1 Boring Old Man

Banks Prepare for Bigger Bonuses, and Public’s Wrath
New York Times
By LOUISE STORY and ERIC DASH
January 9, 2010

^{The bank bonus season, that annual rite of big money and bigger egos, begins in earnest this week, and it looks as if it will be one of the largest and most controversial blowouts the industry has ever seen. Bank executives are grappling with a question that exasperates, even infuriates, many recession-weary Americans: Just how big should their paydays be? Despite calls for restraint from Washington and a chafed public, resurgent banks are preparing to pay out bonuses that rival those of the boom years. The haul, in cash and stock, will run into many billions of dollars.}

^{Industry executives acknowledge that the numbers being tossed around — six-, seven- and even eight-figure sums for some chief executives and top producers — will probably stun the many Americans still hurting from the financial collapse and ensuing Great Recession. Goldman Sachs is expected to pay its employees an average of about $595,000 apiece for 2009, one of the most profitable years in its 141-year history. Workers in the investment bank of JPMorgan Chase stand to collect about $463,000 on average…}

Ordinary Americans lack the power to hurt the big banks
Washington Post
By Martha C. White
January 10, 2010

^{Arianna Huffington is mad as hell and not going to take it anymore – or doesn’t think you should. The woman behind the Huffington Post recently exhorted Americans to yank their money out of big banks and open accounts at community banks instead. She called out the Big Four – Bank of America, Citi, J.P. Morgan Chase and Wells Fargo – by name for their "slap in the face to taxpayers." The crusade includes a link to a new Web site called Move Your Money [http://www.moveyourmoney.info], which includes clips from "It’s a Wonderful Life" and a tool for finding a new bank courtesy of Institutional Risk Analytics.}

^{This is a great example of populist indignation made practical [HuffPo says it does its banking with a smaller bank that specializes in start-ups]. It’s also a great example of why populist indignation shouldn’t drive policy. We get the outrage: The banks did something bad, so let’s spank the banks. But let’s also do the math. Would it even be possible for the roughly 72 million American families with checking or savings accounts to appreciably diminish banks’ holdings just by closing their accounts?…}

^{Here’s one problem: The small banks rely on the big ones, as Ely points out. In fact, for foreign-currency exchanges and complex loan offerings, among other transactions, small banks regularly turn to their brawnier brethren. The small and medium-size institutions that Huffington lionizes depend on the industry’s behemoths for "correspondent banking," as it’s known in the industry. That would cushion any blow the big banks might feel. But Move Your Money’s biggest problem is that the average American bank account has only $4,000 in it, according to the American Bankers Association. To achieve that 5 percent reduction, you’d need to have roughly 2.6 million Big Four customers close their accounts…}

^{Huffington says the Big Four "are not too big to feel the impact of hundreds of thousands of people taking action to change a broken financial and political system." For her campaign to really have an impact, though, even hundreds of thousands wouldn’t be enough.}

^{Banks make their money in a lot of ways, says Bert Ely, owner of the bank consulting company Ely & Co. One such way is by collecting fees. For instance, banks are projected to collect $38.5 billion in overdraft fees this year, and about 90 percent of those fees come from only 10 percent of the customer base. While the new opt-in requirement for overdraft protection will probably lower this number in coming years, it’s safe to assume that banks will come up with other ways to extract their pound of flesh. A recent Bankrate study showed that many fees, including those for account maintenance and out-of-network ATM use, rose last year. Banks also make money from merchant fees paid by retailers every time someone swipes a credit or debit card. And a program just announced by the Federal Reserve, aimed at curbing inflation, will even pay banks interest to park their excess reserves in the equivalent of CDs at the central bank. There’s also investment banking, consulting fees and a host of other income streams, both in the United States and abroad.}