Opinion

Felix Salmon

How to lose a bet in style, Nick Denton edition

Felix Salmon
Oct 13, 2011 05:53 UTC

Nick Denton lost his bet with Rex Sorgatz by the narrowest of margins — just 10 million pageviews, or alternatively just four days. But he handed over a check for $100 with a smile, and even threw us a huge party into the bargain! Hence, obvs, my not-entirely-sober status by the time we’d waited for Lockhart Steele to finish his eleven-course dinner and make his way up to the Gawker Media rooftop.

Here’s to next year — when Denton will have to achieve 700 million pageviews in order to avoid writing a second check. I promise to film the outcome, whoever the winner might be.

COMMENT

you ever tried a silent disco?
silent disco is a great way to party :-)
here some places to visit
http://www.silentdiscotheque.com/silent_ disco.html
http://soundtransporter.com/
http://silentdisco.de/

Posted by silentdisco | Report as abusive

Counterparties

Nick Rizzo
Oct 13, 2011 00:13 UTC

Just a few of our favorite story links today on Counterparties.com

People don’t really trust banks right now — Pro Publica

UK unemployment is at a 17-year high — BBC

Pennsylvania capital city Harrisburg files for Chapter 9 bankruptcy — Bloomberg

A Teach For America for startups in struggling cities — NYT You’re the Boss Blog

Economic policy as culture war – The Economist

41% of WSJ Europe’s circulation was completely bogus; the publisher has resigned — Guardian

Groupon and Zynga’s accounting crises are self-induced — Dealbook

Siri on the iPhone 4S is a “life changer” — Wired

 

Corporate governance chart of the day, Benford’s Law edition

Felix Salmon
Oct 12, 2011 20:30 UTC

benf_year.jpg

This chart was put together by Jialan Wang, and it shows the degree to which companies’ reported assets and revenues deviate from a Benford’s Law prediction over time. (If you want some good background on Benford’s Law and how it can uncover dodgy numbers from eg the Greek government, Tim Harford had a great column last month on the subject.)

Writes Wang:

Deviations from Benford’s law have increased substantially over time, such that today the empirical distribution of each digit is about 3 percentage points off from what Benford’s law would predict. The deviation increased sharply between 1982-1986 before leveling off, then zoomed up again from 1998 to 2002. Notably, the deviation from Benford dropped off very slightly in 2003-2004 after the enactment of Sarbanes-Oxley accounting reform act in 2002, but this was very tiny and the deviation resumed its increase up to an all-time peak in 2009.

So according to Benford’s law, accounting statements are getting less and less representative of what’s really going on inside of companies. The major reform that was passed after Enron and other major accounting standards barely made a dent.

This doesn’t necessarily mean fraud, per se; it could just be a chart of the degree to which companies are managing and massaging their quarterly figures over time. The kind of fraud that’s so respectable, Jack Welch got lionized for it. Once you start down that road, it’s easy to go further and further forwards, while it’s almost impossible to reverse course. So I can easily see how the natural tendency in this chart would be up and to the right.

Still, it’s worrying; all the more so because I can’t think of any way of reversing the trend. If Sarbox can’t do it, nothing will.

COMMENT

This is under the assumption that Benford’s law will always be correct. If, due to other reasons, the reporting of accounting figures changes such that it is no longer correct, no fraud or ‘massaging’ is necessary

Posted by gleisdreieck | Report as abusive

Restaurant histograms of the day

Felix Salmon
Oct 12, 2011 17:06 UTC

I have a column at Grub Street today looking at some check-by-check level data for five New York restaurants. I got the data from the good people at Bundle, and NY Mag turned it into pretty charts, complete with a red line marking the median amount spent at each place.

But of course there’s much more to these charts than could be fit into a Grub Street column. So here they are again; this time I’ve added two more datapoints to each one. The blue line — which is always to the right of the red line — marks the mean cost of a restaurant meal. That’s the number you’ll see if you visit the Bundle website. And the blue Z marks the amount that Zagat thinks a diner is likely to spend, with tax, tip, and one drink. At Per Se, for instance, the mean cost is $878, while the Zagat cost is $303. (This is a slight apples-to-oranges comparison, since the Zagat price is for one person, while the Bundle data is not per person but rather per credit card or debit card. But both are intended to give an idea of how much the restaurant is going to cost, and the Bundle data is surely  much more accurate on that front.)

daniel.jpg perse.jpg babbo.jpg chow.jpg megu.jpg

Zagat reckons that the “cost” of a meal at Megu is $87 — which is surely meant to mean something. But few people pay much attention to Zagat cost estimates, for good reason — in many cases, it’s actually impossible to get out of a restaurant for the amount of money listed in the Zagat guide. At Per Se, for instance, even with no drink at all, the $295 prix-fixe menu, plus tax, will run you $320.

