Life is good. I am back in warm and sunny Key West for the season and I get to write a blog about my two most favorite subjects – bankers and outsourcing.
You know my belief that bankers are the real reason why it is illegal for first cousins to marry. As I have said countless times, I have had goldfish smarter than most bankers. Bankers have the unique ability to lose their way in a herd. (At right is a photo of your typical banker at work.) Only two things are infinite: the universe and the stupidity of bankers and I am not so sure about the universe. When stupidity is sufficient reason to explain the actions of bankers, there is no reason to seek any other explanation for why they do what they do. At least bankers have some value – they make Sarah Palin seem like a Rhodes Scholar. It is just too bad that stupidity is not painful for the stupid one, rather than the victims of stupidity.
Those who are regular readers of this blog (however few there may be) know that the other business activity that riles me to no end is outsourcing. Outsourcing is nothing more than a cocoon of refuge for the incompetent, incoherent and indolent business executive. Unfortunately this means that outsourcing has become a booming business.
Dream on, You Fools . . .
There are voluminous examples of the horrific results outsourcing causes, but none more poignant than Boeing and their new Dreamliner. The Dreamliner, of course, is Boeing’s new 787 long range, twin-engine jet airliner that it claims is the most fuel-efficient airliner in the world, and the world’s first major airliner to use composite materials for most of its construction.
Several years ago Boeing decided the quickest, most effective and cost-efficient way to get its new Dreamliner on the market to compete against Airbus was to outsource many of the critical development and assembly efforts. It became a management nightmare that cost Boeing billions of dollars, not to mention lost customers and credibility. The airliner is now years behind schedule and is still not certified to carry passengers. Boeing is now promising (hoping?) to begin deliveries “sometime” in 2011.
This is but one example that could be used to prove the point that outsourcing should never ever ever be implemented for those activities that are critical to the success of the organization. It is a cardinal sin that should be punishable by termination of the leader who allows a company to abdicate activities that are critical to the success of the company to anyone outside the company. While the appeal of outsourcing critical and difficult tasks to “experts” who specialize in them may be alluring, more often than not they lead to the very opposite of expectations and are nothing more than confirmation of weak management.
So, what do you think might happen if one were to combine the stupidity of bankers with the false promises and risks of outsourcing?
To find the answer, we need look no further than a recent front page article in The New York Times, aptly titled “Bankers Ignore Signs of Trouble on Foreclosures.” Article writers Eric Dash and Nelson expose the fact that, during the housing boom times, banks were so eager to make millions issuing and packaging new mortgages that they gave scant attention to developing the resources and ability to service the mortgages once they were made.
As the Times article pointed out, “Banks spent billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide. The lowly task of servicing these loans became an afterthought. Even after the housing bubble began to burst, many of these operations languished with inadequate staffing and outmoded technology, despite warnings from regulators.” Just the way you would expect stupid bankers to function.
The bankers so disregarded the costs and complexity of servicing these loans that they only allocated .25 percent of the total value of the mortgage for maintenance. This comes to about $500 per year on a mortgage of $200,000. And the result? The system became so strained that in many cases the banks couldn’t track those who were paying their mortgage, not to mention those who were delinquent.
And when the mortgage crisis began to wash over them like a toxic tsunami, the banks were forced to hastily staff up to deal with the deluge of foreclosures and requests for loan modifications. Sadly, the banks often turned to workers with minimal qualifications or work experience. A JP Morgan executive characterized these employees as “Burger King Kids” who barely knew what a mortgage was.
So, taking the above into account, it will not come as a surprise that when banks got into trouble processing mortgage adjustments and foreclosure paperwork they decided the solution was to outsource the activity. If it were not so serious, it would be funny, but banks actually outsourced the mortgage processing to firms in Guam and the Philippines. Really! I am not joshing here!
The New York Times article quoted an employee managing this outsourcing who said, “The girls would come out on the floor not knowing what they were doing. Mortgages would get placed in different files. They would get thrown out. There was no real organization when it came to the original documents.”
Of course all of this led to the mortgage and foreclosure abuses we’ve been reading about. It is why Bank of America and several other large banks to put a moratorium on foreclosures; not because they care about the customer, but because they have absolutely no firkin’ idea of where their mortgage portfolios stand or how to find out.
Now tell me that bankers are not stupid!
And the Moral of the Story …
It’s simple … When stupid people have power, don’t be surprised when they do stupid things. To bad we can’t outsource bankers.