Now tell me true, do you love your bank? Banking is not as easy as it used to be.
Banking is not as easy as it used to be. For example, in 2023 alone, let’s consider bank failures by Silicon Valley Bank, Signature, First Republic and Heartland, as well as a few other engineered “rescues” by some of the Wall Street big guys.
The boys did some research on the 2008 mortgage crisis and found that the kind of bonuses being paid had the effect of distorting the loan officer’s perceptions.It was the intersections of greed and bonuses, the loan originators essentially made “liar loans” based primarily on whether or not the applicant was simply breathing. They knew they were going to fail, but they issued them anyway because they were getting a bonus for every origination.
But when the stakes were higher, i.e.the loan officer only got paid if the loan performed, they exerted more effort and made better decisions. “It wasn’t just that they were more conservative, but they were doing a better job of ferreting out bad loans.” Imagine that, a lending officer with skin in the game? Incentives in the rear-view mirror may appear closer than they are.A friend of mine, Herkimer, has banked at the same institution for 25 years.