Book Reviews ‘A – E’

The Banking Jungle

Authors: Paul S. Nadler/ Richard B. Miller

Before computers, the banks knew more about a man’s personal and business finances than did his wife.

The people that are employed part time by the bank while still in night school tend to make better employees. They are being trained to cross sell different products and services to maximize efficiency and boost profit margins. Banks are using less bricks and mortar and relying more on electronic transactions. They raise service charges to boost profits. Shareholders are important to a bank. Nothing makes a customer more loyal than being a shareholder. The public loves stock splits and dividend increases. It is also more difficult for banks to sell services because there are more companies hiring cash managers. When people know more, they need less. The banks have to be innovative about selling more services in order to maintain growth for shareholders.

Authors: John B. McCoy, Larry A. Frieder and Robert B. Hedges, Jr.

The competition is the financial services industry has heated up.  Banks are going to have to start leveraging their franchises. They must start charging for services that used to be free. They also must develop new products to generate fee - based income. Non – banks have captured nearly 70% of the nations assets. While banks have to maintain employees and a branch system, mutual fund companies rely on direct marketing, high levels of customer service, mass marketing and advertising. They have few clerical personnel and have toll free telephone numbers and a low cost structure. The fund companies have used brand name recognition and mass marketing through TV and radio. They also allow flexibility in moving money easily within different funds. The banks must use relationship banking in order to achieve higher profitability. The boomers are moving from mortgages into complex investments. The banks have to change fast. A sales and marketing culture is essential for banking success. Besides moving from a product driven system to a relationship driven one, superior knowledge of the consumer will end up becoming their ultimate competitive advantage. The bank’s stock price and shareholder value will ultimately determine success. A new sense of urgency must be implemented in order to create profitable revenue streams.  Read More

Authors: Mary Buffet & David Clark

“Investment is most intelligent when it is most businesslike.”

Invest in companies that make products you understand. You also want to own companies that have little or no competition. These companies are dubbed “consumer monopolies”. These companies are very conservatively financed and can easily raise prices to boost profits. They also use their large capital to buy other great businesses or conduct share buy backs. Their management is well seasoned and experienced. To understand a company’s past performance, go to any library and get “The Guide To Business Periodicals”. To find a consumer monopoly, subscribe to either The Globe and Mail Newspaper or The Wall Street Journal, or go into any bookstore and look for books on the world’s best-run companies. Then go ahead and use the strategies in this book. Understand exactly what you are investing in and become an expert on it. Use the power of compounding and study the charts.Read More

Author: Earle Beattie In Consultation With Tom Delaney

Heavy borrowing from governments has shortchanged pensioners out of receiving better retirement benefits from the Canada Pension Plan.

On June 4th 1964, Ottawa and Quebec reached a historic agreement on two separate plans, one for Quebec, the QPP and one for the other nine provinces and territories, the Canada Pension Plan. The Canada Pension Plan, which provides assistance to Canadian workers in the event of death or retirement, began operating in 1966. The CPP is a pay - as - you go plan - and the contributions by employers and employees are used to make payouts to retired workers. The plan is federal and is locked into a system that allows all participating provinces to legally borrow money at favorable rates. Provinces are using pension money in order to fund capital projects. The Canada Pension Plan ends up benefiting the government more than the citizens it is suppose to serve.

Author: Merrill Denison

  History of Bank of Montreal: VOLUME ONE

On Nov 3rd of 1817, Canada’s first permanent banking institution opened its doors and was strategically located very close to business and commerce. The bank was so successful that it declares a dividend within only 5 months of operations. A policy of lending to well-established commercial businesses and a combination of entrepreneurial ability and managerial integrity defined its staff members. Management focused on the long-term interests and needs of shareholders, government and the community. Montreal was also the trans shipment point of most of the imports and all-significant exports in Upper Canada. The bank became the facilitator for payments between Canada, Great Britain and the United States. American investment capital was used to launch the BMO but control remained in Canada. Learn how The Bank of Montreal used its foreign exchange connections in New York and exceptionally able management to become the principle government banker in the Canadian provinces.

