By Marilyn Barnewall

We’ve all heard of the “Thin Blue Line.”  It suggests a thin line of
policemen in blue uniforms is all that stands between civilized society
and the chaos of predators descending upon us.  It is also a term used
to express a sense of “brotherhood” that exists between police
officers.

There are other lines… thin lines that stand between society and
other forms of chaos.  I remember a movie about West Point cadets that
referred to the military as The Long Grey Line.

There is, however, another Long Grey Line –in one of the places you
would probably least expect it.  You will find it in America’s
independently owned commercial banks.  Our small-enough-to-succeed
commercial banks may be all that stand between the American people and
an international body set to take the place of the currently
ineffective regulatory agencies responsible for overseeing America’s
financial services industry.

According to the Federal Reserve Bank of St. Louis, as of June 30,
2009 there were 6,898 commercial banks in the United States.  That
sounds like a lot – unless, like me, you were a banker in the 1970s and
80s.  As of June 30, 1984, for example, there were 14,369 commercial
banks.  By 1994, that number had been pared down to 10,623.  In other
words, it doesn’t take a mathematical genius to determine our
independent banks have been drastically reduced by number – over half
of the commercial banks doing business in 1984 have either been
absorbed by bigger banks, or are otherwise out of business.

Who – or, what – might want the number of independent American commercial banks to be reduced by such a substantial number?

According to statistical data provided online by Canadian bank
officials, as of February 2009, there are 21 domestic commercial banks
in Canada.  Additionally, there are 25 foreign- owned commercial
banks.  The foreign-owned banks include familiar names like Amex
Bank of Canada, Bank of America Canada (in voluntary liquidation), Bank
of China, Bank of East Asia, (The) Bank of Tokyo-Mitsubishi UFJ, Bank
One Canada (in voluntary liquidation), BNP Paribas, United Overseas
Bank (UOB Singapore), and Citibank Canada, among others.

America’s neighbor to the North once had over 900 caisses populaires (similar to credit
unions and mostly in Quebec).  By 2007 consolidation reduced this
number to 525 credit unions and caisses populaires outside of Quebec. 
In essence, Canada (including Quebec) has about 1,000 financial
institutions that require regulatory control.  Of that group, only 21
are domestically-owned commercial banks.

Before nationalized health care can be successfully implemented, the financial sector must first be compact and easy to control

Why are Canada’s numbers important?  First, because these numbers
explain why it has been so much easier to bring socialized everything
to Canada and why it’s more difficult to do so in the U.S.  For
example, before nationalized health care can be successfully
implemented, the financial sector must first be compact and easy to
control.  Second, Canada’s statistics compare favorably to Europe’s
banking industry.  In other words, while America has 6,898 commercial
banks which must be regulated – audited by the Office of the
Comptroller of the Currency (OCC) or State Banking officers and
monitored by the Federal Deposit Insurance Corporation (FDIC) and the
Federal Reserve System (FRS) – most other nations have far fewer
commercial banks that must be regulated and audited than does the U.S.

I have long believed that the independent banking community in this
country is one of the best defenses America has against the forced
centralization of bank regulatory oversight on an international basis. 
It’s our Thin Grey Line.  Regulatory controls must be in place before
the financial services industry can be “internationalized” and the
large number of independent commercial banks in America is helping
prevent that from happening.

Once an international banking system is established, sovereign
nations will be a thing of the past.  One world government supported by
one world currency (or a basket of currencies) will rapidly follow.  It
is very difficult for international bank regulators to keep tabs on
almost 7,000 commercial banks – a number that does not include
thousands of savings and loans plus credit unions – that dominate the
American banking scene.

Looking at the trends over the years, one could deduce that
independent banks have been targeted for annihilation.  The shrinking
numbers of independents tend to verify that.  Nothing happens by
accident in the world of finance – not even derivatives that get
leveraged 40 times.

Regarding the “too big to fail” banks (a/k/a “too big to succeed”),
in 2007 two physicists at the Swiss Federal Institute of Technology in
Zurich did a physics-based analysis of the world economy.  Stefano
Battiston and James Glattfelder analyzed 24,877 stocks and 106,141
shareholding entities in 48 countries.  They found what they called
“the backbone” of the financial markets
in each country.  The “backbones” (a handful of investors) held 80
percent of each country’s market capital and represented remarkably few
shareholders.

The “backbones” with the fewest people in control of wealth included
the U.S., Australia, and the U.K.  Regarding America, Blattfelder and
Battiston’s analysis found that though an American company may show
links to many owners, the owners varied little from stock-to-stock.  In
other words, very few hands hold the total pie.

