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OpEdNews Op Eds    H3'ed 2/21/11

The Banks Are Shooting Their Own Feet

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When we visit a bank to open a checking or savings account, the bank employee will ask for pertinent information. Besides our names, we are required to furnish driver license and social security numbers. If it is a business account, they need corporate papers of the company along with the above information for opening a corporate account. This is understandable because banks must follow rules and regulations that are imposed on them by government or as part of their corporate policy. Let's stop and look at this process and ask -- what in reality is happening? 

When we go to a given bank with which we have secured an account, we deposit our paychecks or the money made from our companies into that bank. The bank takes our money and gives us a receipt for the deposit made. As part of its policy, the Bank imposes its terms on our bank accounts, such as a "minimum requirement," say $100, to be held in that account. If the minimum requirement falls below that $100, a penalty will be imposed in the form of fees. How many times do you think you would go to any other established business, such as a restaurant, or a car dealership, if these merchants would have treated you the way the banks do?! As much as a purchase of a hamburger from a restaurant, or a car from a dealer would enhance their revenue, the same happens when we open an account at a bank and deposit our money. Why don't restaurants, car dealers, and other businesses not have the same leverage as banks do? Why don't corporations impose on us similar terms as banks do? Why do they not penalize us with fees? If corporations worked as banks did, wouldn't we be forced to allow corporations to exploit us in the same manner? 

Unfortunately, since most Americans do not have enough savings to make big purchases, we have come to believe that banks lending us money can make these purchases possible, which is true to some extent. How do you think a car dealership would behave if you were to buy a car and indicated you were desperate to get the car? The price of that car would go up, and the dealer would justify "squeezing" more money out of you as a result of seeing that desperation. The banks justify the same scenario whether we want to believe it or not! 

However, if the car dealer finds out that you are in no rush to get the car, not only would the price drop, but the car salesman would be running after you. 

The best example is when you go to borrow money. Those who have gone through the routine know very well what it involves -- financial statement, proof of income, and other cumbersome information. Now ask yourself this question, when we deposit our money with a banking institution, we are practically doing the same -- loaning them our money, even if it's in the form of a deposit. Do we ask the banks about their financial statements; do we ask for proof of reserve stability, when we deposit our money with them? 

Even worse is when we get into some kind of default payments that are due to financial pressures, caused through loss of income, or unexpected expenditures. The banks often rush to foreclose on assets that we might have and, as bank policy, will report us to credit agencies. Although many other companies follow the same policy when a customer defaults on payment, why should a customer deal with a bank or any company which does not care to understand their customers' financial hardship? 

A good example would be the home foreclosure. Many banks threaten to foreclose homes if the buyer falls behind with the mortgage payment as we see currently with our economic problems. Whether it is morally right to do that is a secondary question, considering the way the bankers' minds are set. What's really perplexing is banks do not realize that, by continuing to foreclose on homes, they shoot themselves in their feet; and they start to put themselves out of business, gradually, but surely. 

Assume banks keep foreclosing on homes without any resistance by home-owners due to their falling behind on payments. The burning question is what are the banks going to do with these foreclosed homes? Sell them on the market for an increasingly lower price, if they are that lucky to find a buyer who could meet the terms of a purchase, which would require a certain amount of cash. If the banks have tough luck, then they must pay for maintenance costs and property taxes of homes they foreclosed on. What have the banks gained? Nothing! The fact is that these banks have lost a lot of money, which leads us to another big question -- when banks know they'll never recover the original amount of foreclosed homes, why wouldn't they work out a deal with current home owners that may in the long run help both bank and home owner, and in the bigger picture, the United States economy in whole? This is a question that only people with bank mentality would or could understand; it is beyond the comprehension of a logically thinking person. 

It maybe argued that once such a step is taken, it would set precedence and all other home owners would want the same deal, or would default in order to get a similar deal. It is completely understandable, and there is some truth to it. However, if the foreclosure rates continue, more foreclosures will become prevalent across the country, people would lose their jobs in the construction industry as it kept faltering, and more jobs must be terminated that are affected, leading to a trickle-down effect and ending up in more foreclosures. Consequently, it would lead to an unending virtual cycle of destruction. Who would want to build a new home, when there are hundreds of foreclosed homes for half the price available everywhere? 

Now, what would happen if people decide to treat the banks the same way the banks treat them? The banks would go belly-up in a heartbeat. Imagine tomorrow, not every account holder at a given bank, but a few thousand of them every day would stand in line to close their accounts at that institution, let's say Bank of America, Chase, or Wachovia? A rush to any bank would mean the end of that bank. As Americans, would we do that? Certainly not, because we are human and good people; we are not like banks.

On the other hand, no person needs to undertake such a drastic step, because the banks are -- as mentioned earlier -- their own worst enemy and inflict the biggest harm to their own existence without any help from outsiders. How can banks continue to exist if all they do is destroy the credit-worthiness of their own clients -- put them out of work and income, and then to expect to exist?! Do banks not see the writing on the wall? 

What bankers have to understand is that hoarding money is worthless in the long run if it's not backed by a strong currency and a vibrant economy, unless they want to create a "banana republic" economy. One thing is certain -- their actions would not create either of these two conditions. Needless to say, if banks survive under these conditions, they would be no more than a banana republic bank -- worthless as other banks of a Third-World nation -- because they have to at least show some valuable reserve currency. What would American Banks have as reserve currency if the U.S. Dollar falters? 

This may lead us to all the conspiracy theories associated with the Bilderberg Group, CFR, Trilateral Commission, Bohemian Groove, the Illuminati, and other such groups. The big question is why these groups would want a prosperous nation like the United States and a world reserve currency such the U.S. Dollar to falter in order to create a world market for big corporations? Do they want the Chinese Yuan or the Euro to become the reserve currencies of the world, replacing the U.S. Dollar? Don't we have enough poverty and economic woe in the United States and in the rest of the world without creating more of it? 

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I am an economist (Ph.D.) and author of nine books dealing with economics, crude oil, energy, currency, environment, healthcare, and cost. For details, please visit
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