Medical Post Articles

Why the economic condition is in the condition it’s in

Written for The Medical Post on January 13, 2009

Looking to improve your credit rating, dude? Tune in, drop out and turn on your attractiveness to banks

Like most of you, I’m sure, I’ve lived most of my adult life believing—often against the strongest evidence—that “the experts” I employ and consult to help me make decisions in areas I know little about actually know what they’re doing.

Most important for this article, I have never questioned the knowledge and expertise of my “money brain trust”—the combined legion of bankers, accountants and financial advisers who I’ve been glad to have in charge of my finances.

True, I may have raised my eyebrows once or twice about some of the suggestions those financial wizards have come up with (as, for example, when I built those huge bonfires to consume my Enron and Bre-X shares), but I have never questioned whether any of them actually know what they’re doing.

But after a recent brush with a “malfunction” in a part of the economic system that is crucial to the well-being of the whole economic shebang, I’ve realized what an idiot I was to believe that any of the guys in the economic system even know how to tread water, let alone swim in the shark-infested, iceberg-cold economic ocean.

Here’s what happened: About six months ago, thieves broke into a branch of the bank I was using and stole a hard drive for the main computer that, for reasons that defy rational explanation, contained every piece of information the bank had gathered on me over the years, stuff they always ask you when you apply for something—your favourite bocce ball team, the altogether prescient comment that your first-grade teacher, Mrs. Rosenfeld, put on your report card (“Arthur will always be a big trouble-maker”)—and that you don’t really worry about sharing with the bank’s inquisitor because, hey, this is a bank, so it’s going to store this vital information in a very safe place.

So, imagine my surprise when I learned that this bank branch was keeping my social insurance number and other vital information on a computer drive in a room that could be broken into without anyone knowing about it for more than 12 hours.

This was also a surprise, apparently, to the beseeching bank apologists who called me more than a week later to tell me how really, really, really sorry they were.

But that “terminal” error of allowing a data-rich computer to be stolen was just the start of my education about how incredibly stupid and incompetent those financial folks really are. Next, as part of a sucking up program, the bank offered me and my son (yup, because of my advice, he banked in the same branch, and he’s still not talking to me) a one-year free membership in a service that would keep close watch on all the credit and banking transactions that occured in our names and would notify us of any suspicious actions.

“But if everyone knows we’re only going to be monitored for one year, why wouldn’t the bad guys just sit on the computer data for that year, and only begin to use it in 13 months?” I asked.

“Well, they could do that, but we don’t think they will.”

“Wow, that’s really, really, really reassuring,” I said, which drew a fresh battery of “sorrys” until I hung up.

A few weeks later, another surprise: I discovered the credit-monitoring company notifies you of any new activity in your file via a computer-generated letter, which they could just e-mail you the minute something occurs in your file, or even phone you to let you know, “Hey, dude, you’ve been ripped off.”

However, these are financial wizards, so the company instead chooses to send you these updates via Canada Post, which means a thief could probably get a $2-million mortgage in your name and move the money to the Caymans days before you even got to read the letter informing you of your new obligation over your morning Corn Flakes.

But here’s the best part: After my son and I enrolled in this service, we both received our “credit profile,” a highly detailed analysis of just how credit-worthy we are based on a sophisticated computer program that tallies your credit details (banking history, mortgages, loans, repayments, etc.) and then issues a credit-rating based on the points they deem this kind of activity to have earned or lost.

So Hister père—a physician who over 42 years of toting up expenses has never been delinquent in a single credit card payment, who has never bought anything except property on credit and who is still gainfully employed—garnered a rating of “fair,” exactly four points more than the Canadian mean of 750.

But my son, a PhD wannabe who owns practically nothing besides an iPod, an old computer and a 1994 Honda Civic he bought off a friend for $1, garnered an “excellent” rating, a whopping 84 points above the Canadian mean.

In other words, the way our economic system works, if my son and I applied for a mortgage or loan at the same time, the guy most likely to get what he wanted and presumably at the best terms is the one who could pledge a 1994 no-air bag Honda Civic and used iPod as collateral.

Which is why, of course, we also got sub-prime mortgages and derivatives that couldn’t possibly fail, hedge funds that couldn’t possibly lose money and the Lehman Brothers collapse.

The story has a happy ending, by the way: My son has offered to take a loan in his name and lend me money any time I require some quick cash.

I thanked him for the offer, and I told him that one day, if he pays off all his loans, he’ll have a credit rating as poor as mine.

Art Hister is a physician in Vancouver. Give him a call if you want to know more about his bank. . . . But, then again, you may already have all of his information.

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