Banking Then and Now

For the past couple of weeks, I’ve been making notes for a post about the various ways life has changed – for better and worse - since we were children. And I will get around to it. But one of the items on my list is banking and it deserves a post of its own.

When I was growing up, banks were places of trust. Even their physical presence was imposing. Big marble interiors, solid pillars holding up vaulted ceilings several stories above the main floor. Sometimes the grills at tellers’ windows were gilded. Loan officers and other officials sat behind substantial wooden desks dressed in suits and ties. Sound was muted, people spoke in quiet voices.

Money was serious business in those days, and it was impossible to doubt the pennies and nickels I saved to deposit in my first passbook account when I was 9 or 10 would be there when I needed cash for a birthday gift or Christmas presents. Banks then took pains to maintain a sober demeanor as befits handling other people’s money - so much so, that they did not advertise. That would have been seen as frivolous.

Times change. Today, the tellers’ grills have long been replaced with bullet-proof plastic and banks look or feel pretty much like the clothing shop next door – flyers taped haphazardly to the walls promoting CDs along with other banking “products,” and ATMs lining the wall. The customer service counter is often empty, discouraging any personal service.

Here in Portland, Maine, there are some bank branches stuck off in corners of parking lots at strip malls. Add a golden arch or two and you’d mistake them for McDonald’s – hardly confidence inspiring. The difference in atmosphere between banks of my youth and those of today mirrors, to a degree, the difference between banking itself then and now.

Large numbers of banks failed during the savings and loan crisis of the late 1980s and early 1990s. Since then there have been few. Although 2002 was a big year – 12 failed – there were none between June 2004 and February 2007, according to the FDIC.

There have been nine since then, including eight this year, with more to come. The New York Times reported earlier this week on another iffy bank in Florida that had been promoting the “59-Minute Mortgage.” It’s hard to take seriously a loan of several hundred thousand dollars with a sales pitch that sounds like a belongs on a discount appliance store.

In the years since the savings and loan crisis ended, the FDIC cut its staff by two-thirds. Now, in anticipation of more bankrupt banks, they are hiring back retirees (that’s one way to put a little dent in age discrimination – see yesterday’s post) who have expertise in handling insolvent banks.

Curious about the bank I use for my checking account, I spent the better part of a day last week trying to find out its financial condition. I had little luck and wasn’t encouraged to read this at the Forbes website [emphasis added]:

“If your bank is failing, you probably won't know about it. Regulators deliberately keep a pending closure secret to avoid a mad rush to remove deposits - a run on the bank, if you will.

“For one thing, a sale of the institution is often possible at the last minute, eliminating the need for federal intervention. But a buyer isn't going to take on the deal if all the deposits rush out the door. For many customers, the first time they know their bank has been shut down is when their credit card gets declined or they walk to their branch and notice it's closed.”

I suppose there is some logic to keeping names of failing banks secret, but the problem is, I need to pay my bills each month and it’s not like I have enough money to keep accounts spread around in several banks.

Last month, I did not receive an e-bill from a credit card company and didn’t discover it was missing until after the due date. In addition to a $29 late fee, the company immediately doubled my interest rate even though I have a pristine credit rating.

The FDIC insures bank accounts up to $100,000, but it may take days or weeks for them to make funds available to customers of failed banks and I haven’t read about any assurance that late fees and interest increases will not being applied to bank customers who suddenly can’t write checks to pay bills on time.

For the past several decades, our culture at large has become more and more casual. Few employers require suits and ties anymore, kids go to school with their naked butts hanging out and banks process new mortgages in minutes and email the documents, if you believe the DiTech commercials.

Why do I think the various money crises we’re struggling with now would not be happening if banks, businesses and the government, which has weakened so many regulations, had maintained the serious, sober attitude toward money they had in my younger years? Not everything new is a good idea and I really hate wondering if my bank will be the next to fail.

(And yes, I know I’m being simplistic, but you don’t really want to read the 50 pages it would take to dissect the banking mess in more detail. Still, it’s worth talking about.)

[At The Elder Storytelling Place today, the winner of the July 2008 Excellence in Storytelling Award.]

