Anthony Garcia

Issue exploration Paper

English 1010

Banks have been through a lot in the last decade. Some banks have completely failed while
others have been bailed out by the government. After the 9/11 terrorist attacks occurred in 2001 there
was a huge shift in the banking industry. Banks had to change operations; they had to implement
different rules and regulations to insure the safety of our financial centers all over the United States of
America. In the last decade we have seen a sore in bank fees and bank regulations. Why have banks
been so greedy? Do banks have to be greedy to remain strong financial institutions? Would it help the
Middle American if banks were punished for doing shady investing and other kinds of bad investing? I
think banks have become greedy to the point that is too expensive to have a bank account there are
other ways of managing your money that is a lot cheaper.

9/11 Changed Everything Even the Banks.

In her article How Has the Banking Industry changed in a Decade, Kathy Burger explains The
challenges facing banks post-9/11 had more to do with operations and process than with policy
and management -- and I was confident the industry could marshal the technology capabilities
and resources to meet the challenges. It would be hard to say that 9/11 did not change anything
especially in the financial industry having an overhaul of operations and system data researching.
9/11 caused $40 billion dollars in insurance coverage making 9/11 the most insured event ever.
$40 billion dollars is a lot of money to recover for insurance companies to back up causing strict
regulation to be implemented by banks to insure that terrorist were not doing any monetary
funding through the fed. On the web page of the FDIC it defines what is known as the Bank
Secrecy Act and Anti Money-Laundering Act it states The FDIC has prescribed in its regulations,
Section 326, Subpart B - Procedures for Monitoring Bank Secrecy Act Compliance a
requirement that depository institutions establish and maintain procedures reasonably designed to
assure and monitor the compliance with the BSA and the implementing regulations 31 CFR Part
103. BSA compliance is a safety and soundness issue due to the reputational, regulatory, legal,
and financial risk exposure to a bank involved in money laundering schemes or willfully
violating the BSA statute. Civil money penalties and regulatory enforcement actions may be
imposed for noncompliance with money laundering regulations which can endanger the bank's
capital and earnings. Furthermore, banks may be criminally prosecuted for willful violations of
money laundering statutes that could ultimately lead to termination of FDIC insurance.(2)
When people go in to a financial institution they must show identification and depending on
what kind of transaction they perform they may need to provide more information like a finger
print if they want to cash a check without an account. The reasons why people have to do these
types of things are to insure that no one is laundering money or funding terrorism. Although all
these types of rules seem tedious and inconvenient they must be fallowed very closely so
something like 9/11 does not happen again.
Banks Need to Stop Feeing! But what Would Happen if They Do?
The banking industry has had to rely on fees such as debit card withdrawals, and courtesy
pay to stay afloat. Amber Veverka of explains, Banks have become reliant on fees because
other non-banking industry competitors have taken their clients.(4) Veverka explains that banks
fee their members because other financial institutions are taking their clients who can afford their
products. It seems, Veverka further explains, banks only benefit the rich and offer them more
choices while they discourage the less wealthy. Banks fee people with less financial structure
which cause them to venture out to find something they can afford. Another financial institution
people invest their money are small financial institutions such as credit unions which offer lower
Anthony Garcia
Issue exploration Paper
English 1010

rates for their members. According to the Nation Credit Union Administration banks are more
likely to charge twice as much for their products and services than a credit union. For example
the national rate credit unions offered for a five year CD in 2013 was 1.36 banks offered 0.77.
now for some explanation when you have a higher rate on a CD the more money you will earn
off that CD depending on the principal you put towards the CD. If credit unions charge 1.36 for a
cd a person will earn more money with a CD with a higher rate than would a person with a lesser
rate of 0.77that a bank charges. Vice Vera when you owe financial institutions money they are
going to put you at a higher rate. If someone wants an auto loan with a financial institution they
will be charged accordingly to their credit history and score the average rate of an auto loan from
a bank last year was 4.47 as compared to a credit unions rate of 2.98. Banks on average are
charging 1.5 times more to have an auto loan with them. A person will do business with
financial institutions that will give them more bang for their buck Ververkas explanation that
individuals will go with other non banking institutions because they can afford their services is
why banks are fleeing their members more.
Banks need to be Punished for Bad Investments! Is that Even Affective?
Banks provide an ecliptic range of products and services like lines of credits, loans, and
mortgages just to name a few and banks make a large profit through these types of services.
Mortgages are what banks thrive on, but one of the most unstable markets in our economy is the
housing market. Five years ago people could get mortgages easily; there were not a lot of
restrictions on buying a home. Unfortunately for the economy, and Americans, lenders did not
take lending large sums of money to individuals seriously, and people found themselves facing
foreclosures and having their homes taken away which all lead to a collapse which we know
today as the Great Recession. Lately its been hard for banks to lend money because of stricter
rules that were passed to deter lending to people who cannot pay back their debts. As the
economy looks to be doing better and the housing market is making a comeback with smaller
interest rates for home buyers Robert Samuelson explains in his article, Punishing Banks, Good
for Politics, Bad for the Economy, Low interest rates dont matter if lenders wont lend or lend
only to ultra-safe borrowers. Fed Chairman Ben Bernanke often complains of overly tight
mortgage credit standards. But some of the toughness turns out to be the unintended side effects
of other government policies designed to punish banks for the financial crisis.(7) In todays
market lending money is not easy. The federal government has become strict on its lending
policies and what banks are allowed to give which makes it tougher to get approvals for
mortgage lending. Today they must look at the individuals FICO score, debt to income ratio,
documenting income, and liquidity. Banks have, to no fault of their own, been put on watch for
their lack of care of what they lent out. Banks have had a hard time making a comeback in the
last couple of years because of this collapse in the housing markets which have prompted them to
make their money elsewhere. The approach is healthy for politics, if a bank does bad things they
should pay for it, but with the penalties banks must pay hurts our economy because people are
not getting mortgages that they need which in turn keeps the economy from getting better.

