And It's Gone: Guy Walks Into Citi Branch, Loses $40,000

The following story from Bloomberg’s Jonathan Weil should be familiar to anyone who i) wanted to get rich quick; ii) wasn’t too willing to read the small print, and iii) put their faith in a TBTF bank. Or simply watches South Park.

Jon recounts the story of “Philip L. Ramatlhware, an immigrant from Botswana who went to a Citigroup branch in downtown Philadelphia one day five years ago to open a regular bank account. He was 48 years old at the time and disabled, after being hurt in an accident as a passenger on a Greyhound bus. His English wasn’t good, he had no college education and his last job had been at a fast-food kiosk at the Philadelphia airport. In April 2008, he received $225,000 in a settlement for his injuries, part of which went to pay legal fees. He was holding the settlement check when he walked into the branch. Immediately he was referred to a broker for a “financial consultation,” according to an arbitration claim he filed against Citigroup. The broker assured him the money would be invested in “guaranteed” funds and that he could have access to them whenever the need arose, the complaint said. Ramatlhware gave him $150,000 to invest. The broker put $5,000 into a bank certificate of deposit, bought a $133,000 variable annuity and invested the rest in a series of mutual funds. Less than six months later, Ramatlhware had lost $40,000, according to the complaint.”

Citigroup settled the case in 2010 for $22,500, without admitting liability, according to a report on the case by the Financial Industry Regulatory Authority.

Of course, considering the events of late 2008, Philip was lucky to lose only 26% of his money. However, the bigger point is not what his P&L was (it should have been zero): it is that a retail bank branch had taken him for the proverbial ride and “invested” it in risky investments, ostensibly without explaining the risks.

Philip was not the only one. As Weil says, “there are countless tales like this of banks cross-selling unsuitable investments to unsophisticated customers. For whatever reason, lots of people trust the advice they get from someone working in the lobby of their local retail bank branch, even if they normally would never set foot in a brokerage firm.”

Well there is a long-running joke (or maybe fact?) that all one needs to appear on CNBC and “be taken seriously” is to sound confident, repeat the same trite cliched phrases over and over (preferably “money on the sidelines” and “buy on the dip mentality“) and, of course, wear a business suit (for an interesting take on this read “Would you trust a doctor in a T-shirt?”).  But is the social credibility (and confidence) response so engrained that people will automatically assume not only intelligence but good will when faced with members of the banking syndicate? Apparently the answer is yes:

Here’s another example from Finra’s files, involving a Michigan couple, Alberto Ferrero and Qingwen Li, who filed a claim in 2010 against CCO Investment Services, a unit of Royal Bank of Scotland Group Plc. (RBS) They sought $60,000, plus attorneys’ fees and other damages. They were awarded almost $72,000.


Their story began one day in April 2007 when they walked into their local bank, Charter One, also owned by RBS. Here’s how the arbitrator explained the November 2012 ruling in their favor:


“Claimants are recent immigrants to the United States, and they had very limited investment experience,” wrote James Graven, an attorney from Toledo, Ohio, who was the arbitration panel’s chairman. “Claimants went to their bank to roll over their CD. The bank directed them to a registered representative. Claimants’ primary objective was capital preservation.


“The broker recommended a solicited trade placing one third of claimants’ net worth in one speculative fund. The broker made material misrepresentations and omissions concerning risk. Claimants lost approximately 50% of their investment in 18 months. The broker invested claimants’ whole account into one high risk junk municipal bond fund.”

To Weil, this is merely another reason why Glass-Steagall should be reinstated:

The banking industry has a long history of preying on unsuspecting depositors by selling them garbage securities without regard to suitability. This was a big reason Glass-Steagall was originally enacted during the Great Depression. It has been a recurring problem ever since key portions of the act were repealed during President Bill Clinton’s administration.

Alas, at a time when the big bank liability structure is one where only a third in funding comes from deposits and the rest is mostly in the form of shadow banking liabilities, not even repealing Gramm-Leach-Bliley would do much to revert the system to normalcy. If anything, splitting bank deposit units from the “risk-taking” divisions would force banks to rely even more on far riskier shadow funding sources (CP, ABS, Repos, etc.) although at least it would make sure that the entire rickety house of cards tumbles sooner rather than later – which at this point is really the only question: how soon until it all comes crashing down as no possibility of actual reform exists. The whole regulatory process has simply been hijacked by the very people it was supposed to supervise while Dodd-Frank is nothing short of the biggest legislative joke ever conceived, as it was created and promoted by none other than Wall Street: after all would anyone leave Congress unsupervised with an electric outlet, let alone regulating a nearly $1 quadrillion financial universe?

But even in a perfect world, people like Philip would still make headlines on a daily basis, not so much because of the fraud and criminality on behalf of the banks but because there really is a sucker (usually quite lazy) born every minute, who wishes to get rich quick in roughly the same period of time.

Which is why, just like The Onion has become a regular staple in our “Fact or Fiction” series, so too South Park acute and often times spot on social commentary will be here to stay.

…. And it’s gone.


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