Goodbye Wells Fargo and Other TBTF Banks

It is time for a personal rant.

I am done with “Too Big To Fail” banks. The government made me an unwilling supporter (via taxpayer bailouts). Over that I had no control. But I was also a customer of Wells Fargo for about twenty-two years. That is over now or soon shall be. Recent arrogance and incompetence has driven me away.

The story which I am about to relate is of little consequence to me or Wells Fargo. It is, however an indictment of government intervention and regulation. It reflects how stupid rules and policies arise when regulation runs amuck and how these regulations get in the way of ordinary commerce.

More importantly, it might serve as a warning to small businesses dependent upon credit to survive. Like me, you are probably considered unimportant to the banking behemoths which government has enabled. Like me, you also might better be at some smaller bank who understands its customers, values your business and knows your needs.

My Relationship With Wells Fargo

I started banking with First Union, opening an account in Southern Pines, NC.  For each subsequent physical relocation (there were three), I remained with the bank through name changes from First Union to Wachovia to finally Wells Fargo. Each name change occurred as a result of a major acquisition. Each time the bank grew larger and less responsive to customers.

For part of my journey I was likely considered a plum individual account, carrying account balances likely well above average. I earned my living as a Chief Financial Officer and then as a professor of finance and economics. Now retired, my own and my wife’s Social Security and retirement checks are deposited directly to our account.

I consider myself a low credit risk, but don’t pretend to understand why banks do some of the things they do. The industry has never appeared to be particularly well run. Much of the inefficiencies are probably due to the heavy-hand of regulation.

I have been fortunate enough to be debt-free for quite a while. I have owned homes for the last forty-three years. After the first thirteen years, I have not had a mortgage except as necessary to afford multiple homes. For the last 12 years, I owned one home and been without any mortgage debt.

I have an aversion to debt. Credit card balances are paid in full each month. No consumer purchases (televisions, furniture or anything else) has ever been bought on credit. Cars are generally purchased with cash or sometimes leased. Prior to WF taking over Wachovia, I leased a car where the dealer used WF as the leasing agent. When the lease was up I used Wells to fund the purchase.  A portion of this loan is still outstanding but will be pre-paid as soon as I change banks.

What Happened?

Over time banking in general became increasingly more regulated. Big banks especially became more perfunctory and less service-oriented. That is the nature of any government-controlled industries. Personally, there were a few minor annoyances at my local branch. None were serious enough to create anything but minor inconveniences. At least that was the case until last week.

I bank at a small branch of Wells Fargo in Weaverville, NC, a suburb outside of Asheville. I have been at this branch for over six years. I frequent it only when I need to supplement regular deposits with transfers from my brokerage accounts or need walking-around cash. That is probably about once per month or every other month.  The tellers are pleasant and generally competent. I have no ATM card (are they cards?). Frankly I would not know how to use one.

On Monday of last week, I wrote a reasonable-sized check on my Citibank account for deposit to my WF account. When I deposited it, I inquired when the funds would be available and was told two or three days. I received an email confirmation on Thursday that the funds were then available.

On Friday I made the purchase that I intended. Payment required a wire transfer so I set off to the bank to arrange the transfer. To my surprise, I was told that I could not use these funds for a wire transfer. Apparently there is some Federal regulation that funds have to be in an account for ten business days prior to using them for a wire transfer. I don’t know why such a regulation exists or why it makes any sense other than to benefit banks by forcing balances to remain idle for almost half a month. I suspect it has something to do with the War on Drugs which penalizes honest citizens while having little to no effect on the drug trade. In my case the amount was too small to even interest any self-respecting drug dealer.

I explained to the “bank officer” what I was told regarding fund availability, that I had made a commitment based on that information and that I wanted to honor my commitment. To do so, the wire transfer had to go out that day. The funds “available” in my account were twice the amount that I wanted to wire and apparently available to me for anything but a wire transfer.

She left, conferring with someone in a different office. Upon return, she indicated there was nothing she could do. I explained that I had been banking with Wells Fargo or its predecessors for over twenty years and could not understand why this would be a problem. She said that it was a “regulation” although I was never explained why or by whom. I told her that we would have to find a way of accomplishing what needed to be done without violating the regulation or I would cease my relationship with the bank.

She left and returned with some gentleman who I presume was the branch manager. I don’t believe he even introduced himself, but said he could/would not send a wire. He was arrogant and obviously disinterested. I told him that I had made a commitment based upon what the bank had told me and I wanted to honor it. He showed no interest in my problem or discussing alternatives which might have met my needs and left almost immediately.

I continued the conversation briefly with the woman. I suggested that I would be willing to borrow funds for a few days in order to make the wire transfer, after which they could pay down the temporary loan from the available funds in my account. Here is where the conversation became particularly bizarre.

She indicated that if the amount of the wire transfer wasn’t so large it would not be a problem and they could easily lend the money. I told her I did not consider the amount large, to which she responded that it was about three times my average monthly checking account balance. I explained to her that I really was not looking for a loan and had used that example of one way that the transaction might be accomplished.

Then I explained why it made no sense for me to carry excessive and redundant balances in my checking account for a once a year transaction. Then she told me that if my average balance had been four or more times the amount requested, there would be no problem. I told her again that the currently available funds in my account were twice what the amount of the wire transfer and asked why anyone would borrow funds if they had excess money.

It became clear to me that we were living in different universes. I did not want to borrow money except as a possible way of accomplishing a goal which this bank had obviously no interest in assisting me with. The impression I received was that I could have done so if they would have granted a loan.

To me, the entire meeting was insulting, especially the implication that I was turned down for a loan. Never in my business or personal career was I ever turned down for a loan. I didn’t want a loan nor were they interested in providing me one. They knew nothing about my income or net worth which easily would have supported a loan request probably 50 to 100 times the small amount of this wire transfer.

I bid adieu with the assurance that I would be back one more time – to close my account. The entire meeting took about 10 minutes.

The Resolution

This episode transpired on Friday. This week I am visiting banks to decide which one to choose. It will not be any of the TBTF banks in which my family and my grandchildren have been forced by government to invest unknown amounts of funds. I have no further interest in benefiting them in the slightest, although am sure they will be back to taxpayers for more bailouts sometime soon.

In my corporate life I dealt with banks regularly, usually with the presidents of banks. I borrowed and repaid millions of dollars with over a half dozen different banks. I never encountered the frustration, lack of interest or unwillingness to even discuss an alternative that I did last Friday. The branch manager was either ill-trained, having a bad day or had some other problem. Or perhaps he was trained by the Department of Motor Vehicles, which is the model upon which the banking industry appears headed.  I intend to find a smaller bank where customer service is still considered important.

Regarding the resolution of my wire transfer issue, I contacted the selling party right after my bank encounter and explained what had happened. He graciously agreed to give me the ten days required for the wire transfer. That will be my final transaction with Wells Fargo.

Good bye and good riddance to these government-enabled, subsidized and effectively run entities! I do not believe I will ever need to borrow money. The tragedy of this deteriorating situation, however, is life or death for struggling small business owners. I sympathize with what it must be like in this economic and banking climate. My advice would be to get away from the behemoths. Take your business to local banks where personal relationships still matter and a handshake still means something. When the next banking crisis arrives, and it will not to far down the road, you and your new bank may have a better chance for survival than the misnamed “Too Big To Fail” banks.