Design or Incompetence?

Or both?

In late summer or early fall, Citibank was running a promotion: if you opened a new account or moved a certain amount of money to your bank account, you would get a $200 bonus within three months. Someone I know took advantage of this promotion, but as of Monday he still hadn’t gotten the $200 bonus, so he visited a branch.

“I was given the ridiculous explanation that I didn’t surrender the promotion letter and  that the promotion code NP55 was not linked (?) in the application. I told them that: (1) the letter is not a coupon to be surrendered, (2) I should not have to tell the customer service rep how to process the promotion, (3) there was no requirement that the letter even  be presented (just go to a financial center, it states), and (4) the code only needed to be mentioned if applying by phone. They called me back in the afternoon and asked me to come back this morning. They first offered me some ‘thank you’ points, but I stood my ground.  After calling several places they finally reached a Texas office that would further research my problem. “

Eventually, he got a letter saying that Citibank would give him the $200 credit.

I’ve often wondered about situations like this: Is this just garden-variety incompetence, where the marketing folks think of a promotion and the computer guys program the systems wrong? Or is it a sinister design, in which the company decides to pull a bait-and-switch, and will only make you whole if you complain? (This goes far beyond banking. Think about any situation where you were overbilled, and after spending hours complaining you only ended up where you should have been in the first place. I’ve always thought there should be a treble-damages rule or something like it for overbilling, because otherwise companies have an incentive to overbill everyone all the time, especially if they are near-monopolists like the cable company.)

I’ve generally leaned toward incompetence, because I think if a company actually did have such a sinister plan, it would leak (because lots of people would have to know about it). But maybe it’s something in between.

Paul Kiel of ProPublica has uncovered multiple cases where homeowners are not getting their trial loan modifications made permanent. That’s not news. What is news is that the reasons the banks are giving for not making the modifications permanent are complete bogus! One person had his modification rejected by JPMorgan Chase because he made a statement that he expects his income to eventually recover; another was required by Wells Fargo to update his documentation during the trial period and then put into a second trial period because his income went up by $80 per month. (If you’re wondering why this matters, the big reason is that this way a bank can string you along making you think you’ll get a modification before finally rejecting you; if they rejected you up front, you could have walked away and saved yourself the payments in the interim.) In both of these cases, this violated Treasury Department guidelines for the loan modification program.

Here’s the thing. Jamie Dimon and John Stumpf are not reviewing documents and rejecting people’s modifications. These decisions are being made by first- and second-line servicing center employees, who are following instructions they got from . . . somewhere. What’s more remarkable, official spokespeople for both banks are cheerily giving bogus reasons for failing to make modifications permanent, unaware (until busted by ProPublica) that they are violating the Treasury Department’s rules!

So someone is taking the trouble to create inaccurate instructions for the servicing centers and give inaccurate talking points to the PR department. It could be pure incompetence, I guess. But it could be something in between–incompetence through conscious inattention. The bank’s senior executives make the decision to participate in the loan modification program, but then they don’t try very hard to make sure they are following the rules. They know that if they have a messed-up process, they can save on internal costs, and they can also drag out the trial modification periods, which means (a) more payments they wouldn’t have gotten if they rejected people on schedule and (b) longer before they have to write down the loans in question on their balance sheet. So they aren’t consciously giving orders to break Treasury’s rules, they’re just not trying hard to follow the rules, staff their servicing centers properly, train their people sufficiently, and test their computer systems thoroughly. And that way there’s never a smoking gun; instead, they can just say their servicing centers are swamped and they’re having trouble implementing new processes fast enough. (Wait! That’s what they’ve been saying about this very program for months!)

There doesn’t even need to be intent here (although there could be). Companies focus on the things they think are important. During the financial crisis, all the banks were focusing on their cash levels every day, and I’m sure they did a very good job at it. They don’t focus on things they think aren’t important. It seems like JPMorgan Chase and Wells Fargo are not focusing on their loan modification programs, and Citibank is not focusing on delivering on its promotions, just on using those promotions to suck cheap deposits onto their balance sheet. If that ends up helping their bottom line, then so much the better for them.

By James Kwak

53 responses to “Design or Incompetence?

  1. As always, incentives work. Reward employees based on profitability, and you get profitability — sometimes at the cost of ethical operations, happy customers, or adherence to regulatory authority.