So how much does Megu cost, in reality? It turns out that question is pretty much impossible to answer. On the Bundle page for Megu, we can see that the average amount of money charged per credit card is “about $200 to $210”; that’s based on a mean expenditure per card of $198.82. But if you look at other kinds of average expenditure at Megu, they look very different.

The mean expenditure, $198.82, is basically the total amount spent there divided by the number of cards used to pay for it all. So if someone pays for a massive blow-out party there, that’ll raise the mean expenditure for everybody else. The median expenditure at Megu is substantially lower than the mean — it’s $126.87. Finally, there’s the mode. If you put all the charges at Megu into $10 buckets, instead of the $25 buckets in these charts, then the mode charge at Megu is between $70 and $80. More than 7% of charges at Megu fall in that range, which means that if you charge your card at Megu, there’s a 1-in-14 chance that you’ll spend seventy-something dollars on that card. That doesn’t make it exactly probable, but it’s more likely than any other amount.

But why try to reduce everything to a single number? This is one of those cases where a picture — or a histogram, rather — is worth a thousand words.

The Megu chart is actually about as simple as Bundle’s restaurant histograms get. Megu was not picked at random. It was picked because it gets lots of customers, and therefore generates a lot of datapoints in the Bundle database; because it is open only for dinner, which means that the numbers aren’t complicated by mixing up a relatively low-spending lunch crowd with a higher-spending dinner crowd; and because it doesn’t have much of a bar scene — if you drink there, you’re likely to eat there too.

But even so, the range of expenditures at Megu is enormous. More than 4% — one in 25 — of the card charges at Megu are for less than $20. And at the other end of the spectrum, more than 1.5% of the card charges are for more than $800; in fact, according to the Bundle data, you’re just as likely to spend over $800 at Megu than you are to spend between $600 and $800. What’s more, if you look just at the people spending more than $800 at Megu, their average expenditure is a whopping $1,894. The tails, in other words, are long.

I’ll admit that I was hoping to see some humps in Bundle’s histograms — what statisticians call a bimodal distribution. If Babbo’s histogram, say, has one spike at $100 and another spike at $200, then that would be a pretty good indication that eating at Babbo is likely to cost you about $100 per head. The $100 spike would be people paying for themselves; the $200 spike would be people paying for someone else as well. And then maybe we’d see another spike at $400, too, where people picked up the check for a party of 4.

But I had no luck on that front. If you squint and hope and delude yourself a little, maybe you can find those spikes at $100 and $200 and maybe even $400. But what about that spike at $250?

The main message I get from the Babbo chart is just that there’s an extraordinarily large range of checks at Babbo — you have a pretty good chance of coming up just about anywhere between $60 and $270. Which is not particularly helpful if you’re someone trying to anticipate how much the restaurant is likely to cost.

In many ways, though, the most interesting of all these histograms is the one for Per Se. Here, everything is set: the menu is a fixed price, the service is included, and while some people are sure to push the boat out when it comes to wine, you can pretty much expect that most checks there are going to be much of a muchness. Can’t you? Actually, no, you can’t.

One in every 35 visitors to Per Se spends less than $75 there — how is that even possible? The mean, median, and mode are relatively close together — $878, $768, and $800 respectively — which implies to me that if you take one other person there for dinner, it’s very easy to end up spending about $750 to $800 altogether. Except, that seems to be very much on the low side. Food alone can run you as much as $610 per person, and most people will spend hundreds more on wine.

At the far ends of the spectrum, fully 18% of the people spending money at Per Se are spending less than $325, which barely seems possible, even if you take into account the 3-days-a-week lunch menu at $185 per person. And that spike at the end representing people spending more than $3,000 is pretty substantial — those checks account for less than 2% of the payments run by the restaurant, but fully 10% of all its dining revenues.

