Monday, January 2, 2017

Open letter to US Bank, Western Alliance & Mutual of Omaha Bank - a few words matter to the FDIC

The Chairmen & Board of Directors of
US Bank
Mutual of Omaha Insurance
Western Alliance Bank

Ladies & Gentlemen
I’m an Arizona HOA member but I’ve been a banker much longer than that. Click HERE. I can even remember when banks offered toasters to acquire deposits because, without them, as even Goldman Sachs found out, you can’t survive. In my experience, there’s only two ways to build your account deposit base:
  • Buy them by acquisition – not so easy and expensive
  • Offer toasters, bricks and mortar, advertising, higher rates - hard work and expensive
You can also do it on the cheap, short term, as Wells Fargo did but, at least in their case, they were opening accounts for people they knew already.
From basic banking documentation obtained from numerous HOA’s, your three banks, and others, have invented a new way of doing it on the cheap through wholesale harvesting of HOA deposits using HOA Management Companies. This already cost the FDIC $1bn in two banks in Arizona you know well in 2008. Not only are these Management Companies not licensed, their basic skill sets are managing landscaping contracts. Most of their staff would not know a debit or credit from a pretzel.
Bottom line:
  • You are ignoring the fundamental “know your client provisions” of the Patriot Act. With few exceptions, you have no idea who the ultimate depositor is. They could be drug dealers or worse. I think I’ve figured out how you justify it, but it reminds me of Enron & Arthur Anderson.
  • Direct Debit Authorities are flying around like confetti putting the ACH at risk.
  • HOA’s and the Management Companies are impossibly intermingled. If of them goes bankrupt, it would be an unholy mess. I’m involved in a live case where we may find out. Click HERE
  • The FDIC it appears has been very clear. Click HERE. Unless the bank account documentation reflects the words that Management Companies are acting as fiduciaries for an HOA, the FDIC insurance does not flow through to the deposit. Shades of Keating et al. And of course, if they did put those magic words in, Management Companies would find it impossible to escape regulation as the quasi shadow banks that companies like FirstService are really functioning as. Click HERE if you can find those magic words or even the name of an HOA on the bank account details there.
I could be wrong of course, not for the first time. But when I see people running for the hills – see ATTACHED from Mutual of Omaha and FirstService ATTACHED - to me that’s a sure sign they’ve been caught with their hands in the cookie jar.
My challenge to you:
  • Come onto our blog at and explain why we are wrong. I’ll be the first to apologize.
  • Alternatively, we have at least two administrative hearing coming up noticed by the Arizona Dept of Real Estate as explained below. Please ensure we get the best of your best to testify.
AZDRE Petitions scheduled at the OAH per subpoena applications below:
AZDRE Pending Petition
John Sellers
Dennis Charlton, Arizona Department of Financial Institutions
Martin J. Gruenberg, FDIC Chairman,
Thomas J. Curry, U.S Comptroller of the Currency
Richard Cordray, Director, Consumer Financial Protection Bureau
John C. Williams, President and CEO, Federal Reserve Bank of San Francisco
Senator Elizabeth Warren
Industry Participants