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View Diary: I am Tired of the Taxpayers Paying For Food For Rich People (229 comments)

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  •  Smaller banks use the larger (0+ / 0-)

    banks for many of their physical product offerings.  Rather, a state bank doesn't actually make and maintain value added cards, they buy them from the big bank, put their own logo on, use the big bank for processing and then pass that cost on to the purchaser.  And it's more than just the card business.  It's true for investment products, lockbox, website delivery of information, and a host of other bank products used by commercial businesses and public funds.  

    Typically, this means the smaller banks can't compete for the Public Fund accounts.  The Public Fund bid process is open for public inspection as part of the open records acts in various states, so the public entity can't really hide anything, they have to defend their choice of winning bid.  

    We are all in this together.

    by htowngenie on Fri Sep 20, 2013 at 02:27:49 PM PDT

    [ Parent ]

    •  One other thing I'd like to mention. (1+ / 0-)
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      This is a different topic really, but important to note in my opinion because it points out how unfair the bid process is for public funds.  My example below is for schools, but it could just as easily be for municipalities or any other public funds.

      In Texas, where I live, the public school districts are required to put out RFP's for their banking business every 3 years, all at the same time.  This means that banks are flooded with RFP's all at once and consequently they only concentrate on the large school districts and don't even respond to the smaller school districts.  

      As a result, the smaller school districts typically end up with a local bank and pay through the nose for their bank products, while the larger school districts get heavily discounted bids from the major banks.  

      This doesn't seem fair to me.  The state needs to either change the schedule for the bid process so that it is more spread out and smaller school districts might have a chance of being part of the process, or the state needs to institute regulations that RFP's receive equal treatment regardless of size, ie, if JP Morgan Chase bids on the Houston Independent School District business, then the Spring School District up the road would be able to get the same products and services at the same cost that HISD got.

      We are all in this together.

      by htowngenie on Fri Sep 20, 2013 at 02:55:08 PM PDT

      [ Parent ]

      •  This is unfair. (0+ / 0-)

        A scheduling change probably wouldn't make a difference. A large bank is going to allocate resources for a targeted amount of business. That business has been identified as the larger school districts. In order for these financial institutions to contract with smaller school districts they would need to allocate more resources and to increase their administrative costs to service multiple, small districts. Perhaps I'm wrong, but there doesn't appear to be a financial incentive for them to do this.

        Maybe bundling large and small school districts together could provide a solution. Although it is unlikely two or more school districts would come to terms and make a financial agreement.

        Or, Texas could put a cap on the costs of the financial services to the school districts and then, of course, any loss to a bank in providing services could be a tax deduction in the service of the state and its education system for the greater good. This could easily become a bamboozle.

        The bid process appears to be a gift to banks -- they are calling the shots and have everyone hogtied.

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