Tuesday, April 12, 2016

Banks and Insurance Companies

To speak of banks and insurance companies as though they were separate and unrelated entities is a misconception. They are the Janus face of the financial market. They each have one hand in the other's pocket and they each have their other hand in the public's pocket. The popular household mortgage and insurance binder are roulette games with about as much risk for the lender or insurer as for casino operators. If one extrapolates the association of banks and insurers they are one big family.  By the time one ascends to the rarefied atmosphere of re-insurers it is an apex similar to tracing one's ancestry back to the Mongolians, the beginning of time.  Just to be clear, the risk factor is not limited to insurance.  It doesn't require much speculation to discover that lending $300,000 - 800,000 to someone on the street to buy a house has an element of risk.  The mortgage lenders spread some of that risk among their insurers to cover foreseeable downturns. If, as sometimes happens, the real estate market is at "risk" of declining, the banks resolve the issue by acquiescing to the inflation of housing prices then reducing the cost of borrowing (while of course at the same time co-operating with the increase of capital borrowed).  If things get totally out of hand it is never beneath the big guns to sacrifice the lesser of their own (who were likely to have succumbed to the false allure of securitized debt which had no financial cushion to absorb large loan defaults).

Even if one considers that the "numbers game" and "cost of doing business" are to be tolerated to achieve the greater goal of property ownership (which by the way I consider a fiction), there persists an equally annoying development.  Specifically the banks and insurers (including the subalterns who fill their front-line ranks) have perfected a level of arrogance which is nothing short of appalling.  Like the haughty butler in the home of the feudal lord, the banks and insurance companies presume to have the power and authority of their customers, forgetting who works for whom.  The banks for example regularly weigh in upon private contractual relations, relying solely upon the abuse of their expedient position of control, sometimes to the extent of flying in the face of legislation. Meanwhile the clerks and salespeople of the banks and insurers are tethered to their masters. The mannerisms of the conglomerates overtake anything as mundane and parochial as customer service. The suggestion that the brokers (whether of money or insurance) are somehow "shopping the market for the best deal" is utterly preposterous! The brokers are nothing but inconsequential minions waiting (with their own hands outstretched) to collect their commissions after having served up whatever the primary providers deign to retail.

The ripple effect of this malignancy among the banks and insurers is the contamination of the entire marketplace. The last person of importance in the mix of these financial services is the customer. The manipulative media advertising of the banks and insurers is only geared to distorting the theory of money lending and risk management, portraying it as some corollary to the idyllic nonsense of Mickey Mouse Club.  The best that the so-called competitors do is generate within the public an animosity directed at other lenders or insurers creating a false sense of fairness and economy. The only thing guaranteed by the banks and lenders is that they will win. Nevertheless it is still possible for John Q. Public to exercise some influence by calling the bluff and change suppliers (though it is ultimately of no consequence to the core suppliers).

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