Thursday, November 13, 2014

The Truth Hurts

Yes, I admit that I am surprised, that The People are surprised, that Bank FX Desks routinely (and I emphasize 'routinely') predated customer orders. This is, judging by the long list of things diddled when People have the opportunity(s) and incentive(s) do do so, Standard Operating Procedure, endemic not just to Banks, but, more or less, I am sad to say, most of the human enterprise. Banks undoubtedly are eyebrow-raising, less for their routine seeking of advantage at others' expense (let's term this 'business'), but rather for the breadth and magnitude of their repeated gluttony in a profession where trust is, I daresay, rather crucial to the entire undertaking.

Yet, what I, personally, find most surprising about The Banks, and the cast of characters who run, and inhabit them, is that they are incredulous, and somewhat mystified, to the suggestion that people really do hate them. Take the case of one of the largest American money-center banks where an uncle of mine was engaged to help them understand how to exploit opportunities on their newly-embarked-upon course of "Bancassurance". Specifically, he was asked by their Board to help them understand how to cross-sell insurance services from their newly-acquired insurance arm, into their existing customer base. My uncle, being a pioneer in focus groups, and brand-extension, did what he does best: conductive exhaustive focus-group study of the issue and analysis before presenting his findings to the Board. His results were categorical. He told them, in no uncertain terms, they had almost no chance of selling their subsidiary's insurance to their existing customers. "On what basis?" they asked rather angrily. He said it was obvious: all his research showed that people HATE their bank. It almost didn't matter which one. Most people think the other banks are better than their own, so you actually have a far better chance of selling their subsidiary's insurance to anyone BUT their customers. Awkward silence ensued. Meeting was quickly adjourned. Contract abruptly terminated shortly thereafter. And (unusually for him) no further work from this giant Bank. The truth is painful, yet people in general, and it would seem, bankers in particular, go to great lengths to avoid it.

(NB: The American experiment in Bancassurance, like Mitterand's disastrous nationalization of the French banks was eventually reversed, the ill-informed "guilty" architects, of course, inculpable, and unpunished.)


Mercury said...

Perhaps I’m taking these in with too many grains of salt but your posts are now almost evenly divided between status reports detailing how yet another structural component of the bridge has proven to be compromised or unsound and mocking fusillades directed at hand-wringing pessimists every time another school bus has made it over the bridge safely and without incident.

Either reasonably free, honest and trustworthy state organs, markets and systems for allocating capital and pricing risk are critical to the long term, systemic health and prosperity of a technologically advanced society or such things are mere gentlemanly affectations and vestigial ornaments of an archaic and obsolete system. It seems unlikely that both conditions can obtain simultaneously to any significant extent.

"Cassandra" said...

Mercury, I am flattered by your attention to my posts, whatever their flaws. You know that I am an idealist at heart. I wish bad behaviors weren't so pervasive, but they are. Yet I retain hope and see pockets of virtue. And within these pockets, systemic health is reasonable, and survives without endemic tunneling, cronyism and corruption - certainly on the scale witnessed in the major Anglo-saxon centres. And it comfortably co-exists with interventionist states that respond to market failure(s), or where thoughtful policy cost/benefit deems the public interest is best served by intervention or at the extreme, imposing State control or other monopolistic or monopsonistic solution.

I also struggle against an inherently bearish disposition. Oh, I can rationalize it (this is easy), but like anything pathological, it is likely to be poorly measured vs. reality. So, Bears Anonymous is a caricature 'close to home', which I deal with by successfully pursuing an approach the suits my character (without bankrupting me) - one that is diversified, well-hedged relative value. There is , of course, always a bull-market somewhere and in something…

But most worries are "trades". Yes, I wouldn't rule out that, one day, the system may break. One day, all might collapse around us. The human endeavor may end with a gasp and whimper leaving a David Mitchell or Atwoodian-like dystopian future. But I wouldn't bet on this. And if I could, I should be well-concerned about counterparty risk. Yes, perhaps one can "hedge" (guns, ammo, food, and a space in "the bunker"). Good luck. Should we get there, my inherent optimism will have yielded to nihilism beyond repair.

Finally, for the avoidance of doubt, the Bears' Anon piece IS poking only tongue-in-cheek fun at the bearish disposition, which as I've said I suffer, but is, more than anything, a late-bull-market satirical lament . ZHers are in general too jaded and earnest to see this. FWIW, I think forward returns (from here) are low for US equity. But that is a far cry from stockpiling AK47s and requisite mags.

Mercury said...

Understood. We all need to be members of The Church of What’s Workin’ Now to some extent and despite my Red Pill popping I’ve had 100% of my Rollover in SPY for quite a while now, like a good boy. If I were as successful as you at taming an inherently bearish -or at least contrarian- disposition I’d likely by richer.

I am optimistic however that when the SHTF we fetch up somewhere well short of Armageddon.

Anonymous said...

I feel people do not understand banking. Yes, bankers are not your friends and will try to maximize their profits at your expense, but you are in no ways powerless in the relationship. The real issue seems to be people are really mad at the government, but can't say that for ideological, statist reasons. The government in the U.S. has largely taken over the banks, telling them what to report, how to treat their customers, and setting their rules. If, as a banker, you try to run your business the way banks were run in the 1950's, the government will browbeat & threaten you until you adopt policies that strengthen the government. The banks are actually the victims, who are allowed good profits only as long as they play ball. People should really be mad at the government, but they don't know any better.

"Cassandra" said...

I cannot get behind the sentiment that the Govt is the cause of The People's hatred of banks. And while almost all of Banks' "lying, cheating and stealing" is "Maximizing Profits at your expense", not even most maximizing profits is lying cheating and stealing. Call me old school: I'm, not anti-capitalist, but it is a shame there is no more shame….

CrocodileChuck said...

Sounds like….

Sandy Weill's 'Shittybank'

NB the only place 'bancassurance' has worked is in markets where people still respect the local bank manager. IE, non-Anglo countries

Anonymous said...

People might hate the banks, but they hate them for the same reason they hate the cable company.

And the reason they hate the cable company? They don't really know (exactly), but they do know they love cable. You know what else people love? Debt. And who gives them all the wonderful debt? The banks (well, and "their" government).

The banks, the government, and the rest of the huge organizations which are run by the smart-n-savvy people of society are basically doing what "da people" would do IF they were smart-n-savvy too. The funny thing is "da people" know this. That's why "da people" really aren't THAT pissed about it because, it really is the normal "human enterprise (as you said at the beginning).

The managements of the banks, the government, and the cable company are just winning the scam.

JP said...


I don't particularly think causing a global financial crisis is something "smart-n-savvy" people should do. You sound like the type of person who would watch the movie Wall Street, and come away from that agreeing with Gordon Gekko's motto "Greed is Good", when in fact it was a portrayal of a ruthless corporate raider who lied to shareholders and the union about the purpose of the takeover - pillaging the pension fund.