Grumpy Editor

Charles Schwab: Bankers just ‘sit on their money'

Bankers’ tight purse strings are at the base of many current financial problems in the U.S. and Charles R. Schwab, founder and chairman of the Charles Schwab Corp., has it right when he calls for a return to monetary normalcy, notes Grumpy Editor.

Fed policy --- resulting in socking it to job creation and smacking consumers’ savings --- should be pounded via newspaper editorials around the nation.

In an op-ed piece in the weekend edition of The Wall Street Journal, Schwab cites the Federal Reserve’s near-zero interest rate experiment “is weighing on consumer and investor confidence.”

Schwab sums up the sad situation in one paragraph within his WSJ piece by pointing out small businesses that create jobs “are unable to borrow in any meaningful amounts except via 100 percent collateralized loans.”

He goes on to emphasize, “Banks continue to hold large capital bases, mostly because they have no definitive signal yet from the federal government or regulators about what their capital requirements will be.  So they take the most conservative path available --- they sit on their money.”

How much have they built up in their sturdy nests?

It comes to more than $7.5 trillion in FDIC-insured commercial banks and savings institutions’ deposits, tallies Schwab.

These funds, he adds, are “earning --- and doing --- essentially nothing.”

Images of financial institutions also are suffering from inactions.

A recent Associated Press-National Constitution Center poll finds 52 percent of those surveyed say they have little or no confidence in banks and financial firms.

Unhappy bank customers = major PR job ahead

As the economy improves (word out of Washington on Monday claims the recession ended 15 months ago), banks --- which have been socking it to consumers and businesses --- will have an enormous public relations job ahead, predicts Grumpy Editor.

An Associated Press-National Constitution Center poll finds 52 percent of those surveyed say they have little or no confidence in banks and financial firms.

One in four respondents puts banks in the same “absolutely no confidence in” category as Congress, federal government, organized labor and blogs. 

Banks  are getting the bad image from a variety of things.

Customers complain loan applications get lost or delayed, then in the end are nixed.

Interest rates, including certificates of deposit, money market funds and savings accounts are in the pits --- just barely above the 0.00 percent line.

Patrons, no matter how long they have held accounts with the banks, are getting nicked with hefty fees even with one-day-late payments.

Other unexpected fees and charges are appearing more on statements.

This may spur the American Bankers Association, the trade group representing the industry, to put aside some lobbying efforts from its Washington base to focus on developing a special PR push to soothe and woo a growing number of unhappy bank customers around the nation.

Individual banks, meanwhile, may have to take a page from yesteryear and again dangle account-opening inducements ranging from pens to cruises.

Bank of America’s one-cent quarterly dividend to linger

Bank of America shareholders, looking for an increase in the current penny quarterly dividend on common stock, will have to be patient for a while longer, notes Grumpy Editor.

The latest dividend outlook this week wasn’t given much coverage by media.

CEO and President Brian Moynihan, at the Barclays Capital 2010 Global Financial Services Conference in New York Tuesday, said BofA will raise the one-cent quarterly “as soon as we can.”   He also said the bank’s balance sheet will shrink in coming years.

Amplifying that, he explained new regulations passed by Congress in July plus global banking regulations proposed last Sunday may trim annual revenue.

The low quarterly payout has been in effect since March, 2009.   Until that time, BofA had been increasing its dividends for 30 years.  Dividends have been paid since 1903.
 
The largest U.S. bank by assets was paying shareholders a lofty quarterly dividend of 64 cents a share in September, 2008, before cutting it in half to 32 cents three months later as the credit crisis worsened.

Taking a familiar route in efforts to bolster the bottom line, the bank is eyeing additional fees on patrons.

"We will increase the account balance minimums or charge monthly fees in lieu thereof, which is the choice of the customer," Moynihan mentioned at the New York conference.  The bank also will be reducing staff and the number of branches in efforts to cut costs, he added.

With about 5,900 retail banking offices, the bank said it serves about 57 million consumer and small business customers.

A bank closure holiday? No failures since Aug. 20

A business story missed by outlets ranging from The Wall Street Journal to Associated Press: There have been no U.S. bank failures in almost three weeks --- the longest span without a Federal Deposit Insurance Corp. (FDIC) shuttering this year, tallies Grumpy Editor.

Of course, there is always tomorrow, as Fridays are days the FDIC usually moves in and closes troubled banks.

However, no bank closures have occurred at a time when the FDIC recently pinpointed 829 out of the nation’s 7,932 banks were on the “problem list.”

So far this year, 118 banks have failed.