    Marketplace had a story related to this concept last night: http://marketplace.publicradio.org/display/web/2010/01/14/pm-no-goal/

  2. James: “Citibank was running a promotion: if you opened a new account or moved a certain amount of money to your bank account, you would get a $200 bonus within three months. Someone I know took advantage of this promotion…”

    James, out of curiosity: did you ask your acquaintance why he/she wanted to deposit more money at one of the main culprits of this crisis?!

    As I’ve posted before: anyone depositing his/her honestly earned savings at one of big banksters is a CO-CONSPIRATOR in crime. Or as Bill Maher said: remains in an abusive relationship.

    If everybody in a non-recourse state with an underwater mortgage at the big banksters just let it detonate there (a poor man’s financial weapon of destruction) and deposit their savings at one of the acceptable credit unions or small community banks, we could make an statement.

    You had a posting about moving your money.
    Plenty of people are doing it, see http://MOVEYOURMONEY.INFO

  3. “Violating the Treasury Department’s rules…”

    My understanding is that it was Treasury itself who wrote into the small print of the HAMP that once you apply the banks have carte blanche to foreclose at will, while you forfeit all right to any further notifications or appeal.

    That’s part of the reason why I consider the meager number of permanent mods to be by design; that the whole thing was a joint bank/adminstration scam to induce people who might’ve otherwise walked away earlier to fork over more payments before thy’re foreclosed upon at the bank’s financial convenience.

    But the whole question is irrelevant in the end. The criminal result is what matters; “intention” vs. ideological and structural brainwashing means nothing at such levels of crime. The crime and the criminals are existential, not “intentional”.

  4. It’s definitely just marketing strategy as large majority of customers do not check things further, they are in good faith or helpless and they do not complain. We are quite a few people always complaining…but the profit and loss account turn always in favor of the company…

  5. carol (above) is absolutely correct but I would add that every employee of any company perpetrating this kind of tactic is an accomplice, whether through conscious complicity or abject ignorance and incompetence. What’s even more disgruntling is the fact that most of these people are damn proud of the poor job they do! Personally, I’m going through the same kind of “run-around” trying to get a rebate honored from a cell-phone “wholesaler,” very similar to the Citi scam James describes. I’ve encountered similar bait-and-switch operations from more than a few companies, either personally or via acquaintances. This type of rip-off appears to be rapidly adopted as the SOP of many businesses these days. I’m pretty sure the “in-between” James refers to is best “defined” by calculated scheming “at the top” and absolute ignorance and incompetence of all their minions.

  6. Nearly two (but not quite two) years ago, I went with my son to get a new cell phone. We opted to pay a higher price and not have a contract.

    But when he decided to switch service, guess what? We had a contract that cost $200 to get out of.

    Peanuts compared to the money involved in houses. But it does seem like screwing-the-customer for those pennies has become an active part of profit for too many companies.

    As with health-insurance claim denials, somebody writes the rules those low-level employees are implementing.

  7. I vote for incompetence (aka piss poor management).
    Things changed dramatically with the M&As of the late 90s and continued with the M&As of the 2000s. When the banks talk about retaining the best and the brightest (aka “the good old boys”), they are only speaking of executive management. Everyone else averaged a 2%-3% annual increase and became human capital. Management went from a focus on running good solid operations to being org charts and procedures with common sense having no play. Everything was measured – good numbers were rewarded and bad numbers were cause for demotion. All measures were quantitative, very few, if any, measures were qualitative and the numbers kept to monitor and tune operations disappeared. For instance, it was critical to deliver a project on time, but it did not matter if the results of the project were pure garbage or contained only a tiny piece of what was expected. It was the number of mortgages that counted, not the quality. With the exception of folks close to retirement, the best and the brightest were gone from Sr. Mgmt. in 1 year, the others pretty much disappeared in the following 2 years. This change in management style has kept Scott Adams and Dilbert going for years.

  8. Andrew Foland

    Actually, this sounds like the “mail-in rebates” that were ubiquitous about 10 years ago. You don’t see them anymore, really; I assume this was because consumers caught on that whenever you sent one in, it got rejected. My experience was, similar to above, that if you really stood your ground and hassled them, they’d send the rebate eventually. I must have sent in half-a-dozen for various items I bought, and every single one of them was rejected the first time; one (I kid you not) for being taped to a letter rather than stapled!

    I always assumed this was 100% intentional.

  9. Agoraphobic Kleptomaniac

    Please, don’t blame the front line phone grunt for the requirements imposed on them by management, especially in this job economy. Blame the middle and top managers who insist those said phone grunts say the following phrases, “I can’t seem to fix your problem from here, let me schedule a maintenence guy. . .”, “Because unlocking that phone could damage our network”, “that price you were quoted by the previous customer rep was incorrect, the REAL price is…”.

  10. An interesting thought is the view by many people that big government is inherently bad for the tax payer ie, consumer. Anyone supporting the need for smaller government should be dead set against these TBTF institutions. Why is one big bureacracy seen as inherently bad, but the other inherently good because of the gloss of the “free market”?

  11. I do sympathize with your friend, whether he was going to Citi or BofA, or wherever, a promise is a promise, and they should have been faithful to that promise.

    If I was him I would go (maybe with a lawyer friend who won’t charge him), take the money out and close the account as soon as he can and still keep the $200. Then search for the nearest NCUA member Credit Union. I advise all those people out there with an account with Citi, or Bank of America, or any other ABUSIVE bank, to do the same.

    There are many good internet sites to hunt for NCUA member Credit Unions, here is one http://www.creditunionsonline.com/

  12. It is certainly not incompetence. This is a business model. The numbers can easily be crunched on a spreadsheet. The company develops a sales program with all sorts of restriction written in the fine print. Then they simply renege on the deal. As a matter of policy. They know the new business they get will far exceed the few payouts they will have to make after exhausting the few complainers. Happens all the time.

    A friend of mine got charged for requesting a copy of a check. Somehow this new “fee” just popped up out of the blue. After complaining for hours and hours he finally got the bank to drop the fee.

    When T-Mobile had the huge outage with its Sidekick phone it promised everyone a month of free service. I have a pre-paid Sidekick (the service is very cheap). I do not know how much time I spent on the phone with T-Mobile, first trying to fix the damn phone and then trying to get the free month. Still no free month.

    The only way this bullshit stops is with a massive court judgment. A mere lawsuit will not suffice because companies just settle — that is built into the spreadsheet calculation too.

  13. GEE, these bankers spend a LIFETIME building a reputation (like lawyers, insurance adjusters, and used car salesmen) and you have the nerve to say that?? OH MY. And someone like Newt Gingrich should research these scandalous allegations to find out where the money for this “ProPublica” is coming from and who’s benefitting. Hopefully they can be exposed on Glen Beck. Then some toothless dimwit taking classes at the local Vo-Tech/training school can express what the problem is at the next teabagger meeting. I hope he doesn’t forget his crayon drawing of President Obama.

    (That was said with a smidgeon of sarcasm folks)

  14. “incompetence through conscious inattention”

    That’s certainly how the mortgage banks handled underwriting from 2002 until 2007. It was impossible for anyone with prior experience in the industry not to know that most residential mortgages had not been underwritten by the originators in any meaningful sense. This is true for everyone up the securitization chain, including those who are supposed to be bona fide purchasers without knowledge.

  15. Actually, these large companies operate like fascist governments of the ‘friendly’ variety. Just as governments can ultimately screw no one but constituents, corporations can ultimately screw no one but customers. To apply ‘free market’ principles to a cosmos of corporate governments makes no sense, which is why economics has become ideological nonsense. The real problem is structural. Market sharing by a limited number of competitors produces no free market outcomes.

    We have a free market in pool cleaning services. That works pretty well.

  16. You’re describing “financial innovation” that Republicans and paid-off Demos want to protect.

    The medical insurance version of this is to drop the sick person when the expensive claims show up, with the added benefit that sick people often don’t have the money, time or strength to fight back.

    The same sort of thing applied to vehicle manufacturers would have mechanical failures designed in, which can only be serviced at the dealership.

    Something like that was going on in Detroit products in the ’70s and ’80s (intentional or not), and you know where that led.

    In theory, all this lying and cheating by US/western banks should create a market openng for honest Chinese and Japanese banks, right?

  17. I should have added, this kind of stuff is the sort of “eating the seed corn” that is historically symptomatic of succesful societies that have gone bad and that are on the way down.

  18. “I’ve generally leaned toward incompetence, because I think if a company actually did have such a sinister plan, it would leak (because lots of people would have to know about it). But maybe it’s something in between.”

    I think these types of things are really ‘tendancies’. In other words when someone is powerless there is a tendancy for them to be taken advantage of.

    There really doesn’t have to be some backroom, hand wringing, nefarious plan. Advantages are taken where they can be. The less oversight and accountability the more there is a tendancy for corruption to take place both in the macro and the micro.

  19. A long, long time ago, in response to the fourth or fifth last major financial meltdown that prompted promises of Changes To Make Sure This Will Never Happen Again, a group called The Treadway Commission proposed all sorts of important reforms in the way business did business in this country.

    One of that Commission’s key findings was that it was essential for the leadership of any organization to establish the “tone at the top”. In other words, set clear and emphatic expectations about honest conduct and then hold people accountable under standards of performance review. As straightforward and (in my view) as correct a statement of leadership principles as you can ask for.

    What was true in 1985 is true now and I believe fully applicable to the essential program of mortgage loan modification.

    In my opinion, all it would have taken is for Jamie and the gang to set the tone at the top and publicly tell their executives “look, we have an extreme crisis crippling our country and thousands of our borrowers. Now the government has made it possible to make some real progress helping ourselves and helping our customers out of this mess. So let me say it once—I want this program implemented full speed ahead and as priority Number One. And I will expect full and complete reports to me personally on our success at getting this done. I will not accept slow-walking it, much less failure at implementing it. Tell your people I know mistakes will be made on individual cases and I will back them up as I expect you will. But the possibility of such failures will not be an excuse for doing next to nothing at all. Get it done!”

    No such words that I’m aware of were ever spoken, of course. All we heard was the kind of lip service that sends the message of leadership indifference downstream loud and clear. So the result is that nothing happens. Especially because nobody wants to be the local office doofus who modifies a loan to some guy who then winds up on page 3 of the New York Post as some kind of stimulus “welfare queen”.

    The only resulting downside? Just a few boring and sometimes uncomfortable minutes in front of some grandstanding Congressional types before getting back to doing God’s work.

    Sorry if I sound crabby and really sorry if I sound old, but honest to gosh, after the LBO decade, Long Term Capital, ENRON and Glass-Steagal and on and on and on, when will the people of this country finally say enough is enough?

  20. It’s not “sinister” but it’s not incompetence either. It’s like offering a mail-in rebate. The company knows the exact amount to offer which will be enough to entice X number of customers to buy the product, and they know almost exactly how many will actually be mailed in.

    I don’t know about Citi but my bank did something similar – enticed me to move to the so-called “Platinum” checking which gave me free this and free that and what I wanted above all else, free unlimited withdrawals from out-of-network ATMs. Except that I started using out-of-network ATMs and was charged DOUBLE! I have about an hour fight each time I get my statement. They must be hoping I close my account I can’t think of any other reason to be treated this way.

  21. regarding mortgage modifications, do the banks extending “trial” modifications under HAMP intend on following through with short sales etc. come spring should they fail to make modifications permanent, as required by this directive?

    https://www.hmpadmin.com/portal/docs/hamp_servicer/sd0909.pdf

    I’m not a lawyer, but to me this reads like “foreclosure alternatives” are mandatory by April 5 2010 if modifications under HAMP fail to become permanent.

  22. It’s a scam by design. It doesn’t leak because of the group mentality effect and rationalizing the behavior of the provider of your livlihood. It’s a very strong built in bias to ones thinking.

  23. Carol,

    I never really liked this line of argument. It’s like saying, if you think taxes should be raised why don’t you just throw a few extra bucks to the IRS every year at tax time. B of A is very convenient for me, so I ain’t taking my money out. The point is that we need to put policies in place to alleviate the TBTF problem.

    Populist calls to take your money out of these institutions won’t work, but it’s worse than that, it could actually do harm by ignoring real potential solutions.

  24. Exactly.
    Anyone who deosn’t get that, doesn’t understand the world around them.

  25. HuffPo has it right: Get your money out of the TBTF banks and put it in your local bank or CU.

    For the most part, they don’t mislead, defraud or otherwise abuse their customers.

  26. This kind of goofy stuff to redact George Carlin is everywhere and has been so for a very long time. It is both malevolent and incompetant in a Keystone Cop corporate marriage. Every big corporation gets mired in poor communication among the inside grifters and sycophants. The circle of CYA just keep expanding by all concerned when poorly thought out and coordinated grifts get out of hand. Interspersed among all this is trustful ignorance.

