Commentary

A trip to Financial Wonderland- by Greg Strid

A trip to Financial Wonderland

On a recent, sunny Monday morning, I rose early to
hear the familiar rumblings that have come to
define the AM hours on Jersey City’s Coles St;
the steady drone of vehicular traffic, and random,
booming car stereos- followed by the car alarms that
they inevitably trigger.

I was determined to set up a business bank account.
I settled upon Washington Mutual as my financial
institution of choice after a few rounds of fiscal-related
gossip with my friends. Yes, Washington Mutual seemed
to have the best word—of-mouth reputation of the
three or four banks that dot Newark Avenue. (This is
probably due to the fact that they haven’t been in
business long enough to disappoint their customers.)

I also like their commercial ad campaign, which
ridicules the stodgy bankers of old in attempt to show
just how different and customer-friendly Washington
Mutual is compared to its blue-blooded competition
in the financial services industry.

I felt confident that I had chosen the right bank. Afterall,
if you can’t rely on TV commercials and gossip, how is
one to make such a crucial decision- research, the
Better Business Bureau? I am a product of the information
age, and I don’t have time for due diligence.

And what a bank Washington Mutual turned out to be!
I showed up dressed like I wouldn’t get a second
interview at the local filling station, explained that I was
unemployed; yet I was offered a $75,000 line of credit-
for the paltry annual fee of $150, of course.

I had not provided any assets that could be used for
collateral against this line of credit, and did not even offer a
business plan suitable to fill the back of a cocktail napkin.

I happen to have a good credit rating, and maybe the
bank representative had access to my all-important
credit score. That number, and a full set of teeth may
be all that is required in order to get colossal amounts
of credit these days.

The complete lack of concern expressed by Washington
Mutual for my financial fitness made me a bit nervous.
I have been reading about the implosion of the subprime
loan market (which focuses on lending to those with poor
credit histories), and the growing number of lenders who
are collapsing as a result of bad loans made over the past
few years.

Many in the financial press are explaining this meltdown
as an isolated phenomenon. But, my experience at
Washington Mutual does not put my mind at ease. This
is supposed to be a well respected and responsible lending
institution. Yet all that seems to matter for this bank is the
collection of fees generated by doling out credit to
whoever has a pulse- and lucky me, I have one!

We live in a society that is almost completely dependent
on the access to credit. The generation of loans provides
plump fees to America’s lending institutions, and offers
employment for many- especially in the New York area.
But, easy profits today can turn into nightmares down the
road.

The pursuit of short-term profits at the expense of sound
lending practices jeopardizes the health of America’s
banking sector, and its capital markets. If the subprime
market contagion spreads, larger institutions may eventually
be affected, and this will lead to a reduction in the amount
of money available for future business investment and
individual consumption.

I sincerely hope that the Washington Mutual’s lending
practices are the exception, and not the rule. But, given
the prevailing attitudes toward the assumption of debt,
I am not exactly brimming with confidence that my
experience at this bank was an anomaly.

Greg Strid

© 2007 Splendid Marbles.