The last FDIC action was on Aug. 20 with eight closures.

Only one bank failed in the previous week.

Prior to Aug. 20, only three non-holiday Fridays this year have been without bank terminations --- Feb. 12, April 2 and July 2.

++++++++++++++++++++++++++++++++++++++++++++

UPDATE:   After three-weeks with no action, the FDIC on Sept. 10 closed one bank --- Horizon Bank, Bradenton, Fla.   Its four branches reopen Sept. 13 as offices of Bank of the Ozarks, Little Rock., Ark.

ShoreBank, in Chicago, 7 others closed by authorities

Many newspapers missed this over the weekend:  Following a single bank failure the prior week, eight banks were shuttered Friday by the Federal Deposit Insurance Corp. and the biggest one, ShoreBank, with deep roots in Chicago, had ties to the Obama administration, observes Grumpy Editor.

Four other banks were in California, two in Florida and one in Virginia.

California banks closed were Sonoma Valley Bank, Sonoma; Los Padres Bank, Solvang; Butte Community Bank, Chico, and Pacific State Bank, Stockton.

Florida banks on the list were Independent National Bank, Ocala, and Community National Bank at Bartow.

Also closed was Imperial Savings and Loan Association, Martinsville, Va.

The FDIC actions brought the number of bank failures this year to 118.

ShoreBank, with about $2.16 billion in assets, had been on shaky ground for some time.

Its 15 offices reopened today under the name, Urban Partnership Bank, a newly-chartered institution.

President Barack Obama and Michelle Obama have been acquaintances of ShoreBank’s founders and former leaders. But the White House has consistently denied any involvement in earlier rescue attempts.

The Wall Street Journal reported that Rep. Darrell Issa (R., Calif.), top Republican on the House Oversight and Government Reform Committee, will request an investigation of ShoreBank by the FDIC, said a spokesman.

After prominent Wall Street bankers tried to raise money to save the bank, he added, Issa raised questions about whether the Obama administration had sought help for the bank, but hasn't yet received a response from the White House.

Editors miss key elements in 7 shuttered Illinois banks

When seven banks in and around a major city --- Chicago --- are closed on the same afternoon by the Federal Deposit Insurance Corp. and one of the financial institutions is owned by the family of the state’s treasurer who happens to be running for President Barack Obama’s former U.S. Senate seat, shouldn’t those two unusual elements point to beefing up a story based on the now-weekly FDIC bank failure announcements, asks Grumpy Editor.

The story, out Friday and treated as a routine piece by Associated Press, was picked up by some print and broadcast outlets around the nation.  Despite all the bank failures being in Illinois, the AP story carried a New York rather than a Chicago or a Washington (home of FDIC) dateline.

The New York Times, meanwhile, on its Web site Friday ran only the first six paragraphs of AP’s 11-paragraph story.  The chopped seventh paragraph mentioned Broadway Bank, Chicago, one of the shuttered seven that day, was "owned by the family of Illinois Treasurer Alexi Giannoulias, a Democrat who is running for President Barack Obama's old Senate seat."

The Wall Street Journal, usually alert to major FDIC announcements, omitted mention of the Illinois failures in Saturday editions.

Along with Broadway Bank, others closed by the FDIC were New Century Bank, Citizens Bank & Trust Co. and Lincoln Park Savings Bank, all based in Chicago; Wheatland Bank, Naperville, 30 miles west of the Windy City; Peotone Bank and Trust Co. in Peotone, 40 miles south of Chicago and Amcore Bank, Rockford, 85 miles northwest of Chicago.

Amcore, with 52 branches and $3.8 billion is assets, was the biggest of the seven.

U.S. Senate candidate Giannoulias said shortly after doors were closed on the four-office, $1.2 billion-in-assets Broadway Bank:  “It is an incredibly sad and heartbreaking day for me and my family.”  His brother, Demetris, was CEO of the family operation started 30 years ago by their father.

A spokesperson for Rep. Mark Kirk (R., Ill.), Alexi Giannoulias’ opponent in the U.S. Senate race, declared:  “While years of risky lending schemes. hot money investments and loans to organized crime led to today’s failure, it’s a sad day for Broadway Bank employees who may lose their jobs due to Mr. Giannoulias’ reckless business practices.”

Alexi Giannoulias at one time was chief loan officer at the family-run bank when $20 million in loans during a 14-month period were made to a pair of Chicago crime figures, according to an examination by the Chicago Tribune.

The Chicago Sun-Times has reported FDIC records showed Broadway Bank took more chances in commercial and construction loans than most banks.

