October 14, 2008--A Taste of the New Economy

We’re trying to be prudent with our IRA money.

In a world where markets are gyrating so wildly that on Friday there was a 1,000 point swing in the Dow Jones average—initially down 700 points then up a 1,000 then closing down more than 200, all in one day—and then yesterday an almost 1,000 point rally, we thought to get some of our money out of the market and into safe six-month FDIC-insured CDs. Not a very intrepid or optimistic thought on our part but over the long-run we have done very well and wanted to get out in time to preserve most of our gains. So we did that in a fairly timely way and wanted to take the next step—move from the cash we have parked in money market accounts and switch it in appropriate chunks into CDs with a handful of banks.

The first problem was to think about which banks might still be in business before they could complete the transfer of our funds to them. Whatever happened to Wacovia and Washington Mutual? There are branches of both in our neighborhood, I mean there were branches, but now they are boarded up. I know they still literally exist, taken over for bargain prices by other banks, but it is unnerving to walk by their vacant offices on our morning walk to Balthazar for coffee and commiseration.

Thus, among other narrowing options we selected Chase as one place to enquire about their CD deals.

For what they call “new money” at the relatively high level we were considering trusting to their care—actually to the protection of FDIC—they offered pretty good rates, about 4% for six months (interesting how good 4% now sounds to us after years of looking for at least 8-10% appreciation gains from our stock portfolio) we said let’s talk about how to go about buying a couple—one for me and another for Rona.

“Oh, in that case you will become Preferred Clients” the banker said, “so if it’s all right with you, let me invite Tommy T____ to join us. He’s our vice president.”

We sort of liked being preferred at something and so we nodded our approval.

Boldly, in strode Tommy. A fine looking young man who appeared to be in his lat 20s and as if to convince us—if his moussed hair and pin stripes didn’t convince us that someone looking so young could actually be a vice president of David Rockefeller’s bank—he slid two copies of his business card across the desk. Sure enough in embossed type it proclaimed him a VP.

While shaking our hands he puffed up and said, “Nice to meet you. You can call me Tommy. Can I call you Rona and Steve?” We both nodded. “I’m a Chase vice president. In fact the number two vice president downtown.” When he saw our puzzled look, he explained, “That’s how they rated me. For the work I did over the past six months.”

Since we were there simply to acquire two CDs we didn’t ask about just what that work would be that had caused him to be ranked so high, assuming of course that there were more than two VPs downtown. All we were there for was to fill out a couple of forms, give them the information about our current IRA accounts from which the money would be transferred, and then get out of there so we could go over to Bank of America to get two more CDs—our plan was to spread our money around among a half dozen or so of the still most stable banks.

“Can I see your IRA forms please?” Tommy asked.

“Sure,” we said and passed the most recent statements over to him.

He glanced through them and, looking up at us with the sun glinting in his hair, said, “Have you thought about annuities?” We hadn’t been. “Let me get you something to look at that will tell you about them.”

“But we want CDs. Something as safe and secure as that.”

“Well, these are just as safe and pay at least seven percent a year. I think you should consider them.” He kept his eyes riveted on us, alternating between Rona and me. “Joey, can you get the Zwerlings printed copies of the materials that describe our annuities.” His assistant, Joey, also with glittering hair, at Tommy’s command spun on his heel and raced out of the office.

Tommy leaned across the desk to take us into his confidence. He winked at us, “What I’ll be giving you,” he said in a whisper though we were in private and no one else was nearby, “is a copy of what the bank prepares for those of us who are vice presidents. We’re not supposed to share it with anyone. You’ll see, when you get it, that across the bottom it says ‘For bank staff only.’ I’ll cross that out and if anyone asks where you got it I hope you won’t rat me out.”

Rat me out? I had not ever heard a bank official speak that way. But these are uncertain times and Tommy is very young and has that Gordon-Gekko street side of him still intact. Not a bad thing, I thought: don’t the best of the downtown bankers retain evidence of their origins in Brooklyn or Staten Island? Perhaps we had fallen into good hands. We felt we deserved a little good financial luck.