    I say the foregoing from experience because I was often the guy that had to protect our own people from themselves in project management. Real life events could be very humorus even while being scary if you cannot interdict the goofy stuff or isolate it’s effect. Everyone has constant pressure to deliver what in many cases is simply not deliverable. The big shot that applies the pressure cares nothing about the problems and only wants textbook results. The corporate mummy that must accomplish the textbook result gets backed into a corner and must deliver. The result is a dimwit folly. Then blowup. Then the CYA chain reaction.
    .
    My own view is this is the norm today. The corporate world is a comedy of error’s.

    An Example. My company was asked to build a very large casino in a state that allowed gaming on boats. I called the Project Executive to warn him that he was building personal property and that we would have to collect sales tax from the owner and buy all materials for resale. The owner’s rep screamed it was to be treated as a building. I asked the owners rep’s what would happen if the local Pastor Demon Caster’s understood the casino was a building? He replied that they could and would stop the gaming legally if it were not a boat. He said the casino was “effectively” a structure. I retorted the state law said differently. He implied the fix was in. I not so impliedly asked what would happen when the Pastor Demon Caster’s found out about the fix being in. So, I asked for an iron clad guarantee for all retail sales taxes plus interest and penalties incurred for failure to collect. This was a bluff because an agreement to reimburse an affirmative duty to the state would not be enforceable. This was refused and we did not take on the job which was my personal goal. The other party that did build the casino did not collect taxes and the big shots constantly button holed me to snitch on these people. The PE never forgave me for being so hard nosed. This is the real world of American big business. Your bonus depends on utilizing every angle. Had we done the job down and dirty on taxes and had it blown up I would have been the patsy. So, I was doing preventative CYA. Later I explained to the owner of the company that we could have taken the job on and that I had a methodology that he would not have liked given his fear of adverse publicity. He backed me totally. I used his fear to CYA myself.

    This is what goes on every day in myriads of individual deals in the real world of American business.

  27. “It’s like saying, if you think taxes should be raised why don’t you just throw a few extra bucks to the IRS every year at tax time.”

    I try to understand, but fail to see the analogy.

    “The point is that we need to put policies in place to alleviate the TBTF problem.”

    Indeed, and this blog, as well and many others, and their commentors have come up with all kinds of proposals, improved after discussions, but …..no policies, not even a single policy, has been put in place to alleviate the TBTF problem (on the contrary, the left-over biggies are now even bigger).

    “Populist calls to take your money out of these institutions won’t work, but it’s worse than that, it could actually do harm by ignoring real potential solutions.”

    Why would it not work? Granted, Wall Street ‘earns’ the most by trading, speculation, gambling, and not by ‘old-fashioned’ taking saving deposits in and lending loans out, but surely if BoA/ML, City, JPMorgan lost a lot of their deposit base, they would have to become smaller (due to maximum leverage requirements).

    Seriously, this crisis started summer 2007 (blow-up of two hedge-funds), erupted into the open in March 2008 (Bear Stearns), and gained full speed in September 2008 (Lehman). We are now in January 2010.
    What policy changes have been contemplated and implemented over the last two years? 24 months and nothing to show for it!
    If the ‘representatives’ do not do it, then we have to do it!

    And nobody says that this is the only thing we should do, hence it does not imply that other solutions will be ignored.

  28. Yep. I used to work for a bank in the Trust Dept. We used to sit around the conference table in our monthly meetings doing little more than come up with new ways or angles to either increase fees, or add new fees to accounts. It’s what we were supposed to do because the big guys upstairs demanded more revenue. If it didn’t come in the way of new business, we simply had to come up with other ways simply to meet their profitability goals and projections… or they’d find someone who could. It never crossed our minds to blab or to leak. Our job was to do what the big shots wanted. End of story. It’s that simple.

    The $200 promotion was created with the intent that there would be substantial fall off to minimize the cost. If measures were put in place to enhance the fall off, all the better. Job well done.

  29. Most assuredly I _do_, first and foremost, “blame” the top and middle “managers” of any organization for dictating and implementing any and every “scam.” However, that does not, in any way, absolve the “employees” of their abdication of ethics, honor or integrity toward their “fellow citizens.” I’m also not referring to just the “front line phone grunt.” I once ran the IT dept for a marketing firm selling a water-less car wash. The product worked great but they claimed it was an “environmentally conscious” and “water saving” product. It was based on petroleum compounds that, when washed off the towel one needed to use, the water “saved” would become permanently polluted by the hydrocarbons. And don’t get me started on how onerous their “return policy” was. I quit because they were lying to all of their customers, not to mention the “employees.” I could go on and on about other past employers but, suffice it say, there isn’t a single “honest” (or honorable) corporation anywhere in this country at this time. Most of the practices and procedures now in place would have actually been illegal not that many years ago. Which implies there is plenty of “blame” to be directed at most, if not all, members of local, state and federal governments.

  30. Great observations about how big companies work. In dealing with companies, I often find I have to become a bully with a pit-bull jaw just to get the representative, the supervisor, and the amorphous organization above them to simply do the right thing for the customer.

    Twice I had to report Verizon Wireless to the state consumer-protection department just to get them to do the right thing. One time I had to write a letter the the company COO.

    But I often wonder, What happens to the normal meek people who don’t know how to go into bully mode? I assume they just pay up.

    I usually put this stuff down to organizational incompetence, but your post makes me wonder about that. Could be financial-services “innovation” at work!

  31. I agree. The rebate scam is rampant. I bought a HP laptop years ago for my daughter. I was offered $100 rebate from HP which I got very quickly. I was offered $100 rebate from the retailer, CompUSA I seem to recall. Cut out the label from box and mailed in all the crap they required. Nothing, called their rebate hotline and of course put on hold until I collapsed. Knew I had been had. Months later I saw a new item about the FTC settling a class action with the company and though hey, maybe its the rebate problem. Here is the miracle. I called the FTC office in SF and left a message and an employee called me back. She told me it was not related to my problem but to go ahead to fax her copies of the receipt. Within 3 days I got a call from CompUSA and they offered to fix their little ” mistake” claiming they sent the refund to the wrong address. Got the check in 48 hours.

    Yes, all you right wingers, sometimes government and regulations work Ha Ha.

  32. @ Ben –

    There are competitors with the TBTFs, and these are the smaller banks and credit unions. I’m with Carol. If you want to continue to bank with BoA, you get what you deserve – to be scre#ed.

    This is one opportunity where you can engage in the “natural selection” that is suppose to part of Capitalism via competition (which we have far too little of today, because of ignorance and the influence of wealth in politics), yet you turn your back on competition and prefer that government fix the big bank corruption and inefficiencies. BTW, I guarantee government isn’t going to fix the big banks. But if you want to hold your breath, be my guest.

    I say, let the big banks die.

  33. By design or incompetence? Both are likely at play, but THE ATTITUDE is clearly BY DESIGN.

    Regarding systems – this is what you get when the person handling the situation is not directly impacted.

    Example:

    [A] I once went to a hospital outpatient clinic. I provided them up to date medical insurance information before I saw the doc. The billed my old insurer, who, of course, didn’t cover the bill. Time, mine and theirs, had to be spent to remedy this.

    [B] In all the times I’ve gone to the two-man shop to get dings in my windshield fixed, they have never, ever, billed the wrong insuance company.

    Most large computing systems are filled with errors and glitches. As an IT pro, I have hunted them down and fixed them, or facilitated getting them fixed.

    Unfortunately, too few people, and too few corporate cultures, give a rat’s a## about the customer experience. Ask Bill Gates or Paul Allen when was the last time they tried to get customer service from Microsoft via the same channels as a “regular” customer. I assure you the true answer is “Never.” Because Microsoft like many big corps don’t care about the customer or end user experience, because they have, via monopolistic competition, a captive market.

    Competition is what we need for Capitalism to survive as a method for creating value: the best products and services at the best price. Unfortunately, competition isn’t a word used, understood, or embraced in most places and in most economic circles – and certainly not in Washington, D.C.

  34. It seems to me that we used to have federal agencies with real teeth and claws, like the FTC, that would go after companies that acted like snake-oil salesmen. The odds of getting caught and facing fines and embarrasment seemed to be enough to keep a lid on these scams.

  35. Steve: “In my opinion, all it would have taken is for Jamie and the gang to set the tone at the top and publicly tell their executives “look, we have an extreme crisis crippling our country and thousands of our borrowers. Now the government has made it possible to make some real progress helping ourselves and helping our customers out of this mess….”

    The Jamie who should have spoken those words, would not have made it to a Wall Street CEO position over the last decades.

    That’s why, when Paulson/Bubblenanke said we the taxpayers needed to bailout Wall Street in order for them to then help Main Street, it was not to be believed.

    Unfortunately, Geithner/Bubblenanke repeated the same rhetoric.