Media still fuzzy in identifying WaMu: bank or S&L?

With the failed Washington Mutual back in the news via a congressional investigation, some editors and writers this week continued to have a problem distinguishing between a commercial bank and a savings and loan association, notes Grumpy Editor.

Most print and broadcast outlets referred to Seattle-based Washington Mutual as “the biggest bank failure.”

But it was a savings and loan, also called a thrift.

Reuters correctly identified Washington Mutual as a S&L in the lead to a Monday story. But in the second paragraph it labeled WaMu (its abbreviated identification) as “the biggest bank failure in history.”

The nation’s largest S&L at the time, WaMu filed for bankruptcy in September, 2008, in the wake of mounting sub-prime loans.  It was sold later to New York-based JPMorgan Chase & Co.

The Los Angeles Times, in a state where WaMu had nearly one third of its branches, referred to the financial institution’s collapse as “the largest bank failure in U.S. history.”  Although Times writers continued to describe it as “the bank” in the second paragraph, a caption to a photo accompanying the Monday story got it right, with “Seattle-based thrift.”

USA Today, the Washington Post and many others relying on Associated Press reports, also identified WaMu as “the biggest U.S. bank ever to fail."

The Wall Street Journal, in a major story yesterday, also labeled the WaMu episode as “the largest bank failure in U.S. history,” then went on in following paragraphs branding the financial institution a “thrift.”

Unlike commercial banks such as Bank of America, N.A., Wells Fargo & Co., JP Morgan Chase & Co. and Citigroup Inc., WaMu’s primary regulator was the Office of Thrift Supervision --- within the Treasury Department --- that focuses on thrifts.

Some editors forget proper usage of robbers vs. burglars

The difference between robbers and burglars somehow slipped by some editors this week, notes Grumpy Editor.

Wire services and big city daily newspapers seem confused over robbers/burglars usage.

It is especially noticeable with reports out of Paris mentioning “would-be robbers” early Sunday attempting to drill into the basement of an office of French bank BNP Paribas.

A wire story includes mentions of a Crédit Lyonnais bank branch broken into during the prior weekend by “tunnel-digging robbers” and a Caisse d’Epargne branch in a Paris suburb “robbed at New Year,” both in similar fashions.

In these cases, the proper term is burglars (or burglarized).

Burglars trespass or enter a building with intent to commit a crime. 

Robbers, on the other hand, take property from a person by use of violence or intimidation.

Illustrations --- using a bank --- where the action takes place:

A burglar makes his way into the building (perhaps through an open window, unlocked door or hole in the roof) and steals something.  A robber walks in, points a gun or other weapon and demands that a teller hand over money or other valuables.

Charles Schwab cites seniors squeezed by low CD rates

Charles Schwab, founder and chairman of investment firm Charles Schwab Corp., in a Wall Street Journal op-ed piece, points out how low savings interest rates are socking seniors --- a subject that should have been tackled earlier by business journalists, notes Grumpy Editor.

“Unprecedented low (savings interest) rates have now been in place for almost 18 months,” he mentions.  “As a result, banks have enjoyed virtually free access to money while retirees have been deprived of any meaningful yield on their fixed income portfolios.”

Indeed, other than for security, putting funds into bank accounts has a slight edge over stuffing bills under mattresses.

Average yields on one-year certificates of deposit this week remained a paltry 0.72 percent, unchanged from the prior week, tallies bankrate.com.

Major national financial institutions are being extremely stingy on one-year CD payouts.  Examples of annual percentage yields:

•  Wells Fargo Bank offers 0.30 percent APY.  That’s less than one third of one percent in keeping funds tied up for a year.

•  Bank of America boasts 0.40 percent.

•  Citibank, highest of the trio, trumpets 0.80 percent. 

For retirees, “the ultra-low interest rate is more than a hardship,” contends Schwab.  “It’s a potential disaster striking at core American principles of self-reliance, individual responsibility and fairness.”

Keep in mind that Social Security recipients this year received no cost-of-living (COLA) adjustment for the first time since 1975 because inflation was determined to be “flat.”

An attempt was made to provide $250 checks to 57 million elderly people, veterans and those with disabilities to assist in lieu of no 2010 COLAs.

But the Senate in March defeated that proposal with a close vote of 50 to 47 with mostly Republicans going with “nays.”

Meanwhile, cost of utilities, gasoline, food and home/auto insurance, among other everyday items, continue to climb, smacking pockets of seniors on fixed income.

“Those in Washington should keep their plight in mind as they consider Fed monetary policies going forward,” reminds Schwab.