Maria Said

Posts Tagged ‘banks’

By LOREN STEFFY Copyright 2010 Houston Chronicle
Jan. 5, 2010, 9:35PM
The winner of the BCS championship game won’t be determined until Thursday night, but the loser’s already decided. It’s us.
Citigroup, which needed about $50 billion of our money to stay in business and has repaid less than half of it, is the proud sponsor of the Big Game. Maybe we should call it the Bailout Bowl or the Tournament of Financial Ruin.
AIG executives were forced to give up their junkets after getting bailout money, and auto execs had to ground their jets. Banks, though, are on a sponsorship binge, aligning college sports with failed finance.
In addition to the Bailout Bowl, Citi also underwrote the Rose Bowl — the granddaddy of Wall Street basket cases sponsored the Granddaddy of Them All.
Meanwhile, Capital One, which at least has managed to repay the $3.6 billion it got from the government, sponsored a bowl bearing its name. Then there’s the GMAC Bowl, which I’d like to call the Subprime Showdown after its mortgage-issuing sponsor sopped up more than $16 billion in government aid and probably isn’t done.
Of course, all bailed-out banks have continued to advertise, and the few millions that these banks spent on bowl games pales compared with the billions they borrowed from us. In fact, if they don’t advertise, they may never have a hope of paying us back.
But sponsoring college bowl games isn’t typical advertising. It’s another example of finance companies worming their way into the lucrative college market, associating their names with institutions of higher learning.
Campuses have been fertile ground for banks and finance companies, especially those that issue credit and debit cards and underwrite private student loans.
For example, when my son started college in the fall, a major bank handled the school’s meal card program and quickly suggested he open an account with them as well.
The account, of course, came with massive “overdraft protection” fees that, rather than simply refusing a transaction if he miscalculated his balance by a few dollars, instead turned a $2 soft drink into a $37 one. We closed the account after the bank told us it was impossible to remove the “service.”
His experiences are minor compared with the thousands of students who are being wooed into high-interest debt to pay for school. More than two-thirds of undergraduates from a four-year institution graduate with an average debt of more than $23,000, according to the Institute for College Access and Success.
While federally insured loans have historically carried reasonable, fixed interest rates — currently between about 3 percent and 6.8 percent— banks have used their campus access to develop a new and far risky practice: private student loans.
Unlike federally backed student loans, private loans typically come with variable interest rates, often sold with introductory rates that are lower than the fixed-rates on federal loans. But that’s like the difference between buying a 30-year fixed-rate mortgage and a subprime loan with a balloon payment. Private lenders aren’t even required to disclose the loan’s interest rate before the borrower signs up, although that will change in February when new rules take effect.
“The label of ‘student loan’ tends to confer a confidence in the quality of the product that isn’t borne out,” said Lauren Asher, the institute’s president. “Private student loans are an expensive, risky form of credit, like a credit card.”
According to independent market researcher Student Lending Analytics, one of the biggest underwriters of private student loans is — you guessed it — Citigroup.
Almost two-thirds of undergraduates with private loans haven’t maxxed out their federal loan options, Asher said. In other words, a lot of students are getting suckered into paying more than they should for college.
By sponsoring the Bailout Bowl, Citi is using our money to exploit college students.
It doesn’t matter who you root for or who wins the game. Taxpayers lose again.
Loren Steffy is the Chronicle’s business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy.

