Competition is GOOD!

Competition

I just saw an American Express ad on TV urging its members to do business with small, local businesses and not just the mega corporations.  Awww....it's that nice of them, looking after the little guy like that?  How sweet.  What's that....ulterior motive?  Why yes, yes they do.

This reminded me of a conversation I had with a high-up-the-ladder marketing guy with Lowe's a few years ago.  He told me that consumers had the impression that, because of their volume, Lowe's (and Home Depot) received better pricing from appliance manufacturers than the smaller local retailers.  He said that was not true, and that they in fact paid a bit more.  I asked why that was?

He told me that the two large box stores combined already accounted for something like 50% of all appliance sales.  The appliance manufacturers understood that if they allowed the small retailers to disappear, and Lowe's and HD had it all to themselves, the two big boxes would effectively OWN the appliance makers.  They would bark "jump", and the manufacturers would have to reply, "how high, sir?"  Therefore they gave the small retailers a slightly better price to keep them competitive and in business. 

Until recently American Express was the only credit card the giant members-only store Costco accepted.  Ten percent of all Am Ex cards were issued thru Costco, and 20% of Am Ex total loan portfolio was with Costco.  Feeling like they had the power to pull American Express's strings, Costco demanded that Am Ex cut their processing fee and raise their rewards program, both benefitting Costco and hurting Am Ex.  

American Express realized the folly of having too many of their eggs in one basket and bid Costco adieu.  Now they're trying to boost their business with thousands of small retailers so as to never be held hostage like that again.  And that's, as Paul Harvey would say, "The rest of the story."

So with this in mind, please tell me why we let the Big Six banks (JP Morgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs, and Morgan Stanley) control roughly half of all American banking, with the other half divided up among roughly 6,000 "others"?  Tell me again why we shouldn't break up the Big Six?

Who do YOU bank with?

S

"I didn't do it, it wasn't my fault, I can fix it...."

So everybody is asking, "Why can't the government put together a health care website that works?"  Well, here's one little fact that I'll bet you haven't heard before:

When the government awards a contract to develop something like the HealthCare.gov website they must follow a code called the Federal Acquisition Regulation, which is more than 1,800 pages of legalese.  It all but assures the companies that win the contracts are the ones that can navigate the REGULATIONS the best, NOT the ones who can necessarily do the best job.  In other words, the winning companies have the best lawyers, not necessarily the best techies.

Consider this:  94% of Federal information technology projects in the past 10 years have been delayed, over budget, or performed below expectations....41.4% FAILED COMPLETELY!

IMO bureaucrats rarely do anything well, unless you consider writing endless reams of regulations that do little more than give themselves job security.  At that they're friggin' World Champions!  Nothing that can't be fixed, however.  :)

The men are excited about getting to shoot a bureaucrat. You wouldn't happen to be a lawyer, too, would you?

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I will have to give a reprieve, however, to the Justice Department team that nailed JP Morgan Chase with a $13 BILLION settlement relating to their fraudulent mortgage bundling scam.  And Chase was told they might still be liable for CRIMINAL prosecution, too.  Looks like the pressure being put on the DoJ to not let these formerly "too big to jail" white-collar smug thugs get away with their crime is gaining traction.

Now I understand Bank of America is next in the Fed's gunsight.  I'd love to be a fly on the interrogation room wall as the bankers line up to squeal on each other and try to get themselves a deal.  

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Looks like a fun weekend ahead:  A big Northampton / Saracen rugby match tomorrow am, Texas Tech vs Oklahoma pm, and some sort of food / music / car show event in downtown Plano in between.  And maybe some rain over the weekend, too, which would be welcome.

Hope y'all have a fun weekend planned, too.  ;)

S

King For A Day

Yes, I've once again put back on my CEO hat for a few days.  I must keep the empire rolling.  OK....I've gotta sit here and wait for the phone to ring.  Don't laugh.  The waiting can be intense.

This month my sister-in-law is having a certain momentous birthday (50), so my bro is surprising her with a trip to a resort in Mexico.  Her family and a few close friends are also going.

Let's review.  It's August.  Yesterday it was 104 in Dallas, and today it's expected to be 108.  And bro is taking a vacation, traveling even CLOSER to the equator.

See, even their logo shows a cactus, a blazing sun, and some little native guy burned to a crisp.