In between, there’s all manner of activity going on. There are two spikes at $600 and $800 — people like to put round numbers on their cards. 44% of all spending takes place in the range between $575 and $1,100 — but that just means that 56% doesn’t.

All of which leads me to conclude that the very idea of a typical meal at a restaurant — or the idea of what a restaurant “costs” — just doesn’t stand up to scrutiny. At Mr Chow of Tribeca, Zagat — which we can use as a guide to the minimum price — says a typical meal will run you $77. Bundle says the “real price range” is $200 to $210. The median amount charged to a card there is $145. And 2.1% of customers spend more than $800, while 17% spend less than $70. What will you spend if you go there? Pick a point on the chart and guess. One thing’s for sure, though: you’re wrong if you think that the diners at Mr Chow Tribeca are some kind of homogenous and interchangeable mass. They might look like that from the outside, but in fact there’s a lot of variety there.

It would be nice indeed, then, if there were some neat formula where you could take the price of the average entree, say, multiply it by three, and get a typical all-in price per person. Sadly, there isn’t. Some restaurants make most of their money on cocktails; others concentrate more on the food. Some allow diners to eat cheaply, others don’t. But the big picture is that the differences between restaurants pale in comparison to the differences between diners. Some people are just going to spend a lot, others are going to get away with spending much less.

The next best thing, at least for people like me, would be a look at these histograms. If we had that, along with the ability to easily drill into the data, it would be an invaluable addition to Bundle’s service. Bundle’s $200-$210 number for Mr Chow of Tribeca, for instance, is interesting, but fully two in three people picking up a check spend less than $200 there.

If Bundle doesn’t want to show histograms, then at least they should switch from mean to median. But in any case, their service is really exciting, since it’s the first opportunity we’ve ever had to be able to make like-for-like comparisons between restaurants when to comes to the question of how much you’re likely to spend. It’s early days yet. But this could be the most important step in years when it comes to helping people know just how much different restaurants cost.

COMMENT

Median. Go with the median.

If you’re looking at wealth, for example, the mean tells you the wealth of the pocket the typical dollar lives in. The median tells you the assets of the typical person.

Look, there _is_ a lot of variance in restaurant bills. But if you want to _compare_ locations, and do so from the point of view of the “typical” visitor (and I know the typical visitor is going to vary from one location to another), you’re still best off with the median.

Posted by loopguy | Report as abusive

Markopolos eyes a fortune from BNY whistleblowing

Felix Salmon
Oct 12, 2011 16:26 UTC

The suits and investigations into BNY Mellon’s dodgy FX trading just got a lot more cloak-and-dagger: apparently all of them can be traced back, in one way or another, to a secret plan hatched by none other than Harry Markopolos.

Mr. Wilson’s decision to become a whistleblower started with Mr. Markopolos, the fraud investigator, who had the 2006 hunch about currency-transaction costs. Over the past four years, he and his legal team contacted Mr. Wilson and two former State Street employees, Peter Cera and Ryan Gagne, to secretly help build cases against the two banks…

Working with the legal team, Mr. Markopolos arranged clandestine meetings with the whistleblowers at a shopping center and hotel restaurants…

Mr. Markopolos’s hunch came from a book by Yale University’s chief investment officer, in which a description of currency transactions stuck out: “Foreign exchange translations may influence returns in a substantial, unpredictable manner.” Mr. Markopolos also noticed that pension funds using outside money managers reported slightly lower returns than the money managers themselves.

He asked a friend who had worked at State Street, who told him that custody banks typically charge pension funds unfavorable foreign-exchange, or FX, prices. The friend told Mr. Markopolos, “No one ever checks FX.”

He strategized about how to find bank insiders who could help him look into his suspicions. A key tactic: Looking for traders who might be sympathetic, then cold-calling them and saying, “I have a better job for you.”

The source for this account is clearly Markopolos himself; I do wonder why Markopolos has chosen this time to out his co-conspirators and to boast about his perspicacity and his whistleblower-recruitment technique.

