Ever since there have been banks, one of their principal bookkeeping functions has always been the daily reconciliation of every customer’s account(s) and the posting of credits (on the right hand column) and debits (on the left hand column). From the very first day that the first modern-day bank opened, the daily reconciliation has always been performed in the same exact way, probably because it simply made sense; nonetheless, every bank in every country has always posted the credits to every account first and then the debits. There is no citable reference found up until now that establishes the order in which the functions of the daily reconciliation are performed, it has simply been that way always. What this translates into visually can be described as follows:
Mr. H has a checking account at a bank. On the morning of August 5, 2012 (for example) Mr. H had a balance of $50.00 to his favor in the checking account. During the banking day of August 5, 2012, two transactions took place: 1) Mr. H deposited $2,000.00 in cash into the checking account. 2) A check, payable to City Gas Co. for $62.00 written by Mr. H and drawn on the bank was received for payment. At the end of the banking day, when the accounts are reconciled, this is what has always happened:
- The $2,000.00 cash deposit is posted as a credit to the account, leaving a running balance of $2,050.00.
- The check for $62.00 is posted as a debit, leaving a running balance of $1,988.00.
- After posting all transactions, the account’s final ledger balance is updated to $1,988.00. This is the balance that will be reflected for the account the next morning.
Simple, isn’t it? After some pondering on the topic, I arrived at the opinion that credits were posted first as a courtesy to the customer, probably because courtesy still existed back then, but that is just my opinion. If there is a law, a policy or regulation mandating this particular order of events, then it’s been very well hidden for whatever the reason, the point being that the posting of credits before debits is a matter of rote rather than a matter of statute. It is also a pretty decent custom and a courtesy, which is probably why it’s never been an issue. Well, all that is about to change.
It appears that for some reason and at some unknown point in time, more than likely in the last 3-4 weeks, the banking system modified a custom. Customs, require no authorizations, approvals or other mechanisms in order to be modified, they just are. It can be accomplished by a simple inter-departmental memo or even by a verbal instruction; what’s the big deal? It’s only a custom that’s being modified; it’s not like a major, official change or anything. The custom that was modified is the very one exemplified in the opening paragraph; banks, at least two of them, are now posting debits before credits to the accounts held by their customers. There was no announcement made, no newspaper articles or television reports, nothing on any of the news pages on the web; why should there be? Legally, this was no different then moving the water cooler a little to the left in the lobby.
Let’s re-visit the banking day of August 5, 2012 and Mr. H’s checking account, only this time, the daily reconciliation will be run with the new modified custom. It goes something like this:
- The reconciliation opens with a ledger balance of $50.00.
- An incoming check for $62.00 is posted as a debit, overdrawing the account.
- The check is returned to the bank that presented it for payment, with a notification that the account had insufficient funds or what is commonly referred to as ‘the check bounced’. This leaves a running balance of $50.00
- The bank posts a $35.00 debit as a ‘returned item fee’ leaving a running balance of $15.00.
- The bank posts a $5.00 debit as a ‘misc. penalty’ based on the bank’s policy of charging a $5.00 penalty if any checking account’s balance drops below $20.00. This leaves a running balance of $10.00.
- The $2,000.00 cash deposit made on that day is posted as a credit, leaving a running balance of $2,010.00.
-STOP- If anyone just thought: “Hey, he didn’t make out so bad; he ended up with more money than the other way.” Go back and do the math again, please. Let’s continue because this doesn’t end here:
- The check that was returned had been deposited by City Gas Co in their general account. It was sent to City Gas Co by Mr. H in payment of his monthly gas bill. The Gas company’s bank will now charge the Gas Company a fee for a returned check that is anywhere between $10.00 and $50.00 depending on the bank. The gas company is notified of the returned check and the fee.
- The Gas Company orders Mr. H’s gas service cut off and dispatches a crew to shut off his gas the next morning.
- The Gas Company puts the returned check fee that they were charged by their bank on Mr. H’s account.
