Lessons in Banking: Personal and Political

My first series of posts, Lessons in Banking, has been written largely to help me articulate and process for myself the ways in which my short-lived career at a large bank impacted the way I think now about big business, the financial industry and government regulation. I had spent most of my adult life as a stay-at-home mom and spent many years helping my self-employed husband in his small business. 

I've worked for two other companies for longer than I worked at the one I've referred to TBTF (To Big To Fail) Bank. One of them was a true "small business" with about twenty employees. I've been working at one of the largest credit unions in the country for the past five years now. 

Nowhere else have I witnessed  the intense concentration of greed, deception, denial and lack of accountability l that I observed in less than two years working at a low level position in one small corner of one of the world's largest banks.

I never felt comfortable being associated with TBTF and had frequent little crisis of conscience while working there. In 2006 and 2007 my concerns about TBTF were limited to how their practices impacted their own customers and my own conscience. 

Headlines from fall of 2008

 

What was not on my radar at the time was how TBTF Bank and other huge banking corporations like them had the power to cripple the US and global economies, bring financial ruin to people and families far beyond their own customer base and to exert huge influence on our elections and elected officials. I still am far from astute in my understanding of business and economics, but I did come out of the experience with some personal and hopefully humble opinions. 

By the time the sub-prime mortgage crisis came to a head and the economy was in crisis, I had left TBTF Bank of my own accord and had been happily employed at the credit union for almost a year. As economic events unfolded in 2008 and beyond, I often looked back and tried to process what I observed at the bank in 2006 and 2007 in light of the bigger picture. 

As an American citizen, I think it's important to remember all businesses are not created equal. The words, business, government regulation, pro-business often seem to be thrown around rhetorically with no distinction between sizes and types of business. Some of the rhetoric would convince us that any government regulation of business is inherently wrong. In my opinion, businesses large enough to wield destructive power over our nation and the world had better be held accountable and there is no one to do that other than a government elected by the people and for the people.

October 2009

 


 I hear and agree with warnings against placing our faith in government, but is "In Big Business We Trust" a better option? People who trust in God should recognize both other alternatives as forms of idolatry. 

And as citizens of a democratic republic, we have more influence over our government than we do over multinational corporations, although even that is being diluted as their  influence in government grows. We do need healthy businesses unhampered by unnecessary regulation, but I have come to believe that some government regulation, especially of  large and powerful businesses, is absolutely necessary.

Lessons in Banking: Feeding Frenzies

When I worked at the TBTF (To Big To Fail) Bank customer service call center, mortgages were king in the couple years leading up to the economic meltdown in 2008. Customer service representatives were under pressure to convince callers to open and apply for all types of new accounts and loans with a big emphasis on mortgages and home equity loans. 

We earned commission for each new account we could convince a customer to open. After mortgage loans, checking accounts were especially profitable, probably because fees associated with them were a big source of revenue. Even if the customer never used that checking account and ended up closing it with a zero balance, the rep who convinced them to open it would have already received their commission. 

Nobody in management would have ever admitted that checking accounts were opened without a customer’s knowledge and consent, but I saw it every day. Part of my job was to call people who had brand new accounts and everyday I talked to people who had no recollection of opening a new checking account, but who had recently called customer service. 

In fairness, most of these new accounts had been opened with the customer's consent, but because there was so much pressure to sell checking accounts and so much money to be made doing it, reps used all kinds of tactics to sell them. 

In banking, there are two major types of fraud or  compromise that occur on checking accounts and they each need to be dealt with differently. The first involves the debit card. If a debit card is lost, stolen or compromised, that debit card number has to be closed and replaced with a new one as quickly as possible. As soon as the debit card is closed, there is no further risk to the account it is attached to.

Compromise of an actual checking account number as opposed to the debit card number is much more complicated and nothing short of closing the whole account and opening a new one will eliminate the risk.

Large scale debit/credit card compromises are fairly common when a retailer or payment processing company has a theft of data that includes debit and credit card numbers. When this happens, banks are notified that a large group of their customer's card numbers may have been stolen and need to be closed and replaced. In these situations, all that needs to be done for each customer affected is to replace their debit card with one with a new number. It's inconvenient, but not nearly as inconvenient as closing the whole checking account and transitioning to a new one, which involves switching direct deposits, automatic bill payments, ordering new checks, etc. 

Two such large-scale card compromises took place while I worked at TBTF Bank and both were high profile in the media, triggering panicked customers to call in even as the bank was sending letters and new cards to them. No one earned commission just for closing and replacing a debit card, so sure enough, customer service reps had a feeding frenzy advising customers to close their checking accounts and open new ones over the phone.

