Sure loser in bank mergers: the customer

Bank facade

Some analysts are predicting a new wave of bank mergers. I hope they’re wrong.

While sometimes good for stockholders, bank mergers rarely benefit depositors.

I suffered through many of the 2008-09 mega-deals — Bank of America/Countrywide, Wells Fargo/Wachovia, OneWest/IndyMac, US Bank/Downey and Chase/Washington Mutual.

Although I survived, it was messy.

For starters, there’s the FDIC insurance muddle. Where you once had two separate banks providing you Standard Maximum Deposit Insurance Amount (FDIC-speak for $250,000), once they legally combine, you have only one.

The FDIC’s transition rule eases the pain somewhat, maintaining separate account insurance at the surviving bank for six months following a merger (or, for certificates maturing later, until maturity).

Thus, if you have a $100,000 savings account at Bank A and a $250,000 3-year certificate at Bank B, after A absorbs B, both accounts are fully covered. You can even add $150,000 to the savings account.

But renewing existing CDs is restricted. For example, when BofA swallowed Countrywide, I couldn’t rollover Countrywide certificates that matured more than six months after the merger without losing FDIC coverage.

Of course, the major downside of bank mergers to depositors is the system conversion — and everything that goes along with it.

It’s sometimes hard to find your accounts, much less manage them, once banks combine. It’s also hard to deal with employees with uncertain job prospects.

Take the emergence of OneWest from the rubble of IndyMac.

After IndyMac collapsed, I opened a certificate at the "bridge bank" (more FDIC-speak) created to allow investors (ultimately, the OneWest owners) to pick up the pieces. The account paperwork I got back was pure gibberish, demonstrating that IndyMac had more problems than just bad loans.

When I complained to a customer service representative, all I got was abuse. He told me that, if I didn’t sign the defective documents, he’d have my account frozen.

Fortunately, the head of retail banking came to my rescue after reviewing a recording of our conversation. That CSR was, I believe, soon history.

Then there were the CSRs potentially facing pink slips at WaMu. They just couldn’t cope with my request to have a monthly interest check sent to me pending the Chase merger. The service was appalling.

The next time I see some talking head crowing about bank mergers on CNBC, I’m going to throw a shoe at the TV set.