If we had a vibrant economy where delinquincies were receding and employment was roaring back (NOT!), it would make sense that banks would take on a little more risk.  The evidence is clear, though.  We have  recovery in share prices, but the budgets of households are not back where they were. Credit card charge-offs are up, and unemployment is still high.

That is why it seems odd that some of our largest banks have decided to offer a new payday-loan product.  US Bank, Wells Fargo, and Fifth Third are three banks that are rolling out short-term loan programs where APRs exceed 120 percent.

Did I mention that each of these banks was given a huge TARP investment? True, US Bank and Wells have already repaid their TARP funds, and Fifth Third indicates that it intends to do the same in the next quarter.

I think the appearance of these new products reveals how this credit crisis is hurting middle America. Consumers don’t want to use loan products like payday loan-priced advances on their next paycheck.  They would prefer to use credit cards (interest rates of as much as 29 percent) or a line of credit (perhaps 12 percent.) These new payday products cost at least 120 percent. People aren’t dumb. They are taking this bad deal only because banks aren’t offering something more reasonable.

Let’s review the new payday products.

Fifth Third’s Access Now: “when you need money but you don’t have time to wait.” The cost is simple – $1 for every $10 advanced.  Funds are repaid with the next direct deposit. If your (more…)

Unbelievable.

Citibank announced this morning that it will charge customers a $7.50 bank fee for any month when the balance on their Access or EZ checking account falls below $1,500.

Of course, what is even more upsetting is that Citibank is hardly an outlier.  If anything, they are just the latest bank to follow a new trend.  NBC reports that 54 percent of banks have raised fees on their checking accounts in the last year.  Bank of America, for example, just raised the monthly fee on its checking accounts by $3. Bank of America’s no frills MyAccess checking is touted as a service fee-free account with no minimum balance.  If you make your way to the third page of disclosures, though, you will see that it has an $8.95 monthly maintenance fee if you don’t keep $1,500 in the account without direct deposit.  So, it is true – no service fee.  Perhaps the fact (more…)

There are pigs, and then there are capitalist pigs.  And among the capitalist pigs, Maurice “Hank” Greenberg can rut like none other.

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As much as C.V. Starr deserves genuine credit for founding and developing AIG, his close friend Hank Greenberg is often thought of as the man who built AIG.  Greenberg has been on the sidelines, at least by his own standards, since he was ousted from AIG in 2005 over violations of accounting rules.  Since then, he has been battling AIG in court.  He was able (more…)

Part of the beauty of blogging is its ability to generate constructive feedback. Some feedback yesterday led me to research the trail of insider lending at Pacific Capital.  I’m glad I did, because there’s more smoke out there and it points to CEO George Leis.

When I wrote yesterday about the incidence of high levels of credit extensions to insiders at Pacific Capital, it provoked some good responses.  One of those responses was this:

“Have you researched ‘when’ these loans were made? I would venture to guess over a long period of time, and not in the last few quarters.”

This is a very good question.  It takes the facts that I observed yesterday (lots of lending at a bank to its insiders), but by giving those decisions a time frame, it gives a better picture of the appropriateness of that decision-making.

Just for sake of definitions, insiders are considered to be “executive officers, directors, and prinicipal (more…)

Pacific Capital Bancorp (PCBC) is on the ropes.  With it rides some of the legitimacy of the TARP program. Recently, there has been news of some successful exits by large banks from TARP.  What we haven’t heard is the story of bank that can’t survive, in spite of help from TARP.  Pacific Capital might be that bank.

Pacific Capital, the parent of Santa Barbara Bank & Trust, received $180.6 million in TARP funding last fall.  While the Treasury seems willing to stand by and watch scores of banks fail, it found something worth redeeming in PCBC.

That’s hard to understand, since PCBC makes most of its money off of refund anticipation loans.  These are dubious products that extract high fees from (more…)