Comments

[Marlys Styne]

I agree, Ronni. It seems to me that money used to mean piles of "greenbacks," or at least paper checks, and now it means little notations on the computer screen. It just seems to float out there in cyberspace! If I forget my I.D. and password, I can't even check my account balance.

[Cop Car]

One of the things that my parents did to earn money was to run the local bank--in a little town where the main street was a 2-block-long dirt street. Far from being imposing, the bank was next to the general store and of similar, but smaller, construction. The only "imposing" thing about the bank was the gold lettering on the window. Of course, this was only 9 or 10 years following the failure of so many small banks that led to the establishment of the FDIC (in 1933).

Today, I would not dream of putting all of my money--no matter the amount--into one financial institution, any more than I would dream of holding all of my investments with one investment house. Even though my folks were bankers, they were also farmers--who always taught us kids not to put all of our eggs in one basket.

I, for one, appreciate being able to check my balances online or by phone--much as I appreciated, in the early years, being able to call my friendly bank teller to ask if my 35-cent check had been cashed. Although my mother would wince, I haven't kept a check-book register in nearly 30 years!

Isn't it funny how different people are?

[Marian Van Eyk McCain]

I'm not fussed about suits and ties and it's fine with me if bank tellers dress for comfort as long as they do their job efficiently and pleasantly.
But I disliked it when most banks switched to centralized phone numbers, so that you can no longer telephone your branch and talk to someone who knows you.
On the 'plus' side, it is now possible to choose a bank on the basis of how ethically it invests your money. That was never so in the 'good old days'. Easier here in the UK, admittedly, since we have the Co-operative Bank - a solid and highly respected institution - as well as smaller 'ethical' banks like Triodos. But the US has them too, even though they are harder to find. Like Chittenden Bank in Brattleboro VT where you can put your money in a 'socially responsible' account and know it's not being used to invest in the arms trade or something. equally noxious.
Internet banking is a huge 'plus' for me also. I love to be able to access accounts with the click of a mouse and make transfers online. We have all our utility bills, credit card bills etc on direct debit, so no worries about missing a payment. No, I wouldn't want to go back because for me, the pluses of modern banking outweigh the minuses.

[tnwoman]

I can remember opening my passbook savings account at one of those large banks. The main banks were always "downtown" and a few branches started opening in the suburbs about the time I started driving.

I have been with the same bank since I was 14....50 years. It has gone through several name changes and I no longer am on a first name basis with the manager or the tellers..they come and go too quickly.

I have a friend in her mid eighties who just last week went to her bank and drew out $10,000 in cash which she is going to keep hidden in her house. She remembers the depression.

[Kate]

Working in the 'new' banks is very different, too. I did it for many years; some of the changes seemed to happen overnight. We used to take great pride in knowing our customers, then people became 'positions' and each one had a sales goal. Even tellers were first 'encouraged', and then required to provide sales leads to their coworkers for bank products such as CDs, loans, new accounts, etc. And failing to meet that goal was sufficient grounds for termination.

By the time I left in 2002, it really felt no different than any retail sales job; the company insisted on calling their locations 'stores', and the scorecard was/is king.

I agree with Cop Car about online banking and in using more than one bank.

Bankrate.com is the first place I go to check product rates and banks' reputations, among many other things. Then, because I'm such a skeptic, I spend a little more time with search engines to confirm. So far, so good.

[Darlene]

tnwoman, I hope your neighbor's house doesn't catch fire or that she doesn't let anyone else know she has all that cash in her house. I remember the depression, too, but I also know of elderly women and men murdered for their cash.

Bank deposits are insured by the government for $100,000 for each deposit and if the government fails your money won't be any good anyhow. (Remember the old joke: Save your Confederate money - the South's going to rise again.)

I try to keep as little cash as possible in my home. But I also am leery of on line banking after my computer crashed and I lost my check register and my credit card statement. Be sure to back up your information.

[Dr. Ron Evans]

Don't expect headlines about wobbly banks...if people think their bank is in trouble, they do stupid things. Witness the latest with Indybank. If you don't trust the FDIC you've just about hit the end of the line on who you can trust.