Arianna Huffington and Rob Johnson
Posted: December 29, 2009 06:02 PM

Move Your Money: A New Year’s Resolution
Too-big-to-fail banks are profiting from bailout dollars and government guarantees, and growing bigger.
Last week, over a pre-Christmas dinner, the two of us, along with political strategist Alexis McGill, filmmaker/author Eugene Jarecki, and Nick Penniman of the HuffPost Investigative Fund, began talking about the huge, growing chasm between the fortunes of Wall Street banks and Main Street banks, and started discussing what concrete steps individuals could take to help create a better financial system. Before long, the conversation turned practical, and with some help from friends in the world of bank analysis, a video and website were produced devoted to a simple idea: Move Your Money.
The big banks on Wall Street, propped up by taxpayer money and government guarantees, have had a record year, making record profits while returning to the highly leveraged activities that brought our economy to the brink of disaster. In a slap in the face to taxpayers, they have also cut back on the money they are lending, even though the need to get credit flowing again was one of the main points used in selling the public the bank bailout. But since April, the Big Four banks — JP Morgan/Chase, Citibank, Bank of America, and Wells Fargo — all of which took billions in taxpayer money, have cut lending to businesses by $100 billion.
Meanwhile, America’s Main Street community banks — the vast majority of which avoided the banquet of greed and corruption that created the toxic economic swamp we are still fighting to get ourselves out of — are struggling. Many of them have closed down (or been taken over by the FDIC) over the last 12 months. The government policy of protecting the Too Big and Politically Connected to Fail is badly hurting the small banks, which are having a much harder time competing in the financial marketplace. As a result, a system which was already dangerously concentrated at the top has only become more so.
We talked about the outrage of big, bailed-out banks turning around and spending millions of dollars on lobbying to gut or kill financial reform — including “too big to fail” legislation and regulation of the derivatives that played such a huge part in the meltdown. And as we contrasted that with the efforts of local banks to show that you can both be profitable and have a positive impact on the community, an idea took hold: why don’t we take our money out of these big banks and put them into community banks? And what, we asked ourselves, would happen if lots of people around America decided to do the same thing? Our money has been used to make the system worse — what if we used it to make the system better?
Everyone around the table quickly got excited (granted we are an excitable group), and began tossing out suggestions for how to get this idea circulating.
Eugene, the filmmaker among us, remarked that the contrast between the big banks and the community banks we were talking about was very much like the story in the classic Frank Capra film It’s a Wonderful Life, where community banker George Bailey helps the people of Bedford Falls escape the grip of the rapacious and predatory banker Mr. Potter.
It was a lightbulb moment. And, unlike the vast majority of dinner conversations, the excitement over this idea didn’t end with dessert. It actually led to something — thanks in great part to Eugene and his remarkable team, who got to work and, in record time, created a brilliant, powerful, and inspiring video playing off the It’s a Wonderful Life concept. Watch it below.
Within a few days, the rest of the pieces fell into place, including an agreement with top financial analysts Chris Whalen and Dennis Santiago, who gave us access to their IRA (Institutional Risk Analytics) database. Using this tool, everyone will be able to plug in their zip code and quickly get a list of the small, solvent Main Street banks operating in their community.
The idea is simple: If enough people who have money in one of the big four banks move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it’s meant to be. It’s neither Left nor Right — it’s populism at its best. Consider it a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest. It’s time for Americans to move their money out of these reckless behemoths. And you don’t have to worry, there is zero risk: deposit insurance is just as good at small banks — and unlike the big banks they don’t provide the toxic dividend of derivatives trading in a heads-they-win, tails-we-lose fashion.
Think of the message it will send to Wall Street — and to the White House. That we have had enough of the high-flying, no-limits-casino banking culture that continues to dominate Wall Street and Capitol Hill. That we won’t wait on Washington to act, because we know that Washington has, in fact, been a part of the problem from the start. We simply can’t count on Congress to fix things. We have to do it ourselves — and the big banks are the core of the problem. We need to return to the stable, reliable, people-oriented approach of America’s community banks.
So watch Eugene’s amazing video, then go to www.moveyourmoney.info to learn more about how easy it is to move your money. And pass the idea on to your friends (help make this video — and this idea — go viral!).
JP Morgan/Chase, Citi, Wells Fargo, and Bank of America may be “too big to fail” — but they are not too big to feel the impact of hundreds of thousands of people taking action to change a broken financial and political system. Let them gamble with their own money, not yours. Let’s turn big banks into smaller banks. We’ll all be better off — and safer — as a result.
Make it your New Year’s resolution to move your money. We can’t think of a better way to start 2010.