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Biggest Financial Pet Peeve: Greedy Banks


The following is a blog swap post from LaTisha D Styles at Financial Success for Young Adults, where she writes about investing and money management. Check out the my pet peeve – Supersize Me over at her site today!

greedy bank of america

If there’s one thing I can’t stand, it’s greedy banks. I understand that banks help the flow of commerce and make the exchange of goods and services easier. I know that they are instrumental to our economic system. Trust me, I was a Finance major. I get it. But I hate the fact that these middlemen get greedier and greedier each day. I have three main reasons why I strongly dislike them.

  1. They Caused the Global Recession
  2. Yes they did. Credit default swaps were largely the cause of the financial freeze up. Guess who creates, buys and sells most credit default swaps? That’s right, banks. J.P. Morgan & Co. is credited with creating the modern credit default swap back in 1994. In September, the Lehman Brothers bankruptcy triggered CDS payments to the buyers of credit default swaps referenced against Lehman Brothers. In the same month, AIG needed your tax dollars because they over sold CDS protection without hedging. They basically went ‘all in’ and when they wanted out, the taxpayers covered them. The banks took excessive risks with their portfolios and we are paying the price.

  3. They Want to Profit From Your Tax Dollars
  4. I would place equal blame on the regulators who gave the money away with no strings attached. In an article from the NY Times, an executive of JP. Morgan Chase explained that they had no intention of using the bailout funds to stimulate the economy in the form of loans to businesses. Rather, they would be using it as an emergency cash fund to buy other banks.

    “Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,” he began. “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”

    Shameless. They even get to profit from short sales created by the mortgage fallout.

  5. They Exploit Their Customers
  6. Chase wants to eliminate debit card purchases over a certain amount. I read this article the first time over at Consumerism Commentary and I was shocked to say the least. Chase Bank is considering declining debit card purchases over either $50 or $100 dollars. Some people thought it was just a way for Chase to test the possible backlash from implementing this decision, but either way it’s ridiculous. Why should a bank, who’s primary purpose is to take deposits and make loans, restrict access to your funds? Once again, shameless.

The best way to fight back against the banks is to get rid of your consumer debt. When banks lose this stream of income they will have to look for newer non-regulated ways to exploit their customers.

What about you? What is your pet peeve about banks?

retirebyforty> The banks are so smug about the bail out. They are not even thankful for all our tax dollars and then they pay their executives so much bonuses. It’s ridiculous, the government should have built in way more restrictions with the bailout funds.

photo credit – flickr Carrie Sloan

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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{ 30 comments… add one }
  • krantcents March 18, 2011, 11:52 am

    I understand greed, it was made famous in the movie Wall Street! What bothers me is they got away with it. As youngsters and adults, we are taught that there consequences to bad behavior, immorality, criminal behavior or illegal behavior. At the very least, what they did was bad business or a business mistake. What was the consequence? Bonuses? Hmmmm! A reward for a bad business decision, that bothers me. They still have their jobs, where other do not, that bothers me.

    • LaTisha @FSYAonline March 19, 2011, 10:35 am

      I agree. Zero consequences for the banks is the one thing that made me the most upset during the recession.

    • retirebyforty March 19, 2011, 1:22 pm

      Right! It feels like all the bankers got off scot free while so many other people are paying the price.

  • Barb Friedberg March 18, 2011, 5:31 pm

    Wow, I couldn’t agree more. I am furious that the banks made all of those loans to unqualified buyers and then sliced and diced them into unrecognizable derivatives and sold them to the gullible public! Good article.

  • Financial Samurai March 19, 2011, 3:10 am

    Do we blame the bank for people buying a house they could not afford, or the people who bought the house?

    • LaTisha @FSYAonline March 19, 2011, 10:39 am

      I think we blame both. I watched House of Cards, the documentary done by CNBC, and they spoke with people who took out loans that they later couldn’t afford. Many of those people were not educated enough to understand the complexity of the documents they were signing. Some didn’t even know what an interest only loan was. It may not be the bank’s responsibility to act in the best interest of the consumer but I think the entire process of lending to those people was greedy and unethical.