I do almost all my banking online, I pay bills online, I buy CD's online from various places, all without incident. Maybe I've been lucky, but, again, not all the regulators and enforcers are out to lunch. If I have a problem I am certain I can find help.

Pardon more cynicism, but the demise of ethics in business is another sign that the culture is headed in a downward flight path.

[donna]

Haven't used a bank in over 20 years. Credit unions are the way to go. Ours have been great to us, and I know they aren't overextended with bad housing and commercial real estate loans.

[Judy]

If you go to this link, you can find out info re your bank (an earlier poster also mentioned this site): http://www.bankrate.com/brm/safesound/ss_home.asp

[annie]

We talk about a credit crisis in the world, but where does credit come from? I have long thought the banking industry needs much scrutiny. A year ago I was called to serve duty on a federal jury. The case was one of bank fraud. Account numbers had been stolen and false checks printed on a home computer with check stock you can buy at any office supply store. The bank's logo had even been scanned and printed onto the checks for a look of autheticity.

The false checks were handed out to a number of the forger's accomplices who would take them to branches of this large bank and cash them. It was a complicated case. There were two defendants and multiple charges. One defendant, the ring leader and check manufacturer, was a 30-year-old man. The other defendant was a 24-year-old woman who had been with him for ten years, having his children. Yes, since she was 14. (Her mother was in the courtroom, and I so wanted to grab her and say, "where on earth were you?")

The way this pair obtained the account information was that the young woman was, as described by a bank officer, a "phone teller"...that person you talk to when you call the 800 number. She sits in a call center, working at minimum wage, and has access to your account and mine. To look at her in the courtroom was almost too sad to bear. She looked hard and shabby and yet surely had dressed herself in her best for her court appearance. You would not have given this woman a second look except to steer clear of her on the street. When the federal police caught her, she had a gun in her handbag and a huge amount of marijuana bricks in her car...in front of her home.

I always thought that teller was a position to which responsible and capable bank clerks were promoted after having gained experience and trust. This large, well-known bank had hired this defendant. I asked the other jurors after we had reached a decision if they thought the bank had any responsibility. First they looked at me like I was crazy, then one by one they started asking how she could have been hired.

I do most of my bank business on line, although there is a brick & morter branch around the corner, and I do have direct phone numbers for the people who work there. None appears to be over 35 (maybe even over 30!). Where did they gain their banking experience I wonder? Then I realize, they probably have none.

[joared]

Yes, lots has changed in the way of banking. Years ago I worked a few years in the loan dept. of a commercial bank. An excellent education for me at a young age. Believe me the integrity with which loans were made in those days makes what has been done for many years now, and especially since what has happened recently, is shameful to put it mildly.

Some small banks are on shaky ground here in So. Calif. Some are salvaged by buyouts from other banks, FDIC stepping in and it isn't over yet. Not every depositor is coming out unscathed which is more than tragic and it's not over and won't be for quite a long time to come. Of course, we the taxpayers pay for bailing out some of these institutions. People were uncertain about their FDIC coverage and in one instance they made panic withdrawals. The FDIC handled their intervention with depositors poorly in the beginning, but seem to have rectified that situation.

[Sheila Halet]

Ronni-very good article....to avoid the late fee on an e-bill, I always have a hard copy of the bill at hand,filed by due date, just in case the e-one does not come in or I miss it...for me it is a form of checks and balances (excuse the pun) in the bill paying department of my life.
I still like hard copies of invoices.

[anonymous]

Great article.

But if you are really worried, I would get a credit card with a different bank, such as BOA (which is highly unlikely to fail, but could). Then if your bank fails, you can get an advance on your card to tide you over, until the FDIC kicks in. Just make sure whatever institution you are keeping money in is FDIC. That was the big problem with Savings and Loans. They weren't insured, thus people lost out.

Be sure to use your card once a month to keep it active. If you pay it off every month it is 'free'.

I do everything online these days, from bill-pay to my company's books. I'd hate to go back to the 'bad old days' of banking. (Those banks failed too...)

[DaisyDeadhead]

Great thread, great information, thanks so much. And Judy, thanks for the link.