    +
    “Sorry if I sound crabby and really sorry if I sound old, but honest to gosh, after the LBO decade, Long Term Capital, ENRON and Glass-Steagal and on and on and on, when will the people of this country finally say enough is enough?”

    Steve, you sound neither crappy nor old to me.
    And you raise a very essential question.

  36. Quriosity above mentions the Verizon thing… That’s another great example.

    My employee accidentally presses some buttons in succession. This triggers some kind of automatic data download. This costs $5. Every month!

    I am asked by accts payable why the charge on this guys phone. I call but there’s no way to get the charge reversed or even to cease for subsequent months! It is now a permanent part of his bill. Some CSR says I have to get the CEO of a multi-billion dollar company to call or write in to stop the charge. Yeah right. No way am I gonna make my one interaction with the CEO that. It’s what they are counting on, I presume.

    I did, however, call the procurement manager. But the charge is still there month after month.

    By design or incompetence?

  37. Moving your money DOES work. I am moving to a credit union for one basic reason: I am dyslexic and sometimes make mistakes in my personal checking account. My bank capitalizes on this by letting the mistakes pile up at $35 per check and not telling me for days except by snail mail. Several times I have ended up owing them $500 even though I have enough in my business account to cover any check written. The credit union will–at no extra charge–take the money out of my saving account to cover any check that might bounce. In addition, any loans at the credit union are at a lower percentage and ALL their fees are lower than the bank’s.

    If I can save myself a lot of money, why wouldn’t I do it?

  38. I must admit I do not go in for the big government is always “bad” government line of thought. Also a large financial institution is not automatically “good” because it isn’t a part of the government.

    One difference between the two is that a government should be run for tbe benifit of its citizens. Governments run for the benefits of its own bureaucracy and leadership are usually seen as dictatorships. A bank is not run for the benefit of its customers. The bank is run to make a profit for the shareholders, and it seems nowadays more so for its management.

    Your analogy of a fascist regime to a TBTF seems to have much merit. Unfortunately the how dare you call them Nazi’s can cloud the issue. The jackbooted fascist can be just as well replaced with the third world Zimbabwean government as a viable example of the cleptocrats at work.

    Its still a pyramid taking from the citizens/customers to the folks holding the power.

  39. I had a similar offer from Chase last fall (I think that they opened a new branch near me.) $100 for opening a minimum $2,000 account for at least six months. I was tempted and kept the offer letter on the counter for a week. After all, an effective %10 insured return is hard to come by, especially these days. But I finally realized, that getting out was going to be much harder than getting in and tore up the letter. Thanks for your post. I feel much better about tearing up the offer.

  40. “The Jamie who should have spoken those words, would not have made it to a Wall Street CEO position over the last decades.”

    Carol, sadly I completely agree with you on this point. And as to people being fed up enough, I think the drama unfolding with a possible Republican win in Massachusetts (and yes, you read that right) may well bespeak the kind of rising up angry that I believe is responsive not only to proposed health care reform, but to economic/business conduct concerns as well.

    Look, I’m neither a Tea Party Palindrome nor an ACORN-loving lefty, but as a long time observer, I am here to tell you people are really, really p***ed off, and the sooner people in the Beltway tumble to that—and for crying out loud addressing that meaningfully— the social fabric will only strain and tear even worse.

    Sorry for the melodrama, but people need help—and thus far they ain’t getting it.

  41. Off topic (design – incompetence), but just to follow-up:

    “a possible Republican win in Massachusetts (and yes, you read that right) may well bespeak the kind of rising up angry …”

    In this column it is opinionated that a possible loss of the Dem. is due to her bad campaign: not enough debates, not enough meeting with voters, rather than angry voters.

    http://www.boston.com/news/local/massachusetts/articles/2010/01/15/race_is_in_a_spinout/

    +
    “…..but as a long time observer, I am here to tell you people are really, really p***ed off…”

    Granted, people may be really p***ed off, but that is different from the essential question you asked: when will the people say enough is enough?

    One can be angry, frustrated, p***ed off, be a keyboard revolutionist, discuss at the kitchen table, etc., but that does NOT change anything.
    Even voting in Nov. may not change anything, as both parties are bought. Joining the moveyourmoney.info grass roots effort can help if enough people join.

    So the essential question remains: when and how will people express ‘enough is enough’?!

