Financial Clarity

No doubt about it, these are tough times, the kind that “try men’s souls,” as Thomas Paine said about another time. But they are also times that clarify and illuminate.

I’ve got several bright, gorgeous daughters - all very unique. The youngest can unconsciously memorize a movie in one sitting. She has recited movie lines humorously in general conversation since she was first able to talk.

She also memorizes the lines from commercials, and when she was younger she used to tell us where to get something to solve a problem with “pitch-perfect” lines from those commercials.

As my youngest has grown up she has learned something of the Art of Spin. She's come to see the claims of commercials are questionable at best. Not long ago she asked, "Dad, why do commercials tell us the opposite of what we know from our experience about a company or product?”

Well, just as Nat as learned from experience, our experiences are clarifying banker spin for us. Bankers have told us that they will be “with you” at every stage, phase or time in life. The same bankers have told their employees that they are “the most important asset.”

Spin is a world of words. Ad campaigns are devised to attract customers. Speeches about “most important assets” are designed to placate and motivate employees. All of those ads or speeches are words. Actions, on the other hand, suggest true motives, and the actions of bankers have been illuminating.

Governments have responded to the death gasps of banks, providing needed liquidity in order to save them from extinction with amazing largess in order to keep the economy moving. Yet, even as liquidity is ensured, banks have virtually stopped the flow of credit in our economy because they are no longer “with” their customers.

Credit may not fuel our economy but it does keep things moving. Without continued lending, businesses and consumers will continue to hold on to the little money they have left - and the wheels of our economy will continue to slow.

As the stock price has fallen, that “most important asset” is the one you find in increasing numbers packing the contents of a cubicle into a cardboard box.

While the lending economy was booming, a handful of bank managers managed to take millions in profits out of the banks in salaries, bonuses and options. Those funds are not available to restore bank capital or liquidity today.

From those actions we can see clearly now just what is important to a bank:
* Number One Stakeholder: Shareholders (not customers!)
* Number One Asset: The Stock Price (not employees!)
* Number One Beneficiary: Senior Management (not even the shareholder!)

Now I know, individual players in a capitalist system are supposed to be driven by self-interest. Their self-interested actions are supposed to mesh with the self-interest of others. This is all supposed to be mutually satisfying and allow the economy to be self-perpetuating. And if a capitalist system is out of whack, the standard business cycle is supposed to restore balance.

What is clear today is that what is in the self-interest of banks and bankers is not meeting the self-interested needs of any of their customers. They aren't even doing what governments want them to do. Their self-interest is so muscular they will wreck an economy and the lives of millions to survive.

So why do so many Americans continue to think we ought to put our money in the hands of bankers? It is quite clear you are no better than second on their list – and even that is debatable. And you are not helpless in the face of a robust monopoly.

There is another option: Credit Unions.

A credit union is a cooperative, member-owned, locally and democratically governed financial institution. Credit unions are set up to give their members cheaper or better services and to return any profits to the members. The elected directors are unpaid volunteers and they are there to represent the members - both as owners and customers.

But the strength of the credit union movement is not what they are or have or even do, but in what they do not have: a stock price! Because there is no stock price, Credit Unions can manage for the long-term. As a result, very few credit Unions have been caught up in the conflagration that has wreaked havoc on the balance sheets of the nation’s banks.

Most credit unions are still loyally lending to their loyal members. Oh, and their officers have to get rich the old fashioned way - saving and investing some of their modest pay packages just like the members of their credit union.

The difference between banks and credit unions may never have been more apparent. Will the recent evidence make any difference to you? It should.