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Bank's failure gets personal
Logos of First Federal Bank of California and OneWest Bank.
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TEXT OF INTERVIEW
Bob Moon: Consider this: Not a single U.S. bank failed between the summer of 2004 and the beginning of 2007. Since then, around 170 have collapsed -- 140 just this year. And the consulting firm Accenture reckons in the next three years about 2,000 banks will have gone belly-up. That would be roughly a quarter of all the country's banks, most of them gobbled up by other banks.
The list of failed banks grew by seven this past weekend. That included First Federal Bank of California, which had as one of its customers our own Senior Editor Paddy Hirsch. And over the past couple of days, he's gotten a bitter taste of what that failure means to him.
Hi, Paddy.
PADDY HIRSCH: Hi, Bob.
Moon: I have to say I bank at one of those too-big-to-fail institutions, ticker symbol "C."
HIRSCH: Yeah, lucky for you.
Moon: Yeah, I have nothing to worry about, right? But I've wondered how all these failures actually play out if you're a customer. So walk us through this. What happened to your bank?
HIRSCH: Well, it's hard to say, exactly, because nobody is telling us the whole truth yet. But it seems that First Federal was so overexposed to a bunch of bad loans that its regulator closed it down, and then the FDIC brokered a sale to a bigger bank called OneWest.
Moon: OK, so what does that mean to you. The good old FDIC makes it all sound seamless, but you still look a little worried here.
HIRSCH: Well, they say its seamless, but I'm really not convinced. Because OneWest was created at the beginning of this year to buy a bank called IndyMac, which you may remember was a big home lender here in California, and which choked to death on its bad loans. So I feel a bit like I'm jumping out of the fire and back into the frying pan.
Moon: Well, I hope you've been able to visit your amassed fortune since this all played out. Your money is safe, right?
HIRSCH: Yeah, my money is safe, yes. Because I'm under the FDIC guaranteed limits, so the deposit insurance fund covers me. Although I did hear yesterday that the fund is now more than $8 billion in the red, by the way. Still, but that doesn't make me any less unhappy by First Federal being gobbled up because it really changes the whole dynamic of my relationship with my bankers. And I value that relationship. I do.
Moon: You have a relationship with your bank? That's a quaint concept.
HIRSCH: It may be too you, Bob, if you bank at one of these large behemoths. But to me it was a very good relationship, very important to me. And I purposely opted to join a small bank when I arrived in California, because I didn't like dealing with the big banks and the way they treated customers -- or didn't treat them as it were. And I got to know the president there. I got to know all the people at the local branches. And it was great, because I got a human being on the phone every time I called. And the difference is dramatic. I mean, here's what I got when I called OneWest yesterday.
ONE WEST: Hello. Thank you for calling OneWest Bank. To open or apply...
HIRSCH: There you go. Doesn't that sound familiar? It was voice mail hell. I was poked and prodded through it and for 15 minutes. And then this hideous hold music came up. It was a really, really unpleasant experience. I'm not going to let you listen to this hold music anymore. Let's get rid of that.
Moon: I was kind of enjoying it.
HIRSCH: No, no, no you weren't. It reminded of the bad old days when I banked with Chase back in New York.
Moon: Now, now. Jamie Dimon got to the executive suite at Chase somehow.
HIRSCH: I'm sure he's a very nice guy, but I didn't think much of his customer service, let me tell you.
Moon: OK, well, what are you going to do now?
HIRSCH: Well, I don't know. I'd like to go to another small bank but, you know, I've had such a bad experience, it's failed, so I don't want to go through that again. So I think I'm going to have to do some pretty careful shopping around in the new year. And frankly, I'm seriously considering a credit union.
Moon: It's only money, Paddy.
HIRSCH: It's only money, but it's important to me, Bob.
Moon: Paddy Hirsch, our senior editor at Marketplace. Thanks, Paddy.
HIRSCH: Thank you.
HIRSCH: Well, it's hard to say, exactly, because nobody is telling us the whole truth yet.
You ain't lying Paddy. The Banks and the Fed and the Treasury and the Congress and the White House are all covering up. I am still of the opinion that all we accomplished was to postpone the day of reckoning with more borrowing and financial trickery ... and perhaps make it worse when it finally arrives.
remember this my friends. Bank small.
Think: Big fish small pond, small fish big pond. You remember what happens to small fish?? Invest and deposit your money into a small community local bank. ATM's are worldwide, there's no reason to bank Big. Every reason to bank small. Big is Bad AND proven over and over UNTRUSTWORTHY.