Markopolos can be a little bit crazy — he said recently, for instance, that law enforcement agencies should treat the board of BNY Mellon “like Seal Team 6 treated Osama Bin Laden”. And the story about reading a book by David Swensen just doesn’t ring true to me. If you look at the passage in question (try searching on “unpredictable”, it’s on page 103), Swensen is talking about the optimal number of asset classes to have, and is saying that foreign bonds don’t constitute a particularly sensible asset class. Here’s a bit more of the passage:

Investors cannot know how foreign bonds might respond to a domestic financial crisis, since conditions overseas may differ from the environment at home. Moreover, foreign exchange translations may influence returns in a substantial, unpredictable manner. As a separate asset class, high-quality foreign bonds hold little interest. The combination of low, bondlike expected returns and foreign exchange exposure negate any positive attributes associated with nondomestic fixed income.

In this context, it’s clear that Swensen is talking about the way that fluctuations in foreign-exchange rates affect returns; he’s not talking about the difficulty of getting good FX execution. Or maybe Markopolos is a bit like Matt Zames: someone who, when reading public documents, can see ideas which are invisible to most people’s eyes.

More likely, there’s quite a lot that Markopolos is not telling Carrick Mollenkamp about the genesis of this operation. Enormous sums are at stake here — Markopolos and his team stand to get up to 25% of the amount recovered by the states, and the suits in total are asking for more than $2 billion.

Essentially, Markpolos and his whistleblowers are trying as hard as they can to extract hundreds of millions of dollars from State Street and BNY Mellon, and trouser it for themselves. You can see how Markpolos’s “better job” might have been attractive to someone like Grant Wilson — especially when it involved him staying in his existing job. And it’s certainly a pitch unavailable to journalists looking for this kind of story.

If this tactic ends up paying huge dividends for Markopolos, Wilson, and their team, I also wonder whether the whistleblower space might not start getting a bit more crowded: it’s easy to imagine that in cases like this one, whistleblowing profits could end up being much bigger, and involve much less up-front investment, than short-selling profits. Should short-sellers start thinking about recruiting whistleblowers instead? And also, has anybody asked Markopolos whether he’s short BNY Mellon? He’s on the record saying that it’s “going to go down”. Is there some kind of rule which says that whistleblowers can’t or shouldn’t short the company they’re shopping to the government?

COMMENT

“Is there some kind of rule which says that whistleblowers can’t or shouldn’t short the company they’re shopping to the government?”

Well the banks are free to short anything they’re peddling to the government or any of their clients, so why shouldn’t whistleblowers have the same privileges? This could be the beginning of a fantastic bank back stabbing market with whistleblowers being recruited by the dozens. With the nearly unlimited fraud going on, this is a whole new market waiting to be utilized. I think Markopolos should incorporate and do an IPO and this could be the start of a whole new business sector, creating more jobs and helping to solve the unemployment problem. How about it Felix?

Posted by Mbuna | Report as abusive

Adventures with FDIC secrecy, cont.

Felix Salmon
Oct 11, 2011 22:16 UTC

Last week, we saw how the Federal Housing Finance Agency was above the law, with the government seemingly having no ability to tell it what to do. This week, it’s the FDIC. In the wake of its obstreporous obstructionism upon receipt of FOIA requests, the FDIC’s smug above-the-law impunity is now coming to light:

JunketSleuth worked for months with an attorney from the Office of Governmental Information Services, which mediates disputes between federal agencies and people requesting public records under FOIA.

The attorney was able to help persuade a number of other agencies to provide JunketSleuth with electronic and paper travel records. But she was unable to get the FDIC to provide the exact same types of records…

Federal agencies routinely violate FOIA, as they’ve done since the law was created decades ago. Still, few agencies have rejected requests identical to those that others have granted, especially when the government’s own attorneys (in this case at OGIS) have worked with the agencies to secure access to the records.

This letter, in particular, from the FDIC simply drips with contempt and condescension for anybody daring to file a FOIA from the FDIC. And the long history of correspondence in this case clearly exhibits an utter lack of goodwill at the FDIC, or any desire at all to comply with the spirit of the FOIA law.

In general, it’s the financial agencies within the government — the FHFA, the FDIC, the Federal Reserve (especially the NY Fed, which considers itself not to be a public entity at all), and of course Treasury — which are by far the worst when it comes to transparency and disclosure. We’re constantly told that certain information is commercially sensitive, for example, only to discover when it finally does get disclosed that there’s nothing commercially sensitive about it.

