Once upon a time, a small group of investors invested their money with a new bank. The managagement of this bank was very persuasive, and always touted their academic qualifications, and their experience. The bank was so persuasive that the investors even sign up for monthly deposits to their accounts. Over time, the investors kept depositing more and more money, even though they were paid very low interest on their deposits. They did so because they believe the management of the bank, who kept telling them their money has now grown alot due to smart investing.
One day, they read in a newspaper that the bank had lost a lot of money in some investments. Worried about the security of their nest egg, the investors went to the bank and demanded an exact accounting of their assets. Imagine their surprise when they were told that such an exact accounting will take so long, that most of them would be dead by the time it was done. They were even more concerned when the management team that met them consisted of members of 1 single family, including the father (who started the bank), the son, the daughter-in-law. All of whom had no proven track record or even worked in the finance industry.
At this point, the investors tried to salvage something from the meeting, and said "Ok, since u cannot give us an exact accounting, can you at least tell us what you invested our money in?" Imagine their shock when the management team told them such information is highly confidential, so that competitor banks will not know this information. The investors than ask to withdraw their money, but were shown a small print in their deposit agreements that forbade them from any withdrawal of their principal until age 65. Not even for emergency purposes.
At this stage, the investors were in a quandary. They did not know exactly how much their collective assets were, nor what they were invested in, nor how much of their investment has been lost, and that the whole management team was basically running the bank like a private family business. They decided to take their fears to the local banking regulator who had governmental control of this industry.
After making an appointment to see the bank regulator, they all crowded into his office to discuss their predicament. As they were sitting down, they were greeted by a big picture on the wall depicting the bank regulator and the management of their very own bank smiling for the camera after a round of golf. Than they noticed more pictures of this group fishing, on vacation, etc. With a sinking heart, they realised the regulator was also a close friend and ally of the bank management.
At this time, they realised that their money was not theirs, and they were conned. They were condemned to live a life of hardship because their life savings were not accessible to them to smooth over the rough periods of their lives. This story sound familiar to anyone?
One day, they read in a newspaper that the bank had lost a lot of money in some investments. Worried about the security of their nest egg, the investors went to the bank and demanded an exact accounting of their assets. Imagine their surprise when they were told that such an exact accounting will take so long, that most of them would be dead by the time it was done. They were even more concerned when the management team that met them consisted of members of 1 single family, including the father (who started the bank), the son, the daughter-in-law. All of whom had no proven track record or even worked in the finance industry.
At this point, the investors tried to salvage something from the meeting, and said "Ok, since u cannot give us an exact accounting, can you at least tell us what you invested our money in?" Imagine their shock when the management team told them such information is highly confidential, so that competitor banks will not know this information. The investors than ask to withdraw their money, but were shown a small print in their deposit agreements that forbade them from any withdrawal of their principal until age 65. Not even for emergency purposes.
At this stage, the investors were in a quandary. They did not know exactly how much their collective assets were, nor what they were invested in, nor how much of their investment has been lost, and that the whole management team was basically running the bank like a private family business. They decided to take their fears to the local banking regulator who had governmental control of this industry.
After making an appointment to see the bank regulator, they all crowded into his office to discuss their predicament. As they were sitting down, they were greeted by a big picture on the wall depicting the bank regulator and the management of their very own bank smiling for the camera after a round of golf. Than they noticed more pictures of this group fishing, on vacation, etc. With a sinking heart, they realised the regulator was also a close friend and ally of the bank management.
At this time, they realised that their money was not theirs, and they were conned. They were condemned to live a life of hardship because their life savings were not accessible to them to smooth over the rough periods of their lives. This story sound familiar to anyone?
