My Point of view about the Banking Industry

Last week a banker friend ask me what do you think about our industry. I firmly believe the banking industry is the tool that safeguards and control the flow of money. I believe there are two different banking industries, the retail banking and the investment banking. The banking industry changed drastically after Sandy Weill and Travelers purchased Citibank and created Citigroup.

This merger joined two totally different philosophies, the safeguard of assets and the Risk of Investments. Cross-selling became a way of life, inviting banking clients to become part of the riskier philosophy of investing and facilitating also insurance industry products. This action created a new industry were greed and short term goals destroyed the confidence that the as the banking industry.

Banks should safeguard their customers money and not offer products that could, if something goes wrong, create losses that many times can not be recovered. A banker should be a banker, an Investment consultant should be an invest consultant and an insurance salesman should always be an insurance salesman. The Interest of these three industries are not the same and because of this, they should never be together.

The banking industry should recognize the safeguard of the assets and the facilitation of money as their main objective because once money is lost is gone forever. Millions of Americans have lost fortunes due to these confused and intermingling actions taken by these banks.

Reviving prudent lending practices by banks who know their borrowers is a must. In the good old days bankers knew their customers and they had hands on involvements in their clients.

I read in Forbes magazine August 2009 Publication that Mr. Paul Volcker, the revered former chairman of the Feds endorses a two-tier system that tightly regulates commercial banks that take deposits and make loans, while giving considerable leeway to security firms that engage in riskier activities such as trading.
This is a sound idea and should considered during the new banking system reform

José F. Padró, CPA.
padrocpa@padrocpa.com
www.padrocpa.com
PADRO and Company, P.A.



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