I thought I taught him better than that. *shaking head*

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I see in today's news that there is growing momentum in Washington to wind down Fannie Mae and Freddie Mac, the two home financing institutions taken over by the Feds back in 2008 when the housing market collapsed.  In the pre-2008 days private financiers made 60% of all mortgage loans, with Fannie, Freddie, and FHA making the other 40%.  More recently the latter have been making 87% of all mortgage loans.

President O'bama recently echoed Congress when he said, "I believe that our housing system should operate where there's limited government role and private lending should be the backbone of the housing market...."  

Good....the "free market" is back!  The banks say they are ready to resume their role as the nation's primary source of home mortgages.

In other news, it was announced today that the Justice Department is suing Bank of America, accusing them of defrauding investors by vastly overestimating the quality of some $850 million worth of mortgage-backed securities.  

B of A now joins Goldman Sachs, Citi, JP Morgan Chase, Wells Fargo, Barclays, HSBC Holdings, and Credit Suisse, among others, who have/are being sued for similar mortgage securities fraud.

Ummm.....

(What's that definition of insanity?...."Doing the same thing over and over again, expecting a different result.")

S

An offer they can't refuse....

Good morning world!

I heard on the Happy News this morning that men are helping out around the house more these days.  Not much more, but more than the 0% from days past.  The report said that women spend 52 minutes a day doing housework while men do 16 minutes a day, and women do 70% of the laundry, too.

Another advantage to downsizing to a much smaller place....there's less to clean.  I make up the bed 'cause I'm the last one up.  K does 90% of the cooking, while I do 90% of the clean up.  The laundry is pretty much 50-50.  A housekeeper every other week for a few hours does the heavy lifting.  We could do it ourselves, but after all these years Geneva is like family.  She stays.  

How about at your casa?

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Let's see....first there were the Castelano's, the Gambino's, and the Bonanno's, and now we have the USB's, the RBS's, the Citi's, the JPMorganChase's and a bunch more, too.  The list of mafia outfits grows every day.  HSBC just paid a $1.9B fine for money laundering.  (They helped Iran and the Mexican drug cartels.)  A dozen other banks are ratting on each other over their interest-rate-rigging scandal in the UK.  (Their defense....the others were more guilty than they were.)  

Now there are a combined TRILLION dollars in claims pending against BofA, JPMorganChase, Wells Fargo, Citigroup, and others over their fraudulent mortgage securities businesses.  The banks will probably settle for something like $400B.  (Does this mean they'll get away with the other $600B?  How is that fair?)  

The only thing missing from this organized crime drama is some executive "whacking" in broad daylight while they're eating their spaghetti dinners.  (Personally I'd classify that as "justifiable homicide".)

First we had "too big to fail".  Now we have "too big to indict".  It seems the Feds are offering plea bargains to the banks rather than indicting their ivory tower Dons because they're afraid a guilty verdict in court would scare away investors and the banks would go belly-up.  Then us taxpayers would get stuck with the clean up.

The message here....if you're gonna commit a crime, make it a BIG ONE!

Now, unless you're a banker....have a nice day.  :)

S

You can't bullshit an old bullshitter

The world's toughest job?  Being the public relations guy for a bank.  This was a tiny little article in today's paper:

Greece offered universal health coverage until an agreement with its international lenders (banks) stipulated the unemployed must pay for their own treatment.

Isn't this just bringing the unemployed into line with the banking policy of charging customers a hefty fee for bouncing a check?  They're just charging you more of what they already know you don't have any of.  Duh!

A close second might be the PR guy representing Foxconn, the huge Chinese electronics contractor who employs hundreds of thousands of low-wage workers to assemble iPads for Apple.  (Their motto...."The beatings will continue until morale improves.") 

"They actually like working 18 hour days, on account of there isn't anything to do back in the dorm with their 250 roommates."

The Feds are suing Bank of America, accusing them of making home loans without ever even checking borrower credentials, a policy known mockingly within the company as "the Hustle".  They then sold the loans to Fannie Mae and Freddie Mac, where they mostly went straight into default.  

The taxpayers had to assume the loss when Fannie and Freddie failed, and now the Feds are going back on B of A.  How might the bank's PR guy possibly spin this?  "Ahh....umm....the Hustle?....that was just a dance contest we had on casual Friday's, that's all.  We're good."

Another tough one....the PR guy for bankrupt American Airlines.  "If we don't give big bonuses to our senior executives we'll lose our top talent to our competitors."  

Dude, you're BANKRUPT.  You don't HAVE any top talent.  That's why you're BANKRUPT!

You can't bullshit an old bullshitter.  ;)

S

Bidness History 101

Not that I expect anyone to actually read this....


Here's how our economy went over the cliff:  Historically banking was a fairly mundane business.  Banks paid depositors a small percentage interest, charged borrowers a higher rate of interest, and the gap in the middle was their profit.  They matched up those who had an excess of money (depositors) with those who needed money (borrowers).  It was called 3-6-3 banking...they paid depositors 3%, charged borrowers 6%, and were on the golf course by 3pm.  Every small town had their own bank and everyone knew the banker and the banker knew all the townspeople.  They knew who was a good credit risk and who wasn't.  They thought long term, hopeing to help you start and grow a business and become your banker for life.  Banking was NOT a "get rich quick" profession.


Occasionally they strayed and began bankrolling speculators in exchange for higher returns for themselves, but things usually ended badly.  (Think:  The Great Depression)  After that fiasco the government passed all kinds of new laws hopeing to prevent a recurrence, the big one being the Glass-Steagall Act.  It said commercial banks (the ones where you put your paycheck) were given FDIC protection, but were limited to the very mundane types of banking ONLY (see above).  Investment banks such as Goldman Sachs, Bear Stearns, etc were NOT given FDIC protection, but were allowed to gamble with their "investors" money with the hope of hitting a home run....higher risks, higher returns.  Brokerage firms could buy and sell securities, but could not do what commercial or investment banks could.  These firewalls kept our financial system out of serious trouble for the next 50 years.


With the wave of deregulation begun by Jimmy Carter and Ronald Reagan these various types of financial service companies began eyeing and envying the others.  The firewalls began to spring leaks.  Commercial banks wanted to be able to gamble like the investment banks hopeing for a home run for themselves.  The investment banks thought if they had the HUGE piles of depositor's money to play with like the commercial banks did they could before long own the world.  With individual investors, mutual funds, and pension funds, etc, seeing the potential for nice returns on Wall Street, the volume of stocks traded went from a few million to eventually several billion a day.  And remember, brokerages are paid by the number of shares traded, NOT whether the market goes up or down.  The banks wanted some of that, too.


Little by little they were allowed to stray a bit farther from their roots.  The small town banks were largely bought up by the regional "downtown" banks, who were in turn absorbed by the "money center" banks such as Citi and Bank of America.  Their power became enormous and they learned how to exchange "campaign contributions" for Washington favor.  Finally, in 1999, Congress passed the Gramm-Leach-Bliley Act which killed off Glass-Steagall.  The firewalls were removed.  Banking became a highly desirable "get-rich-quick" profession.  Banks became less focused on helping their neighbors establish and grow businesses and more focused on devising new products to sell (such as "derivatives") which could generate almost unimaginable profits for their stockholders and immense commissions for themselves.  There was little reason to make "prudent" loans (well, they had to look prudent at least long enough to sell them) as the risk was passed on to those who eventually bought these new financial products.  


Greed ruled.  And then the wheels came off.  Some other time I'll explain what happened next.


S


NOTE:  I would welcome any feedback correcting this post if I have gotten something wrong.  Factual constructive criticism would be appreciated.

Do we dare hope?

I'm almost scared to say this out loud...er...put this in writing, but it looks like maybe our economy has turned the corner.  Job creations have been getting much better lately, unemployment is inching down, even state budgets are on more solid ground.  I realize a lot can still blow up in our face, but I'm genuinely feeling optimistic.  I read this morning that lowly Michigan...basket case Michigan!...has a $450M state budget surplus.  Texas has a $1.6B surplus, plus still has $7.3B is its Rainy Day Fund.  Par-tay!


So where's mine?  I read this morning that a settlement is near between state Attorneys Generals and the Axis of Evil II...that would be Bank of America, JP Morgan Chase, Wells Fargo, Citi, and Ally Financial.  It's gonna cost them $26B to settle mortgage abuse claims against them.  Some $$$ will go to the "victims", but who's looking out for those who kept their payments current and then saw their property values (their life savings?) fall through the floor?  Actually I'm not due anything as I saw this coming and bailed before it hit the fan.  I just feel better knowing the bastards (A of E II) got hit where it hurts, and not just a few measly million bucks, either.  Twenty Six BILLION dollars.  Shame it couldn't be a hundred and twenty six billion dollars.


I'm working from home today (if you call this work), waiting for it to rain.  It's been cloudy for several days now here in Dallas.  I'm almost feeling like a Seattlite.  So does that make me an astronaut?  (And here comes the big hook  :)


S