Greed, Theft, and Banks
I was happy the day I got fired from Caldor. A few months later, I was even more stoked when the manager at Price Chopper stuck out her pudgy mitt and demanded my name badge.
After all, I had a giant FU card in my pocket. As a high schooler, I could always go home and eat mama's cooking and sit on the same couch I did the year before. I didn't need that job.
Heck, the point of investing is to gain back that FU card you might have had as a teenager, tell your boss where to stick it, and go do what you want.
But this story is only tangentially related to investing, or cooking for that matter. No. It's about theft.
After the inglorious start to my career, I landed a third job as a greenskeeper at the Edison Club in upstate New York. It turns out I was much better at raking leaves, planting flowers, and manicuring greens than I ever was at dealing with the public.
In fact, I flourished. When the boss was spying from the bushes to see if we were doing our jobs, I was. Soon, I got a raise from $3.35 to $4 an hour and a new job driving the massive tractors that mowed the fairways. Times were good. I opened a bank account and started depositing some of my paycheck after blowing the rest on beater cars, girls, and rock concerts at the SPAC.
Then one day, I had my eye on a killer Sony two-deck boombox. The $150 saved at the bank through hard work and thriftiness would be just enough. Except, when I went to the mall to retrieve my hard-earned cash, the bank said I didn’t have the $150. Despite the fact that it was carefully tabulated in my check ledger, there was only $135 left.
It seems that my account was below the bank's threshold, and it had charged me $15, a day's labor, for the crime of trusting them. I was pissed. Righteous indignation burst forth like the fires from hell. This was outright theft, highway robbery, in America no less...
Squaring my shoulders and fronting a stern bearing, I demanded the rest of the money that instant. And the teller smirked slightly and said, “No, you can’t have your money as your account hasn’t been open for more than six months.”
The lesson I learned that day is that if you put money in banks, they will steal it. And they do. In 2016, Wells Fargo (NYSE: WFG) stole the most money in history by opening two million fake accounts.
According to USA Today, Wells Fargo:
- Opened millions of unauthorized accounts and enrolled customers into online banking services without their knowledge or consent.
- Improperly referred customers for enrollment in third-party renters and life insurance policies.
- Improperly charged auto loan customers for force-placed and unnecessary collateral protection insurance.
- Failed to ensure that customers received refunds of unearned premiums on some optional auto finance products.
- Incorrectly charged customers for mortgage rate lock extension fees.
And no one went to jail. Not one person. In fact, quite the opposite — Wells Fargo CEO John Stumpf walked away with a $130 million golden parachute.
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Tar and Feathers
Lets face it; banks are a protected class in this country. Any laws written to restrain them are quietly softened and overturned after the crisis has passed.
It is the only industry outside of health care and higher education that hasn’t been hit by the hard, face slap of creative destruction.
For those who don’t know, in economics, creative destruction is the idea that long-standing practices will be swept away in order to clear the path for innovation. Sometimes called Schumpeter’s Gale, it was first coined by Austrian economist Joseph Schumpeter in 1942.
Classic examples are the automobile industry destroying the buggy whip manufacturers. A more recent example is Netflix eviscerating Blockbuster.
However, due to its protected class and “rent seeker” regulations, the banking industry has managed to hold onto its “screw the customer” ethos for the entire internet age.
That said, change is happening fast. Banks are stuck in their balance sheet mindset of mortgages, loans, and credit cards, thinking that customers need them more than they do.
But real people care about other things like getting paid, buying lunch, an easy payment experience, and not getting screwed on a daily basis.
That’s why the growth in fintech is huge. Companies like Monzo, Revolut, and N26 are booming. One digital bank startup called Chime quadrupled in valuation to $5.8 billion in less than a year as it has taken on the megabanks.
Just last month, Visa agreed to buy Plaid, a fintech company that connects users’ bank accounts to apps and services, for $5.3 billion. $5.3 billion! That's for some basic software written by a pair of 20-somethings.
That’s the type of value we are seeing in these fintech companies.
Fintech is the next big growth sector. It is what I am buying personally, and it is what I am telling my readers to buy. Click here to get the free report.
Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.
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