I’m not sure how to fix this. The White House doesn’t seem to be able to change anything: Barack Obama, for instance, released an executive memo on his inauguration day, making it clear that the Freedom of Information Act “should be administered with a clear presumption: In the face of doubt, openness prevails.” The financial arms of government barely blinked, and continued in their secretive ways.

But in this one particular case, at least, I think it might help if a sympathetic journalist started asking for the FDIC’s travel records independently from JunketSleuth. The FDIC doesn’t consider JunketSleuth a legitimate news organization, and seems to be treating it with especial prejudice. Would they send these kind of letters to an established mainstream news outlet which asked for the exact same information? There’s only one way to find out.

Update: Andrew Gray of the FDIC responds by email:

I’m regretting not getting involved the first time that this was raised but wanted to commit to you that I will personally look into it to see what the issues are.  From my experience, the FDIC is strongly in favor of the transparency required in both the letter and spirit of FOIA.  I know of at least two recent sensitive requests from your Reuters colleagues that were handled to their full satisfaction and have worked with numerous other news outlets and other outside individuals to ensure that their requests are handled appropriately and expeditiously.  While I still need to learn more about the facts in this specific request, I would submit that it is a bit of a stretch to cast a sweeping generalization about our commitment to FOIA based on this one case.

Particularly during the last few years, the FDIC has consistently demonstrated is commitment to openness and transparency.  We make public extremely detailed data about the banking industry, our P&A agreements from failed banks, structured sales and other programs.  During the crisis, we led the development, implementation and management of the Temporary Liquidity Guarantee Program, including posting public monthly reporting on debt issuances.  As an agency, we have led an unprecedented and voluntary transparency initiative throughout the implementation of Dodd/Frank, including posting the names and affiliations in all meetings with outside groups.  Our mission is public confidence – and our reputation as an agency has been enhanced by our willingness to be forthcoming with the public about our actions and views.

COMMENT

Felix,
Smug? Above the law? You should take the time to read carefully all of the correspondence between Mr. Carollo and the FDIC, and also to consider the immense amount of travel that is part of the FDIC’s job. I’m an FDIC employee of some 23 years, and I have no problem with the agency divulging my travel records (they’ve already divulged my salary, by the way), and I don’t think the agency itself is essentially averse to giving Mr. Carollo the information he wants. What they are understandably averse to is spending thousands of dollars to comply with a single FOIA request. You will see in the correspondence that Mr. Carollo has not been helpful to his own cause–assuming his cause is not more about building up his journalistic persona than it is about getting the information he seeks. The FDIC’s response to his request regarding ALL travel records is that it cannot fulfill so general of a request. The correspondence shows that the agency has, in fact, conferred with the FDIC’s Division of Finance as to how it might meet Mr. Carollo’s request, and learned that it would be very costly and time consuming. Yet Mr. Carollo has been unbending in what he wants and how he wants it. He might be surprised at what he could accomplish by just being a little more flexible.

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Counterparties

Nick Rizzo
Oct 11, 2011 21:42 UTC

EU bank stress tests will be getting a bit more stressful — Reuters

A bond market indicator suggests a 60% chance of another recession — Bloomberg

The Super Committee has six weeks left to cut $1.2 trillion; it now meets in private — NYT

Unemployment benefits for six million looks dicey next year without a new jobs bill — CNNMoney

Only 10 people work at an institute Rick Perry says created 12,000 jobs — WSJ

Investment banks are doing badly, while some retail banks are up — Bloomberg

Nouriel Roubini’s research firm is for sale, claims 40% revenue growth in 2013 — CNBC

Are ETFs responsible for all the late-day selloffs and rallies we’ve been seeing? — Dealbook

Elizabeth Warren’s great sin: “she knew what she was talking about” — Vanity Fair

Please stop sending t-shirts to Haiti — Foreign Policy

You can find many more stories, just as good as these, at Counterparties.com

 

 

COMMENT

Great stuff! How about we add: “Romney proves that #OccupyWallStreet movement has done more in 3 weeks to change the “Overton Window” of “acceptable” range of debate than the entire American Liberal Establishment in the past 3 years and $500m in spending”

http://economicmaverick.blogspot.com/201 1/10/thermometer-mitt-romney-offers-proo f.html

Posted by EconMaverick | Report as abusive

Charts of the day, WSJ story-length edition

Felix Salmon
Oct 11, 2011 20:06 UTC

Ryan Chittum has taken a look at the length of the stories on the front page of the WSJ.