  42. I suspect that the answer could be somewhere between the two… (incompetence and design). Senior management probably lets the marketing department design and launch promotions, and lets the administrative guys figure out a process for implementing them (giving a rebate or whatever). They probably give the administrative guys no incentive to make the process easy or user-friendly, and so the administrative guys will make a system that makes sense for them (one that will be slow and cumbersome).

    The senior manager can say, in good faith, that he or she approved the promotion and ensured that there was a mechanism to implement it. But the senior manager knows that the mechanism for implementing it will be so slow and cumbersome that many people, perhaps a majority of people, will not receive the benefit. The upshot is that the cost of the promotion is a fraction of what it would otherwise have been.

    So in effect the banks are probably using the clunkiness of their own systems to bilk their customers.

  43. Which just proves that the banks will generally rig anything to enable them to preserve the toxic assets on their books at bogus values, while, if they modify, they weaken them, and, if they foreclose, they will probably destroy them, so this is just more gaming, but the rigging is no doubt convoluted and cheesy as it seems.

  44. This sort of thing happens in every doctor’s office in the country every single day. Employees or doctors on the phone with insurance companies to get authorization for payment. It also happens with individuals in dealing with health insurance companies. And now it is happening more and more with banks. For the first time in 20 years of banking with BOA, it was an “oversight” that interest was not posted in our interest-bearing checking account.

  45. Typical criminality.

    Merrill Lynch now has a policy of stealing $75 from every IRA holder upon account closure. This is almost certainly illegal when the account was opened under a different company and bought by Merrill Lynch.

    Not sure how to address this sort of routine fraud and theft by banks and other financial companies.

    Probably RICO suits by the DoJ to destroy companies like Bank of America would be best.

  46. Call it designed incompetence. The same type that delays or denies insurance claims until threatened or actual litigation occurs, immediately processes ATM withdrawals but takes 10 days to post credits, etc.

    The frauds go by various names and are egregious to varying degrees.

    But the fundamental disrespect and contempt the banks have for their customers is unbelievable.

  47. I would agree with everything Lee said, but I would also add the incompetence is indeed part of this business model. The details of these deals are complex, and the people tasked with carrying out these deals are the least paid, least-trained, least-competent, no-powers-of-authority front line employees.

    Think of every time you called an out-sourced customer service department of a company and got a person who did not (a) know what you were talking about, (b) had no authority to solve your problem anyway, (c) didn’t speak English as a natural language and frequently got confused, and (d) had to transfer you to a “supervisor,” entailing 30- to 60-minute wait times. Think of trying to get a refund from the uncaring teenager at the grocery store.

    Every retail company does this. I should know – I’ve worked enough retail jobs to spot this pattern from a mile away. And because the employees are “cheap,” the company doesn’t care about high turnover (and loss of any institutional knowledge the prior employee had). In fact, the more turnover, the better.

  48. Design or incompetence?

    Both

  49. Maybe the promotion was so wildly succesful they just don’t have the cash to cover it. You didn’t say how much money you had to deposit in a new account? But $200 is a huge chunk of money just for opening a new account.

    The other thing, in order to know for sure whether it was design or incompetence, you need a whistleblower. Not likely to happen in today’s desperate economic climate.

    The whole idea of offering $200 for a new account smells either of desperation or a scam or a desperate scam.

  50. By the way, a business reporter for NBC or MSNBC or some network wrote a whole book on this called “Gotcha Capitalism”.

  51. Great piece. I like the term “incompetence through conscious inattention,” although I think that in this case, the example leans much more to the side of “sinister design.” If there were no manual for how to proceed for instance…because the business was so poorly organized (I have worked places like that), that no one was responsible for creating any directions, protocol, guideline, training…I would think of that as “incompetence through conscious inattention.”

    But when there is a process in place to create instruction manuals and protocols–I say that’s “sinister design” with an implementation plan that happens in two stages. It reminds me vaguely of the (old) movie Rain Man, where it is revealed that employees were directed to systematically reject every health insurance claim the first time it was submitted, without examining the legitimacy of the claim. Only if a claim was submitted a second time would the claim’s content actually be examined.

    Slightly related: John Tantillo recently criticized NBC for making a U-Turn on their original decision to move Leno to prime time: http://blog.marketingdoctor.tv/2010/01/11/john-tantillos-brand-winner-and-loser-avatar–hollywood-and-nbc.aspx

    “ninety-percent of marketing is building the structure before executing your plan. “

  52. If there is no financial incentive to design a system well (penalties for breaking Treasury Dept rules), then businesses have no incentive to fix their systems.