ILLUSTRATION: RANDY POLLAK
One of the first things I did when I moved to Massachusetts, just over 20 years ago, was to open a checking account. I found a little bank within walking distance of my new home: a low-key, friendly, cooperative bank that offered free checking with a minimum balance and a minimum of nonsense. It called itself, I kid you not, HomeTown Cooperative Bank.
Not long after that, I started writing articles for magazines in England and Canada. These publications paid me, not surprisingly, with checks (or "cheques," as they prefer) in English pounds and Canadian dollars. My little HomeTown bank couldn't cash these items by itself--the checks would be sent to a "co-respondent" bank, a big, commercial downtown institution that would charge exorbitant fees for the privilege of handling my money, take six weeks or more to credit my account, and inevitably give me an exchange rate far inferior to that I saw published every day in the financial section of the newspaper.
One day, a vice-president at my homey little bank suggested that if I were to open an account at the big commercial bank just to cash these checks, it would save me money and time. I found it remarkable that any bank would encourage me to put my money somewhere else, but I followed his advice--I opened a savings account at the big bank with a balance just large enough to avoid any service charges, and I funneled my meager offshore assets through it. The exchange rate was a little better; the fee, while it still existed, was much more reasonable; and the account was credited in a week or two.
Then, the big bank changed its policies. It decided it wasn't making enough money on various types of transactions, including foreign-check cashing. It raised its fees to the same level that my little bank had been forced to charge, and it started taking longer to transfer the funds. At the same time, my stake in the situation got bigger: not only was I selling articles in foreign countries, but I had by now produced a couple of records for a British company--a subsidiary of EMI, in fact--and they were handling the publishing royalties. So now I was getting checks quite regularly, and some of them were fairly substantial.
When the bank raised its fees a second time, so that they were higher than they had ever been anywhere, I paid a visit to the branch manager. I explained my situation as a small businessman trying to compete in the global economy (well, it sounded good!). I noted that they were very actively painting themselves in full-page color ads in the local papers as "players in the global economy," and told him that if they were sincere about this, they needed to handle their customers' international transactions better. I pleaded, I cajoled and finally I threatened. I said I would remove all my money from the bank if they didn't do something about this policy. He was adamant. I was outta there.
Actually, I wasn't. Because in the ensuing years, my little cooperative bank had been bought by another bank, and then another, and now was being sucked up by the very same big bank I was grappling with. So as I was noisily pulling my savings account out of the bank, my checking account was quietly coming into it.
And I still had some large British checks to cash. So I got in touch with all the major banks in the area and miraculously found one that still had a reasonable approach to foreign exchange. I opened a new savings account there and was back in business.
Well, not quite. Each time I would go into this bank with sterling in hand, I would be treated as if I had just dropped in from outer space. The poor clerk behind the counter (and there was a different one each time) had no idea why someone in Amurrica would be carrying around this weird foreign money, and invariably, after I had waited in line the requisite 15 minutes, would turn me over to a manager, who would make me wait another 15 minutes. Then I would have to show the manager how to fill out the form--which invariably had to be done twice, since the first time he or she would unthinkingly write "dollars" instead of "pounds," thus ensuring me the worst exchange rate since the War of 1812.
By the time I had gone through this ritual a few times, however, I felt I had achieved a kind of truce with this institution. I held onto my checks,letting them build up until just before their expiration date, then took the bunch down to the bank, making sure I had an empty hour in my schedule for the chore--unless I couldn't avoid going during lunch or on a Friday, in which case two hours were required.
But like many shaky truces, this one didn't last long. The big bank I was now cashing my checks through announced it was being absorbed by an even bigger bank, to create the biggest bank in the state. What bank was doing the absorbing? You guessed it--the one with the usurious exchange policies I had stormed out of not long before.
So I was back where I started. Only now there was one bank on the corner where there had been two. The lines were twice as long, the personnel turnover was twice as fast, and the protocols for nonstandard procedures, like foreign exchange, were twice as difficult and just as expensive as they had always been.
One day, after my now-customary 45-minute wait to get to a teller (who, of course, had no idea what I wanted to do), I found myself yet again arguing with a manager about how her employer could justify charging huge fees for the privilege of handling simple foreign exchanges and tying up the funds for weeks, when we both knew full well that international transactions take place at the electronic level in milliseconds and cost the participants fractions of pennies. Suddenly, the words "Provisional Credit" slipped out of her mouth.
I stopped screaming. What was that? I politely enquired. Provisional Credit, she explained, was a policy extended to "good" customers of the bank who wanted to deposit nonstandard items. I ventured that I might qualify as a good customer, inasmuch as I had maintained an account with some institution or other that eventually became this bank for the last 20 years; plus, my wife and I had a joint account there, which we had opened when we bought a house, through which we paid our mortgage; plus, my wife had some good-sized IRA Certificates of Deposit she had opened many years ago, in a different institution in another part of the state, which was also now part of this bank.
She agreed. Now, under this miraculous Provisional Credit, when I presented my English check, my account would be credited immediately, using the day's published exchange rate, and there would be no fee. If the check bounced, however, I would be subject to a heavy penalty. Since I considered the likelihood of EMI's sending me a bad check about equal to that of Elvis playing rhythm guitar on my next album, I thought this was a good risk. We shook hands, filled out the forms (twice--some things hadn't changed) and for the first time I could remember, I walked out of a bank with a smile on my face.
