Saturday, September 8, 2012

The Banking System

The Banking System
The bank earnings are out again and by God, they’re doing well – sailed right through the recession without missing a beat. Profits are up there in the hundreds of millions, even topping a billion in a couple of cases. That’s good news for shareholders.
Shareholders – these are the people who buy shares or bank stocks and are paid dividends based on the number of shares they buy. I had a friend who used to do that and he did pretty well at it too.
I looked to see what these people get paid to earn that kind of money. Ha! Four, five, six million dollars for CEO’s. That’s a pretty good salary. At the other end of the spectrum, clerks, tellers and the like get ten bucks an hour – a fair spread between top and bottom, typical big business. It kind of looks like the only way to make money in the banking business is either to buy and sell shares depending on the market, or to be in upper management in the bank itself. Everything else just sucks.
That’s about where everything takes a left turn. Here’s how I see the picture. We the depositors give our money over to the banks to look after on our behalf. They charge us for that and it’s not unreasonable in concept. After all, the banks should get paid for work that they do. Mind you, some say that the service charges border on gouging. Be that as it may, we the depositors, by way of our deposits provide the banks with the capital they need to invest in mortgages, business loans and so on. This then is their source of revenue over and above the service charges. That’s what they make their billion dollar profits on after paying their top executives millions in salaries and bonuses.
The banks then get to keep the profits they make and we get to keep our money in the banks for them to use to make more profits and line the pockets of their upper management. The shareholders get “dividends” amounting to a hill of beans. The depositors get “high interest rates” of about one to three percent.
Well, the banks got all these profits just sitting there collecting dust. I don’t know what they use them for, but we still keep on depositing and contributing to their profits. Oh, we can get our money back at par, less the service charges any time we want. And maybe that’s what we should just do – get our money back. The banks don’t really need it anymore with all the profits they’ve accumulated. They should really be self-sustainable by now. That would be an interesting exercise – to discover what the banks are investing in and do the same thing, of course on a smaller scale. Still, we could pay ourselves the big bucks the same way the banks do. In the words of Woody Allen in one of his skits, they should go forth, be fruitful and multiply – but not in those words. A friend of mine was lecturing his son one day about money saying; ‘Why are you working for your money? It should be working for you’. Sound advice, I’d say.
But, too lazy to do our homework, we continue to deposit money into banks and let our money work for them. At least that’s how it seems to me from up here on the top shelf.

Just sayin’. 

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