Friday, 29 January 2010 00:00
Many of us have experienced the horror show. Unfair, unreasonable, unilateral fees, interest rate increases, credit line reductions, payment schedule tricks, foreclosure traps. The biggest banks took our money, and in gratitude there has been an orgy of greedy, predatory behavior. And the bonuses.
The “Move Your Money” movement started up in late December. The simple idea is that Americans can shift power from the biggest “too-big-to-fail” national banks to local community-based banks and credit unions. These alternative institutions, which have never been heavily invested in risky derivatives, have more flexibility and motivation to invest in the local community, creating jobs and revenues. They are also more likely to treat customers like people.
The four biggest banks alone now control over 40 percent of American deposits. Americans have about $900 billion in checking accounts, and $6.8 trillion in “core deposit” savings and time-deposit accounts. We provide big banks with a series of publicly-financed safety nets, and our deposits have been leveraged, invested and gambled like bets in gigantic casinos.
There’s a four-minute video explaining the movement at moveyourmoney.info. Enter your ZIP code, and you’ll get a list of stable local banks. There are two dozen in or near my school district. Some advertise in this newspaper. The Credit Union National Association site (see creditunion.coop/cu_locator) gave me a list of 19 credit unions based within five miles of my house.
You probably have more than you think invested in the behemoth banks.
Our local governments turn to banks for all kinds of financial services. It is the part of local government that is most shrouded in mystery, often based on personal contacts, with little or no public comparison between services offered. Local officials are often overwhelmed by it all and hire financial sector firms for advice on money management, project financing and even basic budget strategies. When you send in that property tax check, it isn’t tacked onto some wall for display purposes; it is spread around various favored banks, in numerous accounts. The banks invest the money they hold, typically multiplying the value of public deposits eight to 10 times over. State guidelines say that long-term funds should be held in interest-bearing accounts. Well, local banks and credit unions pay interest.
As for its own accounts, New York State requires its agencies to deposit funds only in commercial banks. Perhaps at one time this was considered a stable, reliable choice. If you own a commercial bank and would like state agencies to deposit money in your shop, New York helpfully produces brochures and web pages giving hints in how to increase your chances. One bank (JP Morgan Chase) has been granted sole authority to hold any collateral other banks may be required to put up, which is nice work if you can get it.
Meanwhile, North Dakota is one of only three states not in a budget crisