The P.A.

A weekly address from Patrick Adams,
President of St. Louis Community Credit Union

Our Tax Dollars Are Supporting Bad Banking Practices

On January 11th, 2010, posted in: Uncategorized by

I’m a little ticked off.  My tax dollars (yours, too) are being used to prop up GMAC’s banking entity, Ally Bank.  Being a credit union guy, I want to support credit unions.

You might suggest that I take a chill pill.  After all, that’s what the TARP money, aka government bailout, is all about – propping up a banking industry that was in deep need of some help.  (By the way, as a sidebar to this discussion you should probably know that St. Louis Community Credit Union didn’t need any TARP money.  Why not?  Well, we never took the risks associated with chasing the exotic world of mortgages and/or investments.  Without the risks there was no need for the bailout…You’re welcome.) 

You’re probably familiar with Ally Bank.  They’re the ones that have those clever commercials with kids, ponies, model cars and bikes.  The ads tease the youngsters with the spoils of being a kid only to have the full joy of receiving such great present(s) taken away by some hidden, undisclosed set of rules.  The less than subliminal inference is that banks tease you with their attractive offers and then dampen your joy by applying account restrictions.  Of course, Ally is different – or so they claim.  It’s a page straight out of the credit union playbook except Ally is for-profit and we’re not-for-profit, a thought you should tuck away and remember forever and ever and ever and ever.

Here’s the crux of my discontent.  Our members’ (mine and your) tax dollars are being used to create and run some really clever ads both on TV and in print to entice consumers (who include credit union members) to move their money to Ally Bank.  Let me get this straight…I’m helping Ally Bank to be successful at the expense of the credit union and my own well-being.  To draw a parallel, wouldn’t you think it crazy if I told you that Pepsi gave Coke some money to help them run more TV ads?  Yep, crazy is the right word.

Now here’s where I really get fussy.  The clever, thought-provoking ads are offering really high deposit rates.  I mean really high deposit rates.  Super-duper, out of the market, out of the world rates compared to SLCCU and the other banks and credit unions throughout our area.  So again, let’s do the math.  They can offer higher rates because you and I are providing tax dollars that allow them to do so.  What in the wide, wide world of sports is going on here?

You’ll find it interesting that the FDIC (bank insurer) is not pleased with the high-cost deposits that Ally Bank is placing on their balance sheet.  Why might the FDIC be concerned and order a “cease & desist” action?  Remember, the FDIC is the insurer and maybe (just maybe) they have interest in the potential risk related to Ally’s actions.

What’s next, more tax dollars going to assist (bail out) the bad banking practices currently being perpetuated by Ally?  Yep, it’s getting ready to happen: $5 billion more to Ally.  I just thought I’d let you know what’s happening.

 

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