  • Moneycone March 20, 2011, 7:49 am

    What’s sad is not one banker was brought to justice for what happened. Should I hate the banks or the regulators who regulate the banks?

  • Dr Dean March 20, 2011, 11:39 am

    The problem now is the lack of will to make it not happen again. I think the Dodd Frank bill will end up costing consumers and tax payers more, and do nothing to fix the “too big to fail!” problem.

    What I don’t want to see, even with your concerns, is the government deciding what is a fair salary and benefits. The stockholders need to be doing a better job of holding executives accountable, but not the government. (of course now the government is a stockholder in many institutions….)

    • retirebyforty March 21, 2011, 3:17 pm

      Right! I don’t see anything that will prevent this kind of problem from occurring again. The SEC are still way behind every scheme the financial sectors dream up.

  • Jacob @ My Personal Finance Journey March 20, 2011, 1:28 pm

    Interesting post! I am sort of amazed with how some of the bigger banks can get away by offering such poor customer service and low interest bearing savings accounts. I think this just strengthens the case to switch to a local bank or credit union.

    • retirebyforty March 21, 2011, 3:18 pm

      I do most of my banking with the local credit union. They haven’t given me much problems at all over the last 15 years.

  • youngandthrifty March 20, 2011, 9:36 pm

    Great post! I haven’t watched Wall Street but I heard it’s good.

    My biggest pet peeves with the banks is also the big bonuses. These are our tax dollars funding their bonuses! 🙁

  • optionsdude March 21, 2011, 2:50 am

    Your wanted poster just drove me to share this. I have several loans through Bank of America since they bought Countrywide as well as some lines of credit. I don’t pay late and all of my accounts are up-to-date. I wanted to access two of my lines of credit a few weeks ago to gather some additional funds to pay taxes. Well, those lines of credit have been frozen. I am not surprised since all credit seems to be forbidden now-a-days. But I did find it somewhat ironic that a taxpayer who bailed out a bank can’t get credit from said bank to pay income taxes that went for a bailout.

    • retirebyforty March 21, 2011, 3:14 pm

      Sorry to hear that. That’s exactly the issue I have with using HELOC as the emergency fund. The bank can freeze your fund at the most inconvenient time. It’s really unfair that all the bailout money is just kept in the vault and not going out to help the tax payer and small businesses.

  • MoneyIsTheRoot March 21, 2011, 7:51 am

    I agree, Im tired of them myself. I understand their goal is to make a return to investors…but this is why I like credit unions! Low to no fees, and their goal is the satisfaction of the owners, or in this case, the members!

  • Buck Inspire March 21, 2011, 10:09 pm

    Great post. I thought we were done talking recession. Sickening, but we all need to be aware so thank you. The sad thing, it’s like a black hole. No one can be held accountable because there are so many people to blame? Government, regulators, big banks, people who couldn’t control themselves with dangerous loans, the list is endless. Sadly, it seems like an unsolveable puzzle. We will probably see this happen again. All we can do is safeguard against it as best we can.

  • Little House March 22, 2011, 10:13 am

    I can’t stand JP Morgan Chase. I know they are one of the most powerful financial institutions out there, but I refuse to do business with them. I hope that over time consumers will stop banking with them and drive them into ruin. They are the greediest [email protected]&!’s ever!

    • LaTisha @FSYAonline March 24, 2011, 8:14 pm

      I’m slowly beginning to dislike them as well. I switched to them from bank of America after I was dissatisfied with their customer service policies, and it looks like I will be changing banks again.

      • retirebyforty March 25, 2011, 8:43 am

        Maybe you should look into a local credit union? I’ve been with my CU for 15 years and I’m pretty happy with them.

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