Tuesday, January 29, 2008

Wachovia Penny Wise and Billions Foolish

Although I don't bank with Wachovia, I walked into a branch the other day to cash a check that came in late from a client, wanting to deposit cash rather than wait for the instrument to clear. "There will be a five dollar charge to do that," said a teller who was remarkably unpleasant for 8:40 in the morning.

"But that's ridiculous," I said. "The bank is obligated to pay me."

"Sorry, but that's the bank's policy because you're not a customer. Do you want to cash the check or not?"

This is the type of pettiness that makes people hate banks. It's called charging people for the dubious privilege of doing business. Bad enough as a non-customer, I've heard of banks considering charging customers to use teller services. Are the branch staffs really so entirely busy without a let-up that additional people walking up will require additional staff? That certainly wasn't the case where I was, and I doubt it's really that much of a problem over all.

But then, many banks have long since decided that customers were an annoyance. We're just the little people who keep insignificant sums of money in the bank, so it can lend. No, the real important lines of business are the speculative ones - you know, the ones like those derivative investment vehicles that cause banks to write down billions upon billions of dollars of institutional value.

Wachovia wrote down $1.7 billion in its last quarter, and saw only 3 cents per share earnings. Thanks, collateralized debt obligations. Oh, and a $24 billion acquisition of Golden West Financial Corp. and its steady supply of mortgage losses.

Instead of sitting on the roller coaster of questionable profit and trying to squeeze every penny out of the public, here's a radical notion: treat customers well, get their business, see them refer others to you, and be more intelligent about taking risk. Give up the $5 here and there while stemming the grossly unnecessary losses, and it can add up to real money.

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