Here’s what’s happened to the number of stories under 1,500 words:

wsjunder1500.jpg

Here’s the stories over 1,500 words:

wsjover1500.jpg

And here’s the stories over 2,500 words:

wsjover2500.jpg

Ryan is dismayed at these trends. “Without going long,” he writes, “it’s hard to achieve greatness”:

Certainly, the Journal still does lots of top-flight work, and most stories don’t need 2,500 words. But many do, and how does going short as a policy help readers understand the really important stuff like systemic problems, corporate misbehavior, business innovation, or sweeping economic change?

I, on the other hand, am much more sympathetic to what Murdoch is doing here. WSJ readers are busy: they don’t have time to wade through lots of overstuffed stories in the morning. They want to know what’s going on, and why, and they want their news-delivery mechanism to be as efficient as possible.

If you look at the chart of stories over 1,500 words, it peaked at 800 per year in 2006. That’s more than 2.5 such stories per day, every day including Saturdays. And that’s just on the front page! If you look at the paper as a whole, the 1,500-word stories were appearing at a pace of six per day before Murdoch came along and brought some sense to proceedings.

I read long business and finance stories for a living — that’s my job — and I don’t read six per day, let alone six per day from a single publication. The job of the WSJ is not to overload its readers with many hours’ worth of reading every day. And the current pace, of roughly one long-form front-page story per day, seems much more reasonable to me. (Most readers, of course, won’t even read that — but at least they won’t be completely overwhelmed.)

At the same time, it’s great that the WSJ is putting lots of important information on its front page in sub-1,500-word form — on top of the “What’s News” briefs. As a news consumer, I don’t even want anything nearly that long — I’m looking to get what I need within a few hundred words at most. US newspaper stories have a lot of water weight, and nearly all of them could stand to lose a few pounds.

And what of the dramatic fall-off in the really long-form stuff, over 2,500 words? Up until 2007, those managed to make the front page roughly every other day. Then they all but disappeared, and you’ll find maybe one a month at this point.

I can easily see why that should be the case. Very long stories are often highly self-indulgent, and they take a huge amount of time, effort, and money to put together. Sometimes, they’re incredibly important, and well worth both writing and reading. Often, however, they seem to be aimed at other journalists more than at the WSJ’s core business audience — most of which simply doesn’t have the time to read such things. In a good news organization, I think, the bar should be high before any such story is inflicted on millions of blameless readers. And keeping the output of long-form stories low is one great way of doing that.

The Columbia Journalism Review is naturally going to want to encourage “greatness” in American newspapers, and for decades now “greatness” in journalism has been synonymous with Very Long Stories. But I don’t think, frankly, that the WSJ’s readers have any particular interest in getting a serving of greatness alongside their breakfast cereal in the morning. They’re much more interested in news. And that, to its credit, is what the WSJ is giving them.

COMMENT

The WSJ has readers? Are you certain??

http://www.antipope.org/charlie/blog-sta tic/2011/10/going-down-hard.html

Posted by klhoughton | Report as abusive

Annals of transparent banking, Citi edition

Felix Salmon
Oct 11, 2011 13:35 UTC

On Saturday, two NYT columnists — Ron Lieber and Joe Nocera — attacked the sorry state of bank checking accounts. And their conclusions were almost identical. Here’s Ron:

If you’re trying to figure out your own next move amid all of this uncertainty, well, good luck. As Adam Levitin, a Georgetown law professor, noted in a blog post on creditslips.org this week, it’s hard to make apples to apples comparisons between one checking account and another, and harder still to move your money once you do decide to switch banks. This might be a good place for the Consumer Financial Protection Bureau to set standards.

And here’s Joe:

The government will never force Bank of America — or any other bank — to reduce or eliminate its fees; it doesn’t have the nerve. But, at the least, it could insist that banks display their fees in a uniform way so that customers can compare how they’re being gouged and make banking decisions on that basis. That kind of reform could stir competition and bring down fees.

This, of course, is precisely what the new Consumer Financial Protection Bureau is supposed to do — and would do if the Senate Republicans would ever allow a director to be approved.

