear that they’re getting a better one out of us.

We used to bank at a credit union, but there’s not a decent one around here, so that’s out.

As for credit cards, we use whichever ones pay the best rewards. We don’t carry a balance, so we’re only interested in convenience (all are pretty much the same) and rewards (there are big differences here).

Back to the original question… I’m not sure that this is a moral issue per se. To me, it’s not a general good vs. bad sort of thing. I think the “right” answer will vary from person to person (which Matt alluded to at the end of his article).

http://link.brightcove.com/ser.....0264191001

right around the 2:30 mark, they are interviewing the neighbor of one of the foreclosed properties. The guy says he wants ‘the bank’ shutdown because there are liquor bottles and trash all over the porch of the foreclosed (attached) home. What a joke — why doesn’t he spend 4 minutes out of his time to clean it up himself? I wouldn’t be surprised if it was him and his buddies that tossed the crap over there in the first place (pretty sure it wasn’t ‘the bank’ doing it).

In my neighborhood, we get together and clean up properties (even ones where the properties are not vacant). If you don’t respect your own place, don’t expect anybody else to respect it either.

To me, that is a bigger moral issue.

2. Why are reposessions rising? Cause people aren’t paying their mortgages. How far can we blame the banks for that?

3. Should banks lend money to people who can’t pay it back? There is a lot of lending going on and lack of credit is not hurting the economy overall right now. Lack of lending was a problem for a short period and we got over. Who’s unable to borrow money that should be able to? People are saving more and borrowing less in general. This is a good trend. I really don’t think we want the banks making more shaky loans, thats the cause of the whole problem in the first place.

4. Any time a company raises fees or costs to the consumer its a good reason for the consumer to reevaluate if they want to keep doing business with the company.

A lot of the big banks have paid back a lot of the bailout money. Big banks are often not operated differently than little banks. From many accounts the government more or less pushed even healthy banks into taking bailout money.

I quit my credit union years ago since they had stupid automatic fees on my savings account. Their policy and fees drove me away.

Unless a bank is outright treating you as a consumer or other consumers poorly then I don’t see a moral reason to quit them. I don’t think making profits and increased fees are “corrupt”, but simple capitalism.

The best reason to pay off your credit cards and mortgages is to get out of debt.

We ended our relationship with Bank of America when their customer service proved that they did not value us as depositors. We moved the BofA accounts to ING Direct and it has been a big improvement.

Rgds, RB

I don’t believe I have had to pay high fees while banking with the big banks. I try to have a better than bare bones checking account and try to ensure that this comes with the advantage of reducing or eliminating most of the fees. There might be fees that I am not aware of that I am being charged and I would appreciate it if someone could educate me. I make it a point to only use my bank’s ATM.

I agree that some of the banks have raised credit card interest rates. That would tick me off too if I carried a balance.

While I applaud the intent of the post the fact is (like other commenters have mentioned), you have to shop for the best rates, be prepared to walk away from financial products laden with expenses.

By the way this is not a pro-big-bank post. I honestly don’t care about any of the institutions. I only care about my money and how well its doing.

Basically what I hear you advocating is taking responsibility for our own actions. I agree with you. I don’t agree with where this country is headed or how big companies have been bailed out, but the bottom line is we need to do what is right no matter.

Proverbs is so accurate when it says the “borrower is slave to the lender”. When we aren’t enslaved to a company we can choose to walk away and do what’s best for us.

Thanks.

In particular, reading the first chapter titled, “The Lesson” is of much benefit. The rest of the book is simply a study in the application of the lesson.

http://en.wikipedia.org/wiki/Devil%27s_advocate

In common parlance, a devil’s advocate is someone who takes a position he or she disagrees with for the sake of argument. This process can be used to test the quality of the original argument and identify weaknesses in its structure.

That is my comment lesson for the day… it had to be said.

In regard to protecting shareholder interests as moral cover for recent excesses, it’s hard to imagine disregarding sound credit standards, crashing stock prices and feeding at the public trough as being in anyone’s interests, let alone the shareholders.

We should support our local banks.

Rgds,

RB

I’m actually free and clear of banks except my credit card, which is Bank of America – but I don’t carry a balance on it. We just refinanced our mortgage through a credit union, and I use a credit union as my primary bank as well.

Sometimes I get frustrated with the credit union – it has few locations and short hours, compared to the banks -but then I go account-shopping and see the astounding fees the banks charge. I don’t know why so many people use them.

Would you prefer that bailed-out banks not be posting profits now? Banks posting profits is proof that the bailouts worked, right? I’d be a lot more worried if banks were still not profitable.

Home repossessions rising — is that really a bad thing? Capitalism is all about giving the resources to the entities that can utilize them more efficiently. The other side of repossessions is that somebody else who is actually financially responsible is going to get the house now — which is a good thing, right? Who do you think is more deserving of the house?

Banks profiting, yet not lending? Really? I thought banks only make money when they lend. Perhaps the banks have wised up and are only lending to people that can actually pay the loans back — hence not ‘losing’ money. That is a good thing, right? Or do you want the banks to continue lending to people who can’t pay back the loans (which was the cause of this crisis)?

Banks are raising fees, and so are telephone companies, and airlines, and cable companies, and every other business under the sun. If you think the fees are too high, the you should have no problem opening a competing business and taking their market share, right?

It’s for reasons such as these I prefer doing business with local credit unions/pure play online banks, instead of doing business with institutions that could have (should have?) gone extinct.

