There is more to this story than first appears, but in a general sense, this is one of those reasons that I want Elizabeth Warren to absolutely destroy the idiots that run the nation’s banks. Banking is such a vital industry that exists to serve the main economic producers and yet it has become a parody of itself. I love banks. I love stories like the Tootle-Lemon bank. I use banks. I invest in banks.
However, given the horrific mismanagement we’ve seen in the past five to ten years, were I in a legislature, I’d be tempted to reinstate the ban on interstate banking and break up most of the large institutions on a scale not seen since Standard Oil’s monopoly was shattered. No good has come of the existence of these monstrosities. They are too big to be managed. I also want Glass-Steagall brought back and a total, non-negotiable ban on investment banking and commercial banking under the same entity. This served America well for almost 70 years before it was repealed and we didn’t have these kinds of problems.
Going further, investment banks need to return to private partnership structures and be prohibited from seeking public capital. The reason is simple: The partners need to be on the hook in the event the institution fails. It’s moral hazard. I say that as someone who has a significant portion of my personal retirement assets in bank stocks purchased at bargains during the crisis. At some point, the good of society must prevail and these fools are failing at their primary responsibility.
One of my friends who worked in the banking industry wrote this excellent email to me explaining what is likely going on here:
I don’t know all the details but if he was over 3 months late the bank will not accept any form of payment period. The account would have been sent to pre foreclosure as per federal law and without working an arrangement with the loss mitigation and foreclosure department payment will not stop the action. He would have the option to work with those groups and bring the account fully current including and bank and legal fees that were now associated with the account. Or if he qualified he could work out a payment arrangement that would allow the bank to put a hold on the foreclosure action, not stop it completely but hold it for a series of month to show good faith payments. If this was to happen he still would not be allowed to pay in the bank but payment would be sent to those departments for processing and holding.
Just some insight from my days working this crap.
My hunch is that it probably what is happening. If it is not, and the bank just refused to accept legal tender, I think their charter should be pulled. Banks will not change until they are forced to change. The current system is too lucrative for them.