- The Gas Company charges Mr. H a $50.00 returned check fee.
- The Gas Company charges Mr. H a $15.00 late fee for not having paid by the due date.
- The Gas Company charges Mr. H a $50.00 disconnection fee and notifies Mr. H that it will cost him another $50.00 to re-connect his gas.
- The Gas Company charges Mr. H a $15.00 ‘convenience fee’, because it can.
- The Gas Company will require Mr. H to put up a deposit of $500.00 as a guarantee of payment on account.
- Mr. H still owes the original $62.00 from his gas bill, and has no gas. His house has all-gas appliances and heater, Mr. H lives in Gnome, Alaska. It is mid-August, 2012 so Mr. H is lucky; today it was more than likely in the mid- to high ‘forties’.
- The Gas Company reports the incidents to the credit bureaus who in turn update Mr. H’s file and flag him.
- All of the banks that had issued Mr. H a credit card panic and close his account, regardless of the balance.
- One of the banks that had issued Mr. H a credit card not only closed his account in mid-cycle, when they wrote to him to inform him of their decision, they offered to accept settlement payment of $20.00 in lieu of the $80.00 balance on Mr. H’s credit card and the account would be considered settled.
- Mr. H’s three major credit card issuing banks, the two department stores that had issued him credit cards and the one gas station company that had issued him a credit card all turned over whatever balance (even $0.00) was left owing when they closed his accounts to their various collection agencies, even though Mr. H had never been late with a payment in his life.
- The collection agencies began a relentless telephone persecution of Mr. H; calling him at 7:00 a.m., yelling and screaming at him about being a lowlife and owing money. They call his work, his father, his mother and pretty much everyone he knows, asking for him, or if anyone has seen him because he owes money.
It is very likely that this entire situation will continue, undisturbed and to a great degree, unnoticed. It will take us, the general public, roughly two months to assimilate this new little detail, and by Christmastime, it will be simply another normal thing…normal.
Now, in the time when everyone knows that something has gone very wrong; half the world is desperately searching for a previously unidentified event in the recent past that can account for, be blamed for and ultimately be the foundation for the restoration of what was and the other half is bracing for something unspeakably horrible to happen, something that makes now feel like the warm up. Nobody can predict the future, but there a very good probability that whatever caused the incomparably catastrophic collapse of human civilization’s infrastructure was neither a single event or one that hasn’t happened yet but instead a range of time where many little, tiny, insignificant changes in this mechanism or that system that were nothing more than details which benefitted only a few or even none at all at the expense of everyone, all achieved normalcy.
–Rarely do I personally interject in any math that I’m writing; this is one of those times. Four days ago, someone that I’ve known for over ten years called me a “conspiracy theorist”, with a straight face – as if he were mentioning the color of the sky or anything else that might be considered ‘obvious’. A conspiracy theorist? I laughed for about 15 minutes, hard. No one, ever in my whole life has called me that. None of you; my subscribers, readers of the catalogue of calculations an those who follow my work (there are six digits worth) have ever even alluded to anything like that in all of the e-mails that I’ve received, which will require a long life to read them all. I am about the farthest thing in the world from a conspiracy theorist; I’m a scientist, we don’t understand conspiracies, only facts. Then I realized how this person could have come to such an outlandish conclusion; they found themselves having to compare (and therefore judge) the world and me, and from that perspective, I can almost understand, but I don’t. That conclusion is an excuse to not think, to not see clearly, to simply be one more of what we are turning ourselves into: pussies. I’ll leave you with this for the moment: first, the promise that I will answer the riddle of the conspiracy theories in my next post and finally; the image below.
What you are looking at is not a joke or a story, it is an actual button that was worn by the tellers of a particular bank chain between February and April, 2012 and then by the tellers of another bank chain between May and July, 2012. I’m sure it’s out there somewhere right now. It’s just a little detail; a promotion that is popular this year, from a certain point of view, it can even be considered ‘cute’ . . . NOT.
It’s all in the details.
We can do better.