I greatly admire Marketplace and the fair coverage that you seem to usually provide. However, I thought the piece by Paddy Hirsch yesterday about First Federal Bank was decidedly off base on quite a number of counts. I, too, have been a long time customer of First Federal. I seek the same things Mr. Hirsch does - the superior customer service, people in the branch knowing me by name, lettle extra things to recognize me as a valued customer. I am saddened by their demise. However, the presumed problems he laments have not at all been my experience. All of my branch employees are still there to give me the same service they always have. When I was in the branch, they made the transition seem seamless, and an assistant manager came up to me to make sure I knew the news. I later got a call from one of my personal bankers to explain and to assure me about any concerns, including the fact that no branches are slated for closure and no one in the branches is expected to lose his or her job. I found the comments by Mr. Hirsch irresponsible. First, as he states, his money is safe. Wht scare people about the FDIC when in fact it is backed by the full faith and credit of the US Treasury. Furthermore, since First Federal has a buyer, I believe that is not an issue anyway. Second, he laments the loss of the great relationships he has with the bank's branch employees. Well, they are all still there, and as I found out yesterday, ready and willing to deliver the same service they always have. The only way they won't b ethere is if this type of off base reporting causes people to panic and leave unnecessarily. That would truly be a shame and a great disservice to the employees Mr. Hirsch claims to appreciate. This particular piece seems much more aimed at sensationalism (Oh my, the end of community banks and good service - get out now!!). I recommend that Mr. Hirsch keep his relationship where it is so that the people he claims to appreciate can keep their jobs. His piece was unfair and not worthy of Marketplace - it belongs in the tabloids, because it doesn't mesh with the facts, but I guess the facts are not as interesting as blowing things way out of proportion.
However if service is your kicker, these folks are second to none. You find tenured, genuine, and experienced bankers that know their trade and industry. Futhermore, they know and appreciate their customers like no other institution, big or small. One reason is the bank is still owned and managed by the founder's heirs. The Walker family continues to operate the now $4 Billion bank is a strong, conservative, and friendly manner.
Might I add that Credit Unions are limited by a number of means. And they are in no way immune to troubles and failures. There have been many cedit unions to fail this year alone. Furthermore since they are "member owned" they have no access to capital markets if and when they need to raise capital. Remember, credit unions were and are still trying to play "bank". So as long as they do, they will have bank problems. May i suggest Farmers & Merchants Bank of Long Beach. They have been profitable every quarter throughout this fiasco. They capital position is 3x what the regulators require to be deemed "well capitalized". They didn't do subprime loans, and only lent 50% loan to value on commerical real estate. They are one of the strongest in the entire nation. Or if their offices are not convenient, go to www.Bauerfinancial.com and find a 5 star bank to begin a relationship with.
I am a big fan of Credit Unions. I work at Cal Poly Pomona and our credit union advertises itself as the "Friendliest Place on Campus". It's true, they know your name and it takes about 20 seconds to talk to a human being. It's all the convenience of modern banking but with a very personal touch.
A credit union would be a good choice for Mr. Hirsch, as they are member owned, literally "by the people, for the people". The kind of service that stems from this philosophy simply can not be delivered by any institution remotely resembling the "too large to fail" size, and in my opinion, hard for a stockholder owned bank of any size to match.
I will admit that I am biased, having been involved closely with credit unions for the last 20 years, but I believe strongly that now more than any time in my lifetime (post WWII), the difference between banks and credit unions is very pronounced in a positive way. Southern Californians are blessed to have both a high concentration and wide variety of credit unions available to them.
Eric Dosch - CEO
Technicolor FCU
First of all, how cute was it to hear bob moon talking over Madlib beat??!!
Finally some due credit for Credit Unions. In all the talk of some banks failing and others "too big to fail" I hardly hear any talk of the Credit Union Movement. Not that any financial institution is immune in such a dire situation, but when your Execs and Board are looking out for YOU (the member) and not necessarily themselves, how can the CUs be ignored? PROPS to Paddy!
You reported on a subject I care about. Might I suggest Peoples First Savings Bank in Mason, OH? Too far away, I know, but I must brag about them. They are a tradiitonal mutual company and they have two branches. I am a loyal customer because they treat me "like a real person" and I *never* have to talk to a machine. When I applied for my home loan three years ago I only had to wait a few days for the Board to meet and vote on my loan. (The Board president was (is?) the town pharmacist, who knows practically everyone in town) They meet weekly at the bank, and they do not resell their loans, so I know if I have a question I can call up the bank president, Ryan, talk to him about it, get a response in a timely fashion, and do not have to wait for someone up the management chain (that I never heard of) to respond. Even though I moved 20 miles away, I continue to bank there because I value their customer service and I trust them. And I am just an average customer, not a lot of money. According to their fact sheet they did not have a single foreclosure due to extending credit inappropriately through this mortgage crisis. I doubt many banks can say that. Here is a link! I imagine there are many small banks like them in small towns across the US, but they are mine, and I like to tell people about my excellent experience with them.
Please tell Mr. Hirsch that I bank at First Bank in Marina del Rey. They have several branches in Los Angeles and California.
The good news?
Even though my bank balance is, to say the least, humble, they all know my name and answer the phone when I call. The bank is warm, friendly, and I never wait more than three minutes to get to a teller. Furthermore, they all greet me by name when I walk through the door.
The bad news?
There isn't any.
Honest.