Why does the Government Bail Banks out all the Time? Do They Even Learn?

Banking, like any industry has its flaws. There are many factors that play roles on how
our banking system is regulated and without them the system would be corrupt. Banks have
made decisions that were not beneficial, not to say that it is okay but in most industries mistakes
happen. With most mistakes we need help to correct the wrong that has been done. When the
Anthony Garcia
Issue exploration Paper
English 1010

economy crashed in 2008 the responsibility came back heavily onto the banks and our
government bailed out our banks. 2008 is not the first time our banks have been bailed out. In
Peter Schweizers article Wall Street Bailout: Business as usual Peter details different
instances that our government has bailed out big banks from there bad business In 1995 the
Clinton administration used taxpayer money to extend a $20 billion line of credit to rescue
Goldman Sachs and others from speculative, high-risk Mexican government bonds they obtained
through arbitrage. In the end, this bailout saw to it that the speculators not only got their money
back--they also received a healthy profit. (6)These types of bail outs have cost the economy
billions of dollars typically at the tax payers expense and the banks do not always have to pay
them back. Bailing speculators breeds more speculation explains Schwweizer who goes on the
quote British philosopher Herbert Spencer "The ultimate result of shielding men from the effects
of folly is to fill the world with fools." When banks keep getting bailed out from making the
same mistakes it only hurts our economy and leads to uncertainty in our finances so the best way
to wax off bad banks is to ultimately let them self destruct.
The banks in America have been through a rough time from 9/11to the housing market
crash of 08 all in which have occurred in a span of just a decade. Yes the banks have been
through it all and as such we the people have had the unfortunate role to stand by our banks and
our financial institution so we could one day be doing as good as it was before they fell. Banks
are for the people, banks are here to provide a service for us as a nation and we as a nation stand
by our financial institution through the bad times and through the good times. It seems like our
banks are as strong as its members will to trust and keep them in business. Banks have had to
rely on fees and other means to make its money so it can function. Lending money has not been
an easy feat for banks to make a comeback but banks are starting to lend again. They are
beginning to lend to people because they have to make money and they are hesitant to give out
loans to people that are lower income but that is how it should have been in the first place so that
no one got loans they could not afford which was what caused a large part of the recession in
2008. It has taken five years for banks to feel confident again to lend to its member but it is I
time. With banks capability to loan again hopefully they will ease off the fees they have had to
rely on so much. If they are able to ease off the fees people will be more inclined to invest in
their firms by opening accounts and letting their money be lent to other members. If banks have
learned from their mistakes and handle their finances more efficiently and honestly there should
not be another recession caused by the banks at least. It is important to trust our banks so that we
can have our economy flourish as it once did.













Anthony Garcia
Issue exploration Paper
English 1010


Chu Kathy. Rising Bank Fees Hit Customers. USA Today 05. Oct. 2005: NP SIRS Issues research web 13
Apr. 2014
http://www.fdic.gov/regulations/examinations/bsa/
http://www.banktech.com/risk-management/how-has-the-banking-industry-changed-in/231601104
http://www.nytimes.com/2008/06/01/realestate/01cov.html?pagewanted=all&_r=0
http://www.cnbc.com/id/100716455
Schweizer Peter. Wall Street Bailouts: Business as usual. USA Today. 08 Oct 2009 SIRS Issuer Research
13 Apr 2014
Samuelson Robert. Punishing Banks Good Politics Bad for Economy. Fort Worth Business Press. 28 Aug
2013 Regional Business News.
Solnik Claude. FDIC Rule Change Hits Big Banks the Hardest. Business News, Ranohoma New York 03
Aug 2012.
Veverka Amber. Customers Learning to Accept Banking Fees. Las Vegas, Nevada. Review Journal 1999.
Print.