Commentary—

Banks Put Willie Sutton To Shame

By William A. Collins

My finances,

In the tank,

Since I borrowed,

From the bank.

My 103-year-old aunt has finally escaped the banks. She died. No more credit card offers. No more privacy statements explaining how they absolutely will not divulge her personal information to any other company unless they really, really want to. No more offers to consolidate her debts or recitations of exorbitant new fees and interest rates. Dying has its compensations.

Banks, you see, for all their solemnity and protocol, learned a great deal from Willie Sutton, the 20th Century’s most prominent robber. When asked why he plundered banks he replied, “That’s where the money is.” Yogi Berra couldn’t improve on that.

But bankers could, and have. They’ve learned instead how to separate people from their money legally and to remain pillars of the community all the while. Their most egregious technique in these parts is to convert old mutual savings banks to public stock companies. Peoples Bank of Bridgeport has now joined New Alliance of New Haven in the state’s top echelon of these greed practitioners.

The depositors (they used to own the place) must first approve such a change before it can happen, and generally, they do so under a heavy barrage of propaganda. The resulting sale of stock brings in a flood of cash, a big chunk of which is quietly siphoned off by the bank’s executives for themselves. It works great — no consumer protection, no investigations, no indictments. Poor Willie was on the wrong end of the business.

Other mammon-oriented banks and pseudobanks jumped into the recent housing boom. They financed mortgages to “subprime” borrowers. These folks probably couldn’t afford a house in the first place, but bought into the national euphoria for “home ownership.”

Supporting this charade, the subprime lenders often took fees and charges off the top. As the inevitable defaults and foreclosures have now followed, some lenders themselves have declared bankruptcy, leaving borrowers, employees, and investors all holding the bag. Already a bunch of failed execs is starting new ventures to repeat this shoddy cycle. Mortgage Lenders Network of Middletown is Connecticut’s biggie in that unsavory industry.

But perhaps the ugliest parasites in the “civilized” lending business are the credit card banks. Their game is to set up massive penalties and usurious interest rates to drop on any borrower who is late with a payment. All those appealing low rates from the newspaper ads and mass mailings are revoked instantly if you miss a deadline.

Not surprisingly, this sort of predatory lending has driven a lot of families into bankruptcy, which, while painful, used to allow sufferers to write down some of those unjust debts. No more. Last year the banks were able to gather enough muscle in Congress to tighten the bankruptcy law. This has switched lots of families from merely being poor into a new life of abject penury. It foments family break-ups as well.

Meanwhile the industry marches along unfettered. We have nearly 20 different banks here in Norwalk alone, plus branches. Half that number would be plenty. In many cases, the owners are simply biding their time waiting for the next merger mania to dawn. Then some of them will sell out to megabanks and start the cycle all over again. Maybe a few branches will close and emerge as Dunkin’ Donuts shops in the process, but mostly they won’t miss a beat, operating just as they do today. Only the signage will change.

And these mergers will unquestionably occur. Bank of America is still on the prowl, as are Chase, Citi, Wachovia, and the other national sharks. Each pines for nationwide coverage. Then, upon completion of an acquisition, the acquired regional bank chiefs get paid off handsomely for all their work in pulling together so many small local units into an appealing package.

Poor Willie just got very bad career counseling in high school. He should have joined the industry instead.

(Columnist William A. Collins is a former state representative and a former mayor of Norwalk.)