♦  History of Bank of Montreal: VOLUME TWO

The Bank of Montreal was the originator of Canada’s branch banking system and never engaged in any undertaking that was financially beyond their means. The bank established branches in the most important centers and avoided boomtowns.  Employees were placed where needed, creating a flexible and well trained workforce. BMO became the fiscal agent of the Canadian Pacific Railway. The management and founders always were required to put up collateral in the form of securities and other financial instruments of equal value. The staff of the bank foresaw the coming 1929 crash, and there were no bank failures in Canada due to a strong branch system and no depositor lost a cent.  Without a branch system, thousands of banks in the U.S went under and a banking holiday, during which all banking operations in the country were suspended had to be declared for four days. Follow this bank as it set the tone and direction for all other Canadian banking institutions.

Author:  James L. Darrock

Banks are in the information business which in order to be properly priced, must be fully disclosed. However, making it readily available to the public can damage or lessen its value. Information has become a commodity and for the bank to receive full value for it’s knowledge assets, they are kept away from the viewing public and restricted internally. Since their products have become commodities, other competitors including multi-nation corporations have gained a good understanding of their own banking needs and no longer need the bank the way they used to. Some firms have so much excess capital; they’ve jumped into mortgages and loans. They hire the best and brightest and aggressively compete against their former lenders. This has caused banks to focus more on individuals whom are less sophisticated. The strategy has been to start charging customers for things that used to be free. If you want something from the bank, you’re going to have to pay for it. “In 1991, Statistics Canada reported that since 1987 the banks have made their biggest revenue gains through service charges. “ Read More

Author:  Richard Minns

The argument here is that privatization of pensions doesn’t lead to better pensions or greater economic growth.

U.S state pensions and social security has an earning related feature that significantly redistributes income from higher to lower  income groups. It was suppose to be a counter to or insurance against the market and its failings. Privatization channels money into dividend paying stocks with growing stock prices, not new investments that could lead to real growth. Private capital is not usually for direct investment. It is mainly for trade in existing stocks and securities. In Chapter 8, “Arbitrage Capital” the reader learns that 98% of all stock market trading was the buying and selling of existing securities. The capital being channeled into new issues was 2% or less. State pension schemes don’t have to be funded, which saves on the cost of running it. Read More

Author: Ron Chernow

In the beginning, the bank was the most powerful institution.

Companies would go to it, with cap in hand, and pay whatever rate the bank felt like charging. The upside was that companies like J.P Morgan, would nurture the growth of the biggest companies of the time, and his bankers would have seats on the board of directors. His firm helped them grow into global and multination corporations. Banks would dictate the terms and the companies would follow the orders. Fast for ward to the present, where money is everywhere. Banks are losing power to their clients. The firms have hired more educated graduates, and competition is driving down the cost of borrowing funds. Some companies have so much cash, that they are like banks. The wholesale raid on bank deposits is due to the rise of mutual funds. Investors are now seeking a better return for their money. The death of the middleman is a slow but necessary part of the financial revolution. It’s changing the way people get financial services.

Author:  Robert MacIntosh (former President of The Canadian Bankers' Association)

How did the prohibition against taking real property as security save the Canadian banking system from mass speculation? What happened in the United States with the savings and loan industry when this was allowed to occur? Why did the government want large banks instead of small ones? What happened to small banks that were too exposed to one industry during a recession? Why were the eastern banks more successful than those in the west? Why were banks permitted to enter the housing market in 1954? Why was the 6% ceiling on lending rates in place and why was it removed? How did the banks go from 16 percent market share in the consumer credit market to 36 percent by 1967? Why was their share of this market 64 percent in 1990? How much money did Canadians save due to lower loan rates?

This book takes you through the days where borrowing and debt was discouraged, to the roaring 1990s, where everything and anything goes. This book is highly recommended for people that want to learn all about the political and business past, present and future of the banking industry in Canada.

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