“But while we’re waiting for Joey why don’t we begin by transferring your Fidelity IRA money into a new IRA account at Chase. Then from that we can transfer the money into one of our best annuities. Seven percent—and it could go higher over the next ten years—sounds pretty good to me, doesn’t it?” As he was saying this he had turned to the computer and from our Fidelity forms was busy entering data about us, I assumed, in order to open our Chase accounts.

I was impressed by his energy and entrepreneurship and was, in truth, thinking how fortunate we were to have met Tommy—seven percent as safe in an annuity as in CDs was sounding very attractive to me.

“Wait,” Rona said, “What are you doing?”

“Transferring your Fidelity money to Chase.” Tommy kept tying.

“All of it?”

“Well, as we said, that’s the first step. Then we’ll take the money from that and put it into an annuity. That’s what we said, didn’t we?”

I was wondering how high the yield might go. Joey had returned with the papers, which sure enough had “For staff only” along the bottom, and I was scanning the text to see how under what conditions it could yield more than seven percent. But I could still listen to Tommy and Rona.

“No, that’s what you said.” It was Rona. “We came in here to talk about CDs. Not annuities. What you say about them sounds interesting,” he was now typing even faster, “but we have financial advisors and they never mentioned annuities to us. We’d want to talk with them before doing anything like this.”

“Are they with Fidelity?” Tommy asked Rona, and while still entering data he turned to me and asked, “What’s your Social Steve?”

What a multi-tasker, I thought, and began to give it to him. But before I could finish Rona, interrupting me, said to Tommy, “No they’re not with Fidelity.”

“Well, that’s good,” he said, “because after you have you account with us they can still advise you. Though so can I, and I won’t charge you an annual percentage fee as I assume they do.” I thought I saw him wink at her.

“We’re not ready to do this. So let’s roll thing back. We’re here to talk about CDs.”

“We can do that,” Tommy chirped. He had stopped typing. “We can take the money from the Chase IRA and roll it into CDs for you and then if you decide into annuities. It’s simple. And everything will be consolidated with us. Onto one statement. It doesn’t get much easier than that.”

Rona was fingering his business card and while he was saying that took another look at it. “Are you with Chase?” She asked. “Because it says here that though it’s on a Chase card, it says here that you’re a vice president with JP Morgan.”

“Chase, JP Morgan they’re the same thing. One company. So yes I’m with Morgan but since Chase owns them I’m also with Chase.”

“So this means that you’re a broker and not a banker?”

“Technically that’s correct. But as I said . . .”

Rona cut him off, “That’s decidedly not the same thing. We don’t want to talk to a broker; we want to talk with a banker. And,” getting up out of her chair and tugging at me as I continued to pore over the annuity information, running the percentages in my head, “not with a banker at Chase.”

Tommy by then had also gotten up and walked around his gleaming desk to us. “I’m sorry if I confused you. I only want to be of help to you during these trying times.”

He looked at Rona empathetically and reached out to her as if to take her into his arms and comfort her. She backed away, bumping into my chair.

“I, we can take care of ourselves, thank you very much.” She had retrieved her purse from the arm of her chair. “As a matter of fact, I suspect better than you might be able to. I’ve been doing quite a lot of reading about this economic crisis and it appears that some of the bank-brokerage house mergers which were permitted in recent decades contributed to various forms of conflicts of interest that have brought the system to its knees.

“And here we are,” she glared at Tommy, “having a firsthand taste of that. So at least thank you for that. You helped me understand things a little better.”

With that she pulled me from the office. “And please leave those papers with them. I wouldn’t want anyone to see that we have them and get Tommy in trouble.

He meanwhile, as we turned away from him, said, “But Chase has more assets than Citibank and we . . .”

It felt good to be back on the street.