I couldn’t agree more, and I’ve been pushing this move quite hard, both on my blog and whenever I’ve had the opportunity to talk to someone from the CFPB. I’m pretty sure this does not require a director to be approved — it just needs the CFPB to collate checking-account details into one big database, and then publish an API allowing people to interrogate that database any way they like.

As it happened, I’d spent most of the previous afternoon at the big Citibank hub in Long Island City, talking about their checking accounts, savings accounts, and, most of all, the new Citibank website, which they unveiled last week with great fanfare.

We didn’t get into the fraught question of the level of fees. But I did ask to see how easy it was, on the new site, to bring up the details of your checking account — what kind of account it is, what the fees are, what the minimum balance is to avoid those fees, and the like.

At this point, we were in the large, sun-drenched office of Tracey Weber, the head of internet and mobile for North America consumer banking. We’d started in a windowless conference room, where Tracey had attempted to show me the website by running through a series of PowerPoint slides. When I said that I’d rather see the website by seeing the website, there was a flurry of confusion, which ended up with Weber having to log in to her own personal Citibank account on her work computer.

Weber, it turns out, gets the same underpowered Dell setup, with a single small monitor, as anybody else. But I could still see what was going on: information about fees and the like are in an entirely separate section of the website. You don’t need to log out to see them, but you certainly can’t get personalized information about them. Even something as simple as savings accounts are — still — very hard to understand: when the screen presenting the two different choices came up, we had to call up a product guru to explain why anybody might prefer the first to the second. And even he couldn’t really manage that. What’s more, the single most salient feature of a savings account — its interest rate — was nowhere to be seen.

Bits of the site look slick — especially the animated expense-analysis pie chart, where you’re able, for some reason, to drag pieces of the pie out to isolate them. But once you’ve done that, you can’t actually delve into that piece and see what spending went into it: for that, again, you need to go to an entirely different transactions screen.

After spending a good couple of hours with Weber, I came away convinced that I couldn’t reasonably blame her for any of the weaknesses with the website: she was just clearly caught up in the middle of an enormous bureaucracy where it was basically impossible to get anything done. Citibank has business relationships with vendors like Yodlee and Popmoney, so it’s possible to use Citi’s website to see the details of your non-Citi bank accounts or to send money to other people armed with nothing but their email address.

But beyond that kind of bought-in functionality, Citi.com is still at heart a vast list of products and services, which you need to be incredibly financially literate to navigate. I defy anybody, for instance, to be able to tell me the difference between, say, an Inter Institution External Transfer to an account in the US, versus a Wire Transfer to an account in the US. (The answer, by the way, is to use neither a lot of the time: if you’re sending money to someone else in the US, Popmoney is the way to go.)

Weber has no control of Citibank’s product suite — her job is to present everything that Citi offers, and that’s always going to be a bit messy. And she’s no technologist, either — when I asked why there were separate downloads for Citi’s iPhone and iPad apps, rather than simply having a universal version, she had no idea what I was talking about.

I’m sure that at the margin some of the language on the new site is easier to understand than some of the language on the old site. But you just need to look at the language of Weber’s announcement to see how far Citi has to go on that front. “Citibank formulated the personal finance management experience with the tools most important to its clients,” we’re told; she adds for good measure that “Citibank continues to strengthen its standing by delivering modern solutions”.

Even the login screen is ridiculously confusing: before you can even enter your username, you have to choose between one of nine different Citi websites to log into. If you have a Citi bank account, and a Citi credit card, and a Citi mortgage, and Citi ThankYou rewards, which of those sites are you meant to log in to? Why can’t Citi just make sure that each username is unique, and log you in to whatever your account is automatically?

None of this is ever going to be fixed internally, by Weber or anybody else. In order to understand what’s going on at Citi, Lieber and Nocera are right: we need a trusted third party — the Consumer Financial Protection Bureau — to tell us. Some banks — probably smaller ones, with flatter management structures — will have transparent fee structures, be a pleasure to use, and will generally count as best-in-class. Those banks should get some kind of gold star from the CFPB. And big banks like Citi will steam on regardless, with every cosmetic change to their website accompanied by a massive increase in fees somewhere else.

COMMENT

You can’t have people display fees in standardized ways, because new, simpler banks might want to charge different fees. If you want change in the world, make doctors and hospitals publish their price lists and fees.

Posted by mattmc | Report as abusive
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