Logo of the American Financial Services Association. (Photo credit: Wikipedia)
Let us begin by defining our terms, “financial services.” Financial is anything to do with money. Services are actions by one person for the benefit of another person. Financial services firms include banks and insurance companies. How many among us feel that we are being served by financial services firms and how many among us feel that we are here to serve the financial services firms?
For most of US history, financial services firms were the dull, places of steady employment that served an essential and useful place in the community. At some point in the recent past, financial services represented by Wall Street, became a go-go place that generated large profits and huge salaries and bonuses. At that point, financial services stopped serving the public and started serving itself.
Rather than writing mortgages that helped potential home owners buy and stay in a home, mortgages were written and rewritten to generate as much up-front income as possible. Then the mortgages were bundled and sold to investors who cared little or nothing about home owners. Banks engaged in a contest to invent ridiculous fees to generate income. Insurers changed from the non-profit model to share risks and protect the insured to a profit model which emphasized their profits before the interests of the insured.
I refinanced a home equity line of credit to obtain a fixed rate of interest through a broker. The loan was sold and wound up in the hands of Countrywide. Then Countrywide started soliciting me to refinance to a lower rate just days after they acquired my loan. I was angry.
A former co-worker recently used a broker to refinance her home mortgage. Her loan was resold and wound up in the hands of the bank that held the original mortgage. She was not happy. The banks are too large and that restricts competition. The banks should be broken up and required to focus on serving their customers, not on maximizing their profits at the expense of their customers.
Filed under: Business Tagged: FinancialServices, Insurance, Wall Street
