Banking with Felons?

The news was stunning. Barclays, Citibank, J.P. Morgan – Chase, RBS, Bank of America – Merrill Lynch, and UBS, all pled guilty to illegal currency and LIBOR rate manipulation and agreed to pay some $5.5B in aggregate fines – pocket-change for most and no jail terms for any executives – but, nonetheless, an unequivocal institutional admission of guilt and not the usual claim of “a few rogue bad guys.”

So, we open our wallets and look at our credit cards, review our retirement accounts, our investment portfolios, and mortgages. At our next non-profit board meeting, we ask who manages the endowment portfolio. As a director, we have a fiduciary obligation to do so. How many times do those names appear?

We now face an ethical question. “Do we want to continue doing business with admitted felons who have pled guilty to stealing from us, from the non-profits we support and, yes, even the businesses we frequent?”

It’s our call. If our gardener or accountant stole from us, we’d drop them in a New York minute. Megabanks, however, are now so large and opaque that we see them through the lens of the cheery life-style ads they purvey rather than their felonious convictions. Adding further confusion, the Supreme Court has accorded them the legal status of a person with no accountability to human ethical standards. Perhaps it’s the half-billion dollars they spent lobbying last year.

We’d fire a housekeeper who stole an heirloom necklace. We’d dump the lawyer who quoted one amount for preparing a will and then billed much more.

We owe it to ourselves and to society at large to make ethical decisions. Have the guilty banks contacted us and admitted to stealing and cheating? Did they apologize and refund their overcharges or restore our retirement portfolios to their original value before selling us faulty investment instruments?

This is our opportunity to practice good citizenship. We have no regulatory or legal authority and, even if we did, we couldn’t afford to exercise it against a megabank, but we can vote with our wallets.

Community banks and credit unions have to be more transparent and accountable to the communities they serve and can ill afford the expensive congressional and regulatory friendships the large banks can.

We can move our credit cards, debt and asset accounts to local institutions where we know the management team and we can make sure to ask the endowment question at our next board meeting.

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