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One of the reasons our smartphone service in the United States is improving so quickly is an FCC rule from 2003 that says consumers can bring their phone numbers with them when they change carriers. If it weren't so easy for consumers to change phone companies, carriers would have a vice clamp on your nipples and they would feel less pressure to compete aggressively. In this case, government meddling in the free market worked like a charm.

The banking industry is a lot like the phone industry before the 2003 FCC rule on phone number portability. For consumers, changing banks is a gigantic pain in the ass. I have my automatic bill payments linked to my existing accounts. I'd need to reorder checks and make sure the outstanding payments clear. I'd need to learn what services the new bank has, and order new credit cards, and get a new ATM card. It's all doable, but I'm not going to jump ship just because my bank is being a jerk about one thing or another. It's too much work. Let's call this situation a stickiopoly. Banks do compete, but not as aggressively as they would if consumers could switch at the drop of a hat.

So what would happen if banks had to adhere to a "bank consumer portability" law? Suppose you could switch banks as easily as giving your new bank your social security number and asking them to switch all of your credit cards, mortgages, and bank accounts automatically. And let's say the new bank also has the capability to switch all of your automatic payments (water bill, energy bill, car insurance, mortgage, etc.) at the same time with no effort on your part.

If switching banks were easy, a bank would magnify its risk any time it engaged in sketchy behavior such as LIBOR manipulation, ridiculous overdraft fees, or lending discrimination. Consumers could punish banks for being jerks. For example, I wouldn't want to be associated with a bank that was guilty of LIBOR manipulation. I'd figure the rest of the bank's management was rotten too and they're probably screwing me in some way I'm not yet aware of. If it were easy to change banks, I'd do it. But it's not easy, so I don't. (My LIBOR example assumes at least one bank wasn't in on the scam.)

And this brings me, very indirectly, to my point for today. On 7/14/12 I published a Dilbert comic that mocked banks. The original version of this comic used coarse language that reads funnier to me. But newspapers wouldn't have found that language acceptable. Today I submit for your consideration both the published version and the unacceptable version. Which do you prefer?

This one got published...

 
This was the original version...



 
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Jul 16, 2012
This is one of the reasons for government, that draws the line between libertarians and anarchists. A libertarian should agree that good government is necessary to protect consumers and markets from anti-competition practices such as monopolies, confusopolies, stikiopolies, extortion rings, etc. from destroying free-enterprise.

It comes down to two things:
1. competition is an essential part of a free-market
2. institutions abhor competition.
 
 
Jul 16, 2012
EMU -

There are more than 8,400 FDIC-insured banks in the USA. There are 1812 with assets of $300 million or more. There are also overseas banks operating here. It is unrealistic to consider banking a monopoly.

At the same time, offerings of businesses need to make economic sense and provide a competitive advantage. Their offerings must not only meet both criteria, but there is an additional consideration - barriers to entry.

You can Google the term to learn more about it, but in general the greater the barriers to entry, the more it may be confused with a monopolistic practice. It is a common misconception to equate a high barrier to entry to a monopoly. They are not the same.

Compare the cell phone business barriers of entry to, say, an antique store. High barriers in the first case; low in the second case. High barriers to entry do tend to reduce competition, but not in a monopolistic way.

Another thing to look at is market share. Is it really tough to build a new O/S for a computer? Not really. Linus Torvalds built one all by himself. But if it catches on, it creates a barrier to entry for competing systems - think Windows. Is it unfair that Microsoft has the lion's share of the O/S market? No. They earned it. But those who don't consider anything other than the words of Karl Marx would say differently.

It is worrisome to me that today's young people, brought up in our left-leaning public educational system, seem to know much, much more about Karl Marx' theories than they do about Adam Smith's. With the spectacular failures of Mr. Marx' theories and the spectacular successes of Mr. Smith's, this is even more problematic. Remember that satellite photo of North Korea at night versus South Korea? Again, if you haven't, Google it. There's a reason why one is bright while the other one is dark, and it's not the glowing success of communism.

Government is not the answer. Government in most cases, but not all, is the problem. Tending toward socialism is not going to make us stronger nor more prosperous. I'd recommend that those of you who think it is take another look at the competing theories - and look at them both this time. Not just the one you were taught by our public education system.
 
 
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Jul 16, 2012
Definitely the one that uses the word !$%*!$%*!$%*!$% the rest of your blog I have been saying this for a long time. I got my mortgage shortly before the housing crisis. My loan changed hands a few times in the next 3 months. In the end my loan was owned by a bank that has a reputation of terrible customer service who got a large bailout. They had trouble giving access to loan information from all the loans the acquired if it wasn't originally form them. When dealing with their customer service I felt they never had a reason to try to be helpful. I wasn't going to switch where my loan was through just because of the terrible customer service. If I was switching most likely it was going to be for financial reasons. It bothered me so much that I never asked to be their customer, I wouldn't have chosen to be their customer, and they knew they didn't have to do anything to make sure I stayed their customer. Doesn't feel like a system based on competition.
 
 
Jul 16, 2012
Like both of them. Loved the second one! So, I guess I can use the term "bank slapped" at work now without getting into trouble! Thanks Scott!!!!
 
