Friday, September 26, 2008

Irony


One of the nation's largest consumer banks has been seized by the feds.
I can't help but see a little irony in the collapse of Washington Mutual as a result of it's heavy investment in risky mortgage debt.

WaMu is/was very big in California. They had marketed themselves so as to take maximum profit advantage from the less financially reliable segment of the consumer market.
Among the marketing ploys: free checking. Anybody could qualify for free checking at WaMu, while in most cases another bank would require payroll direct deposit, or some other commitment of customer longevity to receive this benefit.

Although this privilege is a benefit to those who otherwise wouldn't qualify at one of the competitors, WaMu was also keenly aware that this more transient customer base is also more prone to overdrafts. And overdraft charges at WaMu where the highest in the land.
This was a extraordinarily high percentage of their operating profits.
(They were also accused by consumer groups of clearing large checks first so as to increase the chance of several smaller successive checks being returned NSF.)

Another of their marketing ploys was offering several branches. With a branch nearly every two blocks in the city, we jokingly refered to them as "McBank". This was convenient for their debit card holders looking for ATM's.
It was also convenient for foreign ATM customers who would run out of cash and just strike at the first ATM they see, usually a WaMu, at higher than average ATM fees.
And every WaMu had not just one ATM, but 3-4 of them. ATM fees were an extraordinarily high source of revenue, as well.

Also, if you were out of money and didn't know it, WaMu would still give you cash at the ATM, and charge you an overdraft fee.
Of course, this bit of info didn't come up on the screen. You saw it on your receipt after the transaction was completed.

In a wrap: Washington Mutual was a good convenient bank for those who had their act together. But those weren't the people they wanted. I remember a friend who was having money wired from out of state, and WaMu stuck him with a $40 wire fee. He never bounced checks, so I guess they had to bleed him anyway they could.

In short, they did nothing illegal. And it can be argued that they did some good by making low-cost banking available to greater numbers of people, as they were accused by consumer groups of being unethical, preying on the least reliable segment of the population. (They were also the first to accept 'matricular' cards, non gov't recognised identification used by illegal Mexicans in place of other reliable forms of identification.)

Washington Mutual grew big milking the weakest among us. Now, it looks like the weakest have struck back.
Karma.

4 comments:

Palm boy said...

I used wamu for 5 years now, and they'd only screw you if you weren't handling your money right.

Darn good staff at my local branch too. Hope they stick around.

Gino said...

that was the point.
just dont accept any wire transfers.

Vanesa Littlecrow W. said...

I have WaMu because it bought out Providian , provider for one of my credit cards. Their interest rates suck. Fortunately, JP Chase owns my other card and they rule, so I am hopeful.

Mark Heuring said...

Karma.

I may be a Catholic boy, but that's a very useful word. And an apt summation. Good post, Gino!