Investing in them, well, that’s another story.

http://www.latimes.com/busines.....9753.story

I’d argue, again, however, that to blame a bank for asking for bailout money seems odd. In fact, I’d again argue that they have a responsibility to ask for it, given the opportunity.

I withdrew ALL money cash from Citibank. It made me sick.

Fight the tyranny!

Rgds,

RB

I see your point about banks being a public company & being responsible to their shareholders… and it is a very solid point. I will answer it this way…

Their actions have become atrocious, and if these are the actions they must take to make money for their shareholders… then count me out, I want no part of that deception, greed, or lust.

If my business – that you funded – went bankrupt, then I forced you to give me money to bail me out of my own business mistakes. Then proceeded to practice business that was indeed detrimental to your needs as my customer… in order to make money… would you still want to be my customer?

Individual people are NOT the only ones who need to suck it up & be responsible for their own actions. Big banks, big auto, & every other business need to be responsible for their own actions too. If their business practices ran them bankrupt & out of business… then hallelujah, let them GO OUT OF BUSINESS!

1) Should institutions attempt to make a profit? By all means. Is their obligation in the attempt? Is it immoral to not make a profit? Are not their customers (especially in baking institutions) investors as well? If yes, then does it become another matter in which more money speaks louder?
I’m not sure the exact number of people who would make up what would constitute the shareholder oligarchy of the main financial institutions involved (in terms of monetarily tied) in the events that led to what we are now experiencing, but I am willing to bet they are far fewer in number than the amount of people who are feeling this recession in its fullest force.

2) I whole heartedly agree, but the financial institutions are making money, the condition of the economy notwithstanding, while the people they used to gain their wealth (or: those who were allowed to misuse) are staring down into the abyss of insolvency. There seems to be very little recourse for the end-user.

-Mo

When you take an investor’s money there’s a very clear expectation that you attempt to earn a return on their investment, that seems to me to generate a moral obligation to attempt to do so.

Does it override all negative effects of their actions? No, of course not. But we need to at least take it into account.

As to your second question, I don’t mean that people abuse banks in the manner in which one might abuse a person. I mean that people abuse bank services in the sense that one might abuse alcohol.

That is, people take services (credit cards, mortgages, personal loans) that are quite reasonable when used properly, and they use them poorly, to the detriment of their finances. Much like alcohol–which can be used appropriately–can also be used inappropriately, to the detriment of one’s health.

Many times, I have pointed out the incongruity of all the screw-ups big banks have made on various PF sites to people who just aren’t willing to give up their precious rewards cards even while they’re benefiting companies that have raked consumers over in many ways. there seems to be a disconnect in seeing the connection between the big picture and one’s own personal financial household. I find this sad and pathetic.

there have always been options to doing business with big banks; not only thrift unions, but also smaller regional and community banks, which in fact tend to be more conservative in their lending practices and offer more competitive rates on savings accounts and lower rates on lending.

1) Why is a bank’s obligation to its shareholders a “moral” issue instead of merely one of consequence given the structure inherent with the shareholder/institution model? Furthermore, is their obligation to make a profit for their shareholders something which supersedes any negative effects of their actions?

2) People who went signed onto loans they had no way of paying back excluded, how else have we (those who use/are used by major banking institutions) misused banks?

- Mo

USAA rocks if you can get in! and ING is good as well.

Best of luck to you brother, and don’t let the naysayers get you down…

It seems unfair to criticize a person who shares his mistakes in the hopes of helping others to avoid them.

1st Mortgage – Wells Fargo
2nd Mortgage – JP Morgan Chase
Auto Loan – Capital One
Credit Card 1 – JP Morgan Chase
Credit Card 2 – Capital One
Credit Card 3 – Citigroup

I’d like to voice a respectful disagreement:

I feel like if we’re going to talk about moral issues, we need to at least mention that banks have a moral obligation to serve the interests of their shareholders. That is, to make a profit.

In the conclusion to your analogy above, you refer to it as a “cycle of abuse.” The comparison being to alcohol or other substance abuse, I gather. (I quite enjoyed the analogy, btw.)

It seems worth noting, however, that in those cases, it’s not the alcohol/drugs that abuse us. It’s we that abuse (that is, misuse) them. I, for one, would argue that it’s the same way with banks.

-Mike

“Moving forward, I intend to continue and increase my banking relationship with ING Direct, where I currently have an online savings account, as well as with my local credit union.”

Whether you’re talking food or money… going local is the way to go!

People have been lured into credit arrangements with easy up front terms (zero down, zero interest, no payments til 20–, etc), but now that the economy has turned, the door was slammed shut rather quickly and most definately mercilessly. Then they lay people off (some of us) and get public money (some of it from us)to stay open when they were technically insolvent.

We should rebel against this by dealing with small, local businesses. Those are the ones who provide most of the job growth anyway, and on transparent terms (since we know where they live, so to speak). Not just in regard to the banks though, but with any business where this is possible.

I’ve seen some of the bad business practices that the banks are engaging in through the Making Home Affordable program. Essentially instead of helping people modify their loans, they’re allowing people to go into foreclosure because even though they’ll lose more in the long run, in the short term they can keep that home loan on the books, and stay in the black. That makes it appear like they’re doing better than they are.. but of course the poor homeowner gets no help and goes into foreclosure.

A great alternative is to let people organize themselves and form borrowing communities. Nothing new about this:
Credit Unions and P2P Lending are much better ways to accomplish this than going to a bank. My fave site is Lending Club, because of their responsible approach to borrowing.