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Friday, April 06, 2012




I grew up (1973 Age 22) in a community-based commercial bank with a National charter – Third National Bank of Springfield, MA. Ultimately it was the impetus to form Bank of New England. Was BNE a traditional bank? Big for its day but basically credit facilities, deposits, Trust Dept., municipal money mgt. Oh, we did trade Fed Funds, normally closing positions at the end of each day. BNE turned into a disaster because of an errant CEO and complacent board.

Is BAC a “traditional bank”? Is Wells Fargo? – As the expression goes “size counts”. There is a point at which there are no more traditions to follow except for the robber barons. If you mean banks that neither engage in nor have subsidiaries that engage in 1. “investment banking”, 2. trading for its/their own account(s), 3. FOREX, 4. sell a range of insurance products and investment services (aside from trust), then we have a starting point: Basically, bringing back Glass-Steagall!

I lobbied Congress (part-time) for the Mutual Savings Bank industry in the mid-80s for”Mutual Holding Company” legislation so we could keep “community banking”. That fight is long over. We won but it no longer mattered. Wall Street and the consolidation in the very early ‘90s assured that bigger was perceived as better. One stop financial services. UNFORTUNATELY we have gotten closer to “Call 1-800-THEBANK”.

Until non-investment banks rally around the concept of “traditional banking” the cause is hopeless. How much pressure was put on Congress to force BAC et al to divest.? How much of a movement was there for a return the the old days of “debits on the left, credits on the right” or “debits by the windows – credits by the door” Deposits and loans?

Today, as the economy has become irrevocably a world economy, my memories will stay just that – a glimpse of the past. However, unless there is a clear movement towards a differentiation among “financial institutions” meaning 1. “traditional banks”, 2. holding companies that have a brand (BAC) that may own a traditional bank but only because it hasn’t been homogenized , AND own brokerages, Hedge Funds, investment banks, loan servicing companies etc. 3. “investment banks” where “bank” may be a misnomer, as you can’t make a deposit or get a loan if you are just an average Joe/Jane rather than a Facebook, we move ever closer to there being only branches.


There is an image problem, at least in my humble opinion, or there is duplicity. Is this really just an attempt to grab a stake in consumer finance and SMB lending? I ran failed S&Ls in MD for the State and with FSLIC. Then I opened an FSB in MD only to have a death in the family and take over BNE-West in the Berkshire region of MA. That lasted 1 year until the $32B holding company failed – well, actually was put out of its misery by FDIC which wanted to send a warning shot across the bows of all other larger banks. I know the game – was victimized by it.

My view is that this is just another movement for a group to reinforce its power base, or maybe just its foundation. Set out what it is the PAC wants to accomplish – not generalizations about keeping “traditional banks” because they didn’t cause the crisis – the other guys did.

Richard Isacoff

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