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The banks are broken. Let's fix them — ourselves

Money Matters
By PHILIP EIL  |  January 16, 2014

In the second sentence of his new book, Checking the Banks: The Nuts and Bolts of Banking for People Who Want to Fix It, Tom Sgouros calls financial activists “almost by definition, dilettantes.”

Wait a second. Is this a defense of Wall Street masquerading as a how-to reform guide?


Sgouros — the policy analyst, freelance robotics programmer, writer, filmmaker, one-time candidate for general treasurer, and accomplished theater performer (his online bio highlights experience as a “rope-walker and silent clown,” plus eight written/performed solo shows, including one co-starring a robot Sgouros built in his basement) — goes on to point out that people who spend their careers studying banks tend to be, well, bankers. The rest of us, meanwhile, are left at “a disadvantage when we notice that banks are messing things up for everyone and we don’t have the vocabulary to discuss the problems with confidence.”

And, so, over the next 200 pages, Sgouros tries to rectify that problem in the “hope some of you will use the information here to become more effective advocates for changing the way our financial system works.” He offers hypothetical balance sheets. He offers equations (“Assets = Liabilities + Capital”). He offers explanations of the differences between money market funds, mutual funds, hedge funds, private equity funds, and venture capital funds. He offers a breakdown of “predatory public finance,” in which he discusses the “many ways banks regard our state and local governments as marks to whom they can sell the newest, shiniest, financial gimmick, no matter how risky or rigged.” And, to top it off, he offers a 28-page glossary where terms like “heteroskedasticity” (“a collection of variables where some portion of the population measured has a different variability than others”) are found next to “humility” (“a quality you would expect to see more of from economists and bankers who failed to foresee the disasters of 2007-2008”).

He also offers a bit of local history. In the same introduction where he states his mission, Sgouros explains how he started looking closely at banking in the first place. It was in 1991, when one third of the Ocean State’s citizens watched their bank accounts freeze and become inaccessible after the Rhode Island Share and Deposit Indemnity Corp. (RISDIC) “turned out to be little more than a nest of backslapping and incompetence. . . driven into sudden insolvency by spectacular misconduct at several of its member banks.”

“Trying to understand the problem, and then trying to imagine better policy responses than the ones on offer, began my career as a banking analyst,” he writes.

The Phoenix caught up with Sgouros recently for a discussion of his book and the state of American banking. Our conversation has been edited and condensed.

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