Thick as Thieves
Bankers stick together. The concept of a Club Deal and a Syndication were both invented by bankers. They love to hang together so that no one looks too stupid when a deal goes bad. Everyone likes to free ride on the other guy’s diligence or smarts. I should know, I was a senior banker for over forty years. And you’ve heard the expression “honor among thieves”? That implies that one banker would not take advantage of another banker if it can be avoided because there is the matter of professional courtesy.
Bankers have lots of regulatory obligations. More than you might think. We are highly restricted in what we can invest in and how that can happen. That is certainly the case if you are arranging deals among big publicly-traded companies where the chances of obtaining insider information is quite high. It is the nature of the beast that bankers who lend to companies and underwrite companies’ issues need more information than is the norm to provide to public market investors. That opportunity for an edge causes most bank compliance departments to bend over backwards to keep bankers out of the business of investing and divesting in the securities of client companies. Exerting influence is also a no-no in the banking realm.
With all this experience and involvement with other bankers, you might wonder where the shoemaker goes to fix his shoes. I used to have a personal/business policy to not do my banking business with my own bank. This seemed especially important when it came to the years when I ran the global private banking business. I much preferred an arms-length banking relationship. That all said and done, I understood the importance of relationship when it came to getting done certain transactions that pushed the envelope. I’m sure in the grand scheme of things, I pushed the boundaries of acceptability far less than many, but I was not without some desire and willing ness to work outside the narrow norms.
I also understood the balancing act to have several banks for my personal business so that I would never be out in the cold in the event of an issue. The hard part of that is that it conflicts with the notion of concentrating one’s relationships in order to maximize impact.
I ran my life as though I were a corporate treasurer. I had banking relationships with five banks (one local Upstate and four national banks). I had credit relationships with four lenders with some overlap between banking and credit. I also had money management relationships with two of those banks. Over the last thirty years it has been hard to keep track of what different banks wanted in a personal business relationship. Some like money management, some like credit, some like banking flow. It’s hard to tell what turns on different banks. I think I’m a great client, but who knows what they think of me as a client. Everyone assesses these things differently.
Almost all of my banking relationships are 25-30 years old. My American Express Platinum Card says “Member Since 1977”. I tend to think of AMEX as a transactional provider with whom I have no money management or lending relationship. They live off my 4% transaction fees and for that I get up to 60 days of float and points to use for free travel. They’re not one of my banks, but what’s the difference?
I use one bank that specializes in consumer banking as my concentration transactional bank. I’ve used it for bill-paying and to accept my direct deposits and to transfer money in and out. I’m not sure how active I am relative to other people in the 1%, but I do some international activity, but I’m sure less than many. I have a checking account, a savings account (God knows why since that’s such a 1950’s thing), an overdraft line (in New York State the banking law FORBIDS bankers from ever bouncing a check or creating an overdraft, so you had better have an overdraft line). I also have MasterCard with that bank. With that and the debit card, which also operates through MasterCard’s platform, that means I have two deposit accounts and three credit accounts. For discretion sake let’s call this institution ShittyBank, for reasons you will soon understand.
One of the big regulatory pushes in private banking is around anti-money laundering (AML). The heart of that process is what is called KYC or Know Your Client. They want to understand the source of your wealth and the nature of your financial activity. I know. I ran a private bank for six years. It’s serious stuff. ShittyBank has had problems with AML so some brain trust took the AML and KYC processes and did what service businesses do, they outsourced them to call centers in SE Asia.
One day about fifteen months ago my wife called me from the bank and said they had blocked our account (right before a long weekend). Being a wizened banker I took the KYC questioning in stride…for a while. After a week of working blind with indirect Q&A with a shielded KYC analyst, I was fit to be tied. I finally cleared their hurdles and felt it was an unpleasant fluke that would not happen again. Wrong. Over the past fifteen months, with frustrating regularity, I have been harassed, threatened and thwarted via more account blocking by ShittyBank, all in the name of KYC questions of a thirty-year client who has lived a very clean financial life and who keeps being asked and answering the same questions over and over.
This month ShittyBank has hit a new low with me. Right before heading over to Turkey for vacation, they blocked my account. I’m getting good at this and managed to get the account reopened the same day. Nevertheless, it prompted me to add my wife to another bank account where I had a much deeper asset management relationship…just in case. When I returned to NYC, sure enough, they had done worse than block my account. They were closing my account. They sent me a check with the remnants of my savings account. DOA. My checking account was minutes away from the same fate, with the funds in it withdrawn by the bank to send me a check for that as well. I jumped in and stopped the runaway train. Today they reopened the account and let me back in. My overdraft line has mysteriously decreased by $0.41 for some inexplicable reasons related to the $0.41 overdraft created by them allowing an ACH debit to slide in after they did their account-closing withdrawal.
I think I may finally be done with ShittyBank. Quite frankly, as a banker, I’m embarrassed for them. They aren’t just too big to fail, but now they have proven to be too big to operate. Bankers may be thick as thieves sometimes, but in this case I would accuse ShittyBank of being just plain thick.