COMMENTARY: Too big to fail--too expensive to keep big

I grew up in Oklahoma City, Oklahoma. Up until the 1980's, the state had rules against branch banking. In a city with 650 square miles of area, it's pretty annoying to have to go back to your bank to make a transaction. ATMs were scarce at that time. I never understood why the Oklahoma State Legislature wanted to keep banks so small.

That all changed in 1982 when Penn Square Bank went under. That failure sent the entire banking infrastructure into chaos. Overnight, OKC banks started falling like dominoes. At that time, we joked the branch bank was the FDIC. Worse, Oklahoma was in a recession that some of the older folks likened to the Great Depression.

Just imagine what the situation would have been like had Oklahoma adopted the practice of allowing branch banks. We wouldn't just have single failures, several smaller banks across the city could potentially have gone down at once.

I remember driving downtown one Sunday on some school errand back in the mid-1980s only to see a bunch of cars around our bank. We knew at that point that they were being audited. Sure enough, they were closed for business the next day. Same thing with any bank. If you saw cars in the area when the bank was normally closed, it'd be closed for good very shortly thereafter.

Thanks to FDIC insurance, our deposits were always covered. All we had to do was just write our last check on the defunct bank to a new one and start a new account. We gave up on vanity checks pretty quickly and settled for the plain vanilla freebies the banks gave out.

Failures happened more frequently than I care to remember. Some years, we had accounts in three separate banks.

The scandals were interesting. At the "Gold Dome" bank, the President of the bank had collateralized Remington sculptures from the Cowboy Hall Of Fame's collection on display at his home. Those same sculptures also had loans on them from a couple of other banks.

When we moved from Oklahoma in 1998, we had a box of 'souvenir' dead checks from half a dozen banks. I can't tell you how many we went through before we finally settled on one the last few years.

When we moved to Oregon, we had a different option: Bank of America. For a state that liked local businesses, Oregon had no problem with branch banking. There were branches all over the city with ATMs in a lot of the places where we'd want to go. Since there was a branch right around the corner from the first place we lived in Beaverton, we grabbed an account there. The folks were friendly and helpful and actually helped us get acquainted with the area. Yeah, we had some issues with a wrong address on our checks, but the bank had the situation squared away as quickly as possible.

Austin had a BOA convenient to us, too. Same thing about good hours, friendly and helpful people. Back then, I knew I could count on my bank to be there when I needed them. That was pretty refreshing, actually.

Knoxville not so much. When we first signed up, we learned our branches here had abbreviated hours and even more abbreviated service. Both TX and OK branches of BOA would take secure documents for shredding. TN will not. The list goes on. Worse, when I first encountered the downtown TN branch, the lobby was so stinky with cigarette smoke, I could barely breathe.

The only reason we haven't changed banks is the local ones might just suck more. When I first came here, the "big" bank had the UT-K coaches dressed in orange as advertising spokesmen. No discussion of locations, hours, interest rates, or insurance, just a strong suggestion that the bank supported the Vols. Oh and I think we got a sport koozie with our deposit. :(

2008 comes along and BOA is going under. They've got to have help from our government. And, of course, they get it because they're "too big to fail."

They're too big to pay taxes, either. I was pretty mightily annoyed when we had to make an arrears payment on 2009 and I realized we were writing our check to the IRS on a bank that was paying zip, expected to be bailed out whenever they got in trouble.

Big surprise when I saw this article below. BOA's potentially going to break up. Why? What it comes down to is they're not profitable enough as one big entity. They're going to sell off the banks that aren't profitable and get sleeker and slimmer.



Hide and watch, our measly Knoxville banks might just end up being owned my someone local. With my luck, it'll be the orange koozie bank.