Add that knowledge to the epidemic of fraud and insider misconduct
that caused numerous bank failures in past years and three-quarters of
savings and loan failures in the 1980s, and it becomes apparent why
it’s important to control our financial alternatives.  We need to keep
them in as many different regulatory hands as possible.

Much of the abuse was undetected.  Federal regulators have made huge
errors… some think intentional errors.  The OCC needs to schedule
regular bank examinations.  And, since the office does not seem to keep
up with the changing marketplace, its auditors need to be better
trained; those who do not understand new financial service
products should be dismissed. An auditing team capable of spot-checking
results of bank audits needs to review and grade those who do the
audits. 

The FDIC, which also regulates commercial banks, could not have been
doing its watchdog job or the banking industry would not be in the mess
it is in now. 

The Securities and Exchange Commission (SEC) ignored so many things
that it is still next to impossible to find all of the errors
overlooked by SEC Chairman Christopher Cox on his watch.  If any single
action can be named in causing the ongoing demise of America’s stock
market from 2007 to the present, naked short-selling is at the top of
the list.  Doing away with uptick laws happened on Cox’s watch.  It was
malfeasance.  Why isn’t he being investigated – along with Timothy
Geithner who, at the time, was the Fed Head of the New York Federal
Reserve?

What can people do to protect themselves from the lack of skilled
bank audits and sad lack of regulatory skills?  What do you need to do
to protect yourself from a failed bank?  And, what happens when a bank
fails?

Everyone knows about the FDIC’s $250,000 deposit guarantee.  It
makes everyone feel safe. But, when you look at the status of funds
available to the FDIC to pay depositors up to $250,000 each when banks
fail, it should cause you concern.  This is a ball on which you need to
keep a watchful eye.  What ball is that?  The bank where you have money on deposit.

People forget that when they deposit money in a bank, they are
investing in someone who lends their money to other people.  Some
bankers are better lenders than others… some banks have better loan
policies in place.  Because it is difficult for non-bankers to know how
to evaluate their banks, here’s a link that can help .  Bank Rate offers a one-to-five star rating.  If your bank gets only one star, you might want to move your account.

Too, it’s a good idea today to spread your deposits among two or
three banks (I use three).  Why?  After all, you’re insured by the
FDIC, aren’t you?  Sure you are!  But it takes time to get an
appointment with an FDIC representative when it takes over a bank. 
What do you use for money until you get your appointment?  What if the
same thing happens to the FDIC as happened to the Federal Savings and
Loan Insurance Corporation (FSLIC) when savings and loans failed in the
1980s?  In Ohio, I watched as people could get only $900 per month from
their accounts, regardless of the amount available in the account.  The
FSLIC did not have sufficient funds (very similar to the FDIC’s
situation today) to pay account holders the total amount of their
deposits.

If you have money in a second or third bank, it’s very unlikely you
will be forced to live on funds made available by a government
regulator should the predicted large number of bank failures occur.
Keep an eye on your bank – and be supportive of your local independent
banks.  They are a very important piece of the financial services
puzzle that is trying to unwind itself… and would unwind itself if left
alone by politicians who support their buddies on Wall Street.

President Obama recommends that bank regulation be consolidated
within one or two organizations.  I read an article last week that
called the FDIC/Fed – the regulators President Obama thinks should
regulate not only regulate our commercial banks, but everything
involved in the business of money – the “axis of evil.”  Personally, I
prefer the term “source of malignant energy,” but the two mean
relatively the same thing.

The point is, politicians are protecting the very system that needs
to be abolished.  They want you to support them in this effort and are
trying to buy that support by promising that your money will be safer
if you do.

And if you buy that, I have some Fannie Mae subprime mortgages in
the form of derivatives I’d like to sell you at a bargain price! 

                     © 2009 Marilyn Barnewall — All Rights Reserved

Marilyn Barnewall received her graduate degree in Banking from
the University of Colorado Graduate School of Business in 1978. She
created the first wealth creation (credit-driven) private bank in
America in the 1970s. Prior to her 21-year banking career, she was a
newspaper reporter, advertising copywriter, public relations director,
magazine editor, assistant to the publisher, singer, dog trainer, and
an insurance salesman and manager.

She was named one of America’s top 100 businesswomen in the book,
What It Takes (Dolphin/Doubleday; Gardenswartz and Roe) and was one of
the founders of the Committee of 200, the official organization of
America’s top 200 businesswomen. She can be found in Who’s Who in
America (2005-08), Who’s Who of American Women (2006-08), Who’s Who in
Finance and Business (2006-08), and Who’s Who in the World (2008). She
can be reached at: emembee@ymail.com