 
Jul 16, 2012
I work in the phone industry and actually worked on a small corner of the number portability implementation. It was a pain in the ass. I say that not to convince anyone it shouldn't have been done, but it would never have been done without government intervention. The hell with which cartoon I like better - let's start a grass roots campaign to start this banking portability legislation. Not only would it save consumers a TON of money and increase competition in the banking industry, it would actually increase jobs. Its a non-trivial procedure, if you think about everything that would have to happen. And these aren't ditch digging jobs, they're white collar, nerd type jobs. And it would take 10 years between when the legislation came up to when it became a full reality. I call that an economic boondoggle.
 
 
Jul 16, 2012
Maybe I'm just normal and not the kind of backwards person who still reads newspapers, but that word has no shock value from me. Like most cusses, it "feels better" to say (due to the sounds involved), which makes it funnier and more generally enjoyable. So the second version is better IMO.
 
 
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Jul 16, 2012
I pefer the second one. I also like the topic and recognitin of what is going on and the public service this blog provides to make for greater awareness of what is happening to us as our society becomes more complex. I'd like to offer the topic of all the little 'hidden/misunderstood' charges that we go thrugh life basically flushing down the toilet on a day to day basis, for a future blog. Items like
'bundling fees', 'roaming charges' various other scams. As an example, I'll also offer the situation where I was buying one of those products on TV that states 'but wait, there's more. We'll offer you not one, but TWO items. All you have to pay is the shipping and handling fees'. The shipping and handling fees invariably cost more than the advertised price of the unit, itself!
 
 
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Jul 16, 2012
Pantom II:
"The companies who didn't allow it would compete with those who did. Who do you think would win? "
Your erroneus assumption is that some companies would initially allow it.
Reality is that phone companies would quickly (just as banks) informally agree not to scratch at each other's eyes and to prevent newcomers to grow beyond niche markets. The parts supplier business already works like this. As a car manufacturer you are pretty much in the hands of one or two companies for some critical parts.

For the theory, read up Karl Marx about the natural tendency of capitalism to degenerate into a monopoly capitalism. He didn't know about "customer lock-in" but he surely would have recognized it for what it is.

"Free market" is about as efficient as "free road traffic". Take down the signs, abolish driving licences and all is well, eh?
 
 
-1 Rank Up Rank Down
Jul 16, 2012
Bank account portability. Sounds tricky, because a mortgage and a credit card account and a bank account and the ancillary services (bill pay, ATM access, etc) aren't like a phone number, which is in essence, a record that consists of an unique number and a routing table.

In any case, the published one looks good to me. More matter of fact, what I'd expect from a bank teller, at least one trying to keep his job...
 
 
Jul 16, 2012
I work for a TBTF bank that took over our brokerage company. Your strip nails it dead on - and the language in the second one is much closer to reality (maybe not at the teller level, but up a level or two where cross selling is strongly encouraged).
 
 
Jul 16, 2012
A private "front-end" banking business might work. PayPal or Mint.com are probably positioned to get into this sort of business. They already link to your bank accounts and credit cards. They could do bill-pay and pay from whatever card/account you like.

You could pay for things with a PayPal credit card which would in turn charge the credit line with the lowest interest first and switch when that credit line is near the limit - or set up rules about when to use which cards.

This sort of business would be able to move funds from one place to another to switch bank acounts without skipping a beat on the bill-pay. (Coordinating direct deposit and bill-pay is my biggest headache when switching banks).
 
 
Jul 16, 2012
I prefer "harder" only because it makes the point clearly and thus is funnier. !$%*!$% has several meanings and although the point is clear the fraction of a second it takes the brain to put it in context is at the expense of the humor (albeit the cost is minor).

Don't make me think!
 
 
Jul 16, 2012
Concerning the comic - I liked them both about equally.
 
 
+7 Rank Up Rank Down
Jul 16, 2012
I prefer the published one.
 
 
Jul 16, 2012
I agree about the difficulty in switching banks, but isn't automatic bill paying a service that could easily be outsourced from the banks if people a)trusted the vendor and b)were willing to pay for it? Isn't it now a differentiation service for some banks? I've used different systems, and I find my current bank to have the best bill pay suite I've used, but if my bank otherwise got bad enough, I'd pay $5 a month for bill paying services from someone else.
 
 
Jul 16, 2012
I'm not offended by bad language but the the "a !$%*!$ one doesn't really work for me. I think it's because it's out of place in a banker.

 
 
+2 Rank Up Rank Down
Jul 16, 2012
I like the second one more. " a B-i-t-c-h" fits better to "s-u-c-k-e-r" in the first picture.
 
 
+7 Rank Up Rank Down
Jul 16, 2012
A bank clerk saying 'it's a !$%*!$ is a secondary funny, which takes some of the steam out of the main one. If '!$%*!$ offends people of a sort I prefer not to know, then 'harder' is probably the best choice. Rough language is like nudity in movies: only when necessary to the plot.
 
 
Jul 16, 2012
The one with the word !$%*! is much funnier. Strange how one word can make the difference, even though the censored version carries the same meaning.
 
 
Jul 16, 2012
Good Post Scott. Things like this are what the government should concentrate on.

Re the strip - I somehow like the sanitised version more - maybe because I read it first.
 
 
 
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