I heard this going on all around me, knowing full well that it was unnecessary and a terrible inconvenience to the customers. I don't necessarily think management was encouraging this and they may not have been aware of it, but they should have been. There just wasn't that much accountability. 

Lessons in Banking: Tricks of the Trade

One day in 2007, the TBTF (Too Big To Fail) Bank customer service call center introduced something new and trained us all on it.  The IVR System Bypass wasn't quite like gastric bypass, but it was hard to stomach and it did make me want to throw up.

Certain customers had been identified as good prospects for new accounts, particularly mortgages and home equity loan and lines of credit. When these people called the automatic phone system to do something like check their bank balance or activate a debit card, they would be transferred to a representative who would get a pop-up on their computer screen telling them which product they were supposed to pitch to the caller.

To the customer, it seemed like they had made a mistake following the recorded prompts or keying in their information. Now I work for a credit union and I know that sometimes these things do happen and callers will randomly be kicked out of an automated phone system to a live rep. 

At TBTF Bank we knew very well something else was going on, but we were expected to pretend otherwise. We were supposed to tell the customer that we'd  be glad to help them with whatever they needed, but in the process we were supposed to try to engage them in a conversation that could transition to a sales pitch. At the end of the phone call, if we had not managed to transfer them to a sales rep, we had to log the reason why. Of course we earned commission for every loan application that was submitted or new account opened as a result of our successful sales pitch.

In this, as in other sales incentives, I didn't perform very well, because my heart just wasn't in it. This was just another little crisis of conscience that kept me actively seeking other job opportunities during the year and a half I worked at TBTF Bank.

Lessons in Banking: Mortgage Mania

So much has happened in the US and world economies and in our political landscape in the past six years. Some of it  has given me cause to reflect back on my experience in 2006-2007 when I worked in an entry level position for a bank that was to become a major player in the sub-prime mortgage crisis. My time at "TBTF" (Too Big To Fail) Bank  helped shape my opinions about federal regulation of large banks, something I'd never had much reason to think about before. 

Customer service representatives at TBTF got extra money in their paychecks for each caller they could transfer to a "personal banker" who would take a loan application or open a new account for them. Even if a loan application was declined, we were still paid for talking the customer into submitting it. When customers told us that they didn’t think they would be approved because they had already been denied credit multiple times, we had everything to gain and nothing to lose by encouraging them to try again "just in case your credit has improved by now." Of course every time they applied, their credit score took another hit. 

Mortgage applications were the ultimate prize. We were expected to ask everyone if they were a home owner or if they wanted to be. It didn’t matter how young or old or poor they were. We were supposed to try to engage every caller in a conversation about the benefits of home ownership and get them transferred to a mortgage sales representative. People who already had mortgages were encouraged to apply for a home equity loan or a refinance. These people were just calling to check their account balances, order checks, report a lost debit card...  

One day I heard one of my co-workers trying to talk a young college student into applying for a pre-approved mortgage. My conscience didn't permit me to try very hard to go after these incentives and I never came close to meeting the sales goals that were set for each of us, but as long as I did well with the actual customer service aspect of my job description, I managed to earn my base pay and remain in good standing.
 

When news began to break about problems in the economy due to sub-prime mortgage lending, my supervisor was quick to tell us that TBTF Bank had very high lending standards and had never engaged in sub-prime lending like those other unscrupulous banks and mortgage companies out there. I think she may have honestly believed that.

Lessons in Banking: Widows in Their Distress

In 2006 I re-entered the workforce after many years as a stay-at-home mom, grandmother and helper in my husband's small business. For the first year and a half I had a small glimpse from the inside, at a low level, of one of the banks that was a major player in the sub-prime mortgage crisis that helped bring the US economy to its knees in 2008. 

I experienced a corporate climate that talked a lot about integrity, but didn’t seem to understand what it meant, that seemed to profit from exploiting the poor and uneducated while catering to the wealthy, but was also willing to exploit the wealthy if they weren’t savvy enough to act in their own best interest. I regularly was faced with little situations that created big ethical dilemmas for me as a Christian. I left that bank, which I will refer to as TBTF (Too Big To Fail) and went to work for a credit union, which has made it much easier to hold my head up in polite society. 

In my short career as a customer service representative at TBTF Bank I had several experiences that shaped my current opinions about regulation of the financial industry and, in particular, the huge multinational banking corporations. This blog post is the story of one of those experiences.

This is not me, but you get the idea.

 

In 2007, my job involved making phone calls to new TBTF Bank clients all over the country to “welcome” them. I had been at TBTF over a year, long enough to have taken several mandatory training courses on compliance with government regulations. One of these was a course about our responsibilities and procedures to comply with a California law against financial abuse/exploitation of the elderly. That law required that any financial institution employee who was aware of a possible violation was personally responsible to report it. Since we spoke with TBTF Bank clients in California on a regular basis, call center employees took this course annually.

http://www.bewiseonline.org/what-is-financial-abuse/ 

One day I called an elderly widow in California, who was eager to talk when I asked if she had any needs or problems regarding her new TBTF Bank accounts. She said she was glad I called and she hoped I could help her. She told me how she had gone to a local branch because they were advertising good interest rates on savings. She knew when she went in that she was only interested in liquid FDIC insured accounts. She said that she explained from the start that at her age she didn’t want any of her money at risk. 

When this lady told the representative how much her initial deposit would be, she was ushered into an office where a man talked to her about options she didn't understand, but she repeated to him that she didn't want any of her money at risk. She was sure he knew that she wanted to keep her funds liquid and she left thinking all her money at TBTF  Bank was in FDIC insured savings and money market accounts.

Later this elderly client went in to make a large withdrawal to buy a new car to replace her old unreliable one. She also had promised her granddaughter that she would fund her college education and it was almost time to pay for her first semester. She discovered that very little of her money was accessible to her. She said that the man who had talked to her in his office when she opened her accounts "grinned like the Cheshire Cat" and told her that her money was in safe investments, but that it was too soon  to take any of it out.

Since I worked for the retail banking side of TBTF, I had access to look only at her FDIC insured deposit accounts, and I could see that there was not enough money in any them to buy a car or pay for a semester of college. 

And of course this is not the actual widow I spoke with.

This widow, who was in her eighties, wasn't very far into her story before she was crying and begging me to help her. She asked me to come to her home and look at her paperwork to see if there was anything I could do. She was terribly disappointed to learn that I was calling from  Texas. 

I asked if she had any family nearby who might be able to look at the papers with her.  She said she had family out of state, but would be ashamed to tell any of them what had happened. She asked me to call her local branch and tell them to give her enough of her money to pay for the car and her granddaughter’s tuition. She gave me the name of the man with the Cheshire cat grin and of course when I looked him up I found that he was in the investment arm of the corporation.

After I got off the phone with this lady, who was still crying, I called the branch in California, but no one there wanted to talk to me. They said yes, they knew the widow was upset, but she had no reason to worry.  Everything was fine and I didn’t need to worry about it either. I’m sure they thought I was overstepping my bounds. 

I went to my supervisor and asked her to listen to the recording of my phone conversation with the client. She put me off even when I practically begged her for help. She assured me that no TBTF employee would put a client’s money into investments without their informed consent and made it clear that she was too busy to be bothered. 

That’s when I reviewed the material from the compliance course and concluded that I would be out of compliance if I didn’t follow the procedure outlined in the course material. I went online and reported the information as it had been relayed to me by the elderly lady. This was an internal reporting procedure that just relayed the information to higher-ups in TBTF who were responsible for compliance with state and federal regulation. 

I then went to my supervisor and told her that I had done this. She was livid. She informed me that this process was in place to report financial abuse of the elderly if we observed it from people outside the company, like a family member or caregiver. It wasn’t intended to report "our own."

I soon became uncomfortably aware that the managers in my department had gone into a meeting. Shortly thereafter a hard copy memo was placed on all the employees' desks informing us that we were to consult our immediate supervisors before we submitted a report of possible violation of the California financial elder abuse law. I knew that this requirement was contrary to the California law. 

I handed the page back to my supervisor and said, as my heart pounded, “I’m just going to suggest that if you haven’t sought approval from the legal department to distribute this memo, you probably want to do that.” 

She looked at me like I’d lost my mind, so I repeated myself.  Before long all the memos were picked back up and shredded. I asked my supervisor if she or anyone had listened to the recording of the call yet. She admitted that they hadn’t. I asked her again to just listen to the call. To her credit, she and other management did eventually pull and listen to the call and she admitted to me, “You were right. That was appalling.”

It's so easy to tell this story five years later, but at the time it was agonizing. I began crying and praying as soon as I got in my car to drive home that day. I felt so angry and frustrated and just plain sorry for that lady and her granddaughter.

I kept monitoring the widow's accounts to see if any of her funds had been deposited into her savings or FDIC insured money market account. I checked a couple times a week and never saw any evidence of that. Finally I made an anonymous  phone call from home to the California elder abuse hotline. 

Headlines from fall of 2008

I don’t know how this story ended, but in the fall of 2008, almost a year after I had left TBTF Bank, I thought of that lady when the sub-prime mortgage crisis came to a head and the American economy nearly collapsed. I hoped and prayed that her life savings was out of the stock market before then and that she had been able to help her granddaughter get off to college.