Joe Robles, Jr., retired Major General and CEO of USAA is asking me to write my Senator. He doesn't like the current legislation that may rewrite the ways banks do business. I can tell that he and his fellow executives are scared because the status quo is about to change. And he wants me to be scared too... he wants me and thousands of other bank members to think that my bank won't do business as usual after the legislation passes.
Here's what USAA wants us to believe:
If unchanged, the bill would:
Prevent USAA from managing the association's portfolio as we have for the past 87 years.
Jeopardize our ability to continue offering many of our competitive products.
Limit our ability to return money to our members. Last year, USAA returned $1.2 billion to our members in the form of distributions, dividends, and bank rebates and rewards.
I really have a problem with my bank telling me how to think. Especially when they don't send the facts to back themselves up.
For those of you who have never heard of USAA, they are a bank and insurance company that has traditionally served active duty and retired military. They started out as an insurance company back in 1922. They filled a niche that was sorely needed - a company that would cover active duty military that moved often. They entered banking in the 1980's and continue to provide services to a membership that is almost constantly moving. They pride themselves on offering consistent and prompt service no matter where their members live - be it in the US of A or overseas. My husband and I have been members since the late 1980's. We've recommended this bank to many other military members, just as it had been recommended to us.
USAA recently added non-military among their members for certain products. And the range and list of products expands year after year. This company is no longer a small, neighborhood bank, though they try to act like one. They are a mixture of insurance, investments, banks, etc. They are running the backroom deals just like the big boys at AIG. Maybe they're smarter guys. I hope so because they have my money. But I have my doubts. My belief is that they just haven't been as greedy, they've kept away from the questionable stuff. But how do I know? How big do you get before the rules no longer apply? But how big do you get before you can't fail?
When my bank starts asking me to write letters to my Senators, I begin to worry that my bank has gotten to big for me to belong. It makes me worry that they're worried... new laws, new rules, new regulations should and can be good for everyone. And, as President Obama said yesterday,
In the end, our system only works -- our markets are only free -- when there are basic safeguards that prevent abuse, that check excesses, that ensure that it is more profitable to play by the rules than to game the system. And that is what the reforms we’ve been proposing are designed to achieve -- no more, no less. And because that is how we will ensure that our economy works for consumers, that it works for investors, and that it works for financial institutions -- in other words, that it works for all of us -- that’s why we’re working so hard to get this stuff passed.
I'm especially bothered by Mr. Robles email because he doesn't send me any information to help me make my own decision about the legislation. He sent me a link to help me write my letter to my Senators and a link to read more about the bank's opinion. Otherwise, I'm on my own.
I did visit the page with more information because I was very curious to see what was on offer. And I found out that the big concern is the Volker Rule:
The "Volcker Rule," as drafted in Section 619 of the Restoring American Financial Stability Act of 2010 ("the Senate bill"), gives regulators the discretion to limit and prohibit certain investment activities of financial services companies, like USAA. In particular, this bill directs regulators to prohibit government insured depository institutions from engaging in "proprietary trading," whereby a company trades for its own account. However, the reach of the bill extends beyond the bounds of a depository institution to its affiliates and subsidiaries. For insurers that own banks or thrifts, like USAA, this could mean that all of the investment activity essential to the running of the insurance operations would be significantly limited to investment in only government securities, despite these operations already being heavily regulated by state insurance regulators. The result would be that products that require more robust investments to support them would be limited to government securities, which do not earn enough to keep the cost of such products affordable.
To illustrate this effect, insurers collect premiums from customers in return for a promise to pay a possible future claim. During the time between the collection of premiums and the claims payout, the insurer takes those premium dollars and invests them in order to ensure that funds exist to pay later arising claims. By limiting an insurer's investments to government securities, that insurer may not be able to generate the income necessary to continue offering its products at affordable rates. This could then result in the need to charge higher premiums on policies and pay less favorable rates on annuities.
I have written USAA to let them know that I think the Volker Rule sounds just fine to me. Isn't this rule set up to prevent the very downfall of AIG from happening again?
In fact, President Obama told the financial community what the Volker Rule will do:
To that end, the bill would also enact what’s known as the Volcker Rule -- and there’s a tall guy sitting in the front row here, Paul Volcker -- (applause) -- who we named it after. And it does something very simple: It places some limits on the size of banks and the kinds of risks that banking institutions can take. This will not only safeguard our system against crises, this will also make our system stronger and more competitive by instilling confidence here at home and across the globe. Markets depend on that confidence. Part of what led to the turmoil of the past two years was that in the absence of clear rules and sound practices, people didn’t trust that our system was one in which it was safe to invest or lend. As we’ve seen, that harms all of us.
Doesn't sound like something a small, well run bank should be concerned about. It does sound like something a bank with it's fingers in a few pies may want to be worried about... maybe my bank is experimenting with new products, new ways to make a buck and just hasn't been on the bad side of deal yet.
USAA is no AIG, but I think I may have to come to terms with leaving my bank. I always wanted to wait until my husband retires, until we stop this constant moving, before I choose a small, local bank in which to deposit our savings. It wouldn't matter if they couldn't overnight a check or handle a foreign wire deposit because I wouldn't need those things anymore. But with online banking and a world economy that shrinks daily, I have a feeling a small, local bank should be able to provide everything my husband and I need - and they won't tell me to write my Senators when the going gets tough.
In the meantime, I need to get the word out to other USAA members. The Volker Rule is a big deal - but not in the way USAA wants us to think. Call your Senators and let them know that you want financial reform to pass - otherwise the banks just might get there way.