A few weeks ago, I went back to this bank, waited the requisite hour, smiled at the teller (whom, of course, I had never seen before), handed her my EMI check and uttered the magic phrase. She didn't smile back, but looked puzzled and asked me to repeat it. I did, but her expression didn't change. Another teller overheard me and rushed to her colleague's aid, saying, "Oh, we don't do that!" "You sure as %^&* do," was my considered reply, which apparently caused her to press some kind of button, at which point a manager (whom I had also never seen before) suddenly appeared at my elbow. "Come into my office," this manager said soothingly.
We sat down, and he calmly explained that the bank had recently decided to stop the policy of issuing Provisional Credit because it was losing money on it, and if I wanted to cash my foreign check, it was back to the good old days of fees, waits, and lousy rates. And, oh yes, the fee had gone up. I asked how it was possible for the now-defunct policy to have lost money, since the privilege was presumably only being extended to customers with enough in their accounts to cover any potential bad checks, and since the penalties were so large that this actually should have been a profit center for the bank. He had no answer.
Then I asked if the fact that there had been a story in the newspaper earlier that week about how his bank had suffered a $76 million loss at the hands of one of its own loan officers (who had funneled the money through several dubious companies in Uruguay run by a well-known convicted swindler, and was now being sought by the FBI and Interpol) had any influence on this decision to chisel just a little more out of its customers. He assured me it didn't.
Then I asked about another story in the paper. This one reported that the building down the street that had previously housed the big bank that had most recently been absorbed into this big bank was being kept deliberately empty for the seven years remaining on the big bank's lease at a cost of $80,000 a year, so that a competing bank wouldn't be able to move in. (The story noted that the town fathers were getting pretty pissed off at the prospect of an empty concrete hulk occupying the town center until 2005.) Did that have any effect on this decision? He assured me it didn't.
This time, I couldn't storm out with my money because there was nowhere else to go. This was the last bank in town that would evenaccept a foreign check. I didn't want to lose my ATM privileges, I didn't want to move our house account and I didn't want to tell my wife to take her IRAs somewhere else. So I gave him the check, thanked him for his help, watched him fill out the form (only once, for a change) and left, not wearing a smile.
When I got home, I sent a fax to EMI in London asking how much it would cost for them to send me checks in U.S. dollars instead of pounds. "Oh, we don't charge for that," came the immediate reply. "When would you like us to start?"
Why did I tell you this story? Well, it doesn't really have that much to do with banks, although I do worry about the banking industry. Apparently, I am in a small minority, because if you believe the newspapers, everyone in America except me owns bank stocks, and if these continuous mega-mergers inconvenience, penalize or just plain rip off customers or employees, it's of little consequence compared to how beneficial they are to shareholders. There are a few other far-left kooks who share my concerns: A few pesky New England Congressmen have been heard muttering about how, as huge banks merge with other financial institutions like insurance companies and stock brokerages, they become "too big to fail," and that if one of them does, it will wipe out the Federal Deposit Insurance Company's reserves ten times over. But, of course, since everyone involved is so busy getting rich, no one's paying much attention to them.
I told you this story because it relates to monopolies in general, and monopolies, as they were in the 1890s, are once again a very big part ofthe business landscape in the 1990s. A monopoly is generally a good thing only for one group: the owners of the monopoly. It is not a good thing--as even AT&T would probably admit by now--for the vast majority of people who use the products and services produced by the monopoly.
Am I worried about some mega-manufacturer getting a corner on professional audio products? No, at least not when it comes to hardware. Our industry is eclectic enough, and populated with people who are creative and individualistic enough, that no matter how big Sony, Yamaha or Harman get, there will always be room for entrepreneurial companies with good ideas and strong messages to find a niche. There's a lot of turnover in our industry: Former giants like MCI, Scully and 3M are nowhere to be found, while upstarts like Alesis, Digidesign and Mackie are the new powerhouses. Come back in 15 years and the names will have changed again. And as long as standards like AES/EBU, MIDI, SMPTE, TCP/IP and maybe even OMF are free to all who want to use them, our industry will continue to nurture new ideas and practices.
But there is an industry in which this churn, this constant renewal and replacement of dominant forces, is in danger, thanks to the monopolistic policies of one of its practitioners and the passive acceptance of those policies by its customers. Read my story again, but whenever you come across the words "foreign exchange" or "foreign checks," change them in your mind to "third-party applications" or "other operating systems." When you see "exorbitant fees," change that to "licensing agreements," or perhaps "incompatible file formats." When you see "clerk" or "teller," change it to "tech support line." When you see "bank," change it to "operating system maker." And when you see "mega-bank," change it to "Microsoft."
More and more of our tools are moving inside machines whose operating system is the sole property of a company who, according to many in the computer world, has defined the term "predatory business practices" for the past two decades. Microsoft didn't single-handedly kill off all of their competition--the people running Commodore, Atari and IBM had a lot to do with it as well, and now we are witnessing Apple, whose aim at their own feet seems uncannily accurate, continue the tradition--but they are making damn sure that no new company will rise to challenge their hegemony. And it's not just in the field of operating systems where they're bulldozing competition: The same tactics are being used for Internet browsers and development tools, office software, games and multimedia tools, and delivery systems, database management and, of course, content.
So far, they have stayed out of professional audio, but as the barriers between "desktop" and "professional" production tools continue to crumble, and audio becomes more integrated with visual media on discs and over modems, it could be only a matter of time before they gaze on our little corner of the world and decide it's time they owned that, too. And then how long will it take for them to figure out how to get us to pay for licenses to produce and deliver our products--both the tools and the content--the Microsoft way?
And when we are forced to do everything the Microsoft way (not because it's the cheapest, the fastest or the best, but because it's all that exists) and they make decisions we don't like, there will be no one in any country on the planet whom we can call up and ask to bail us out.
Copyright 1998, 2001 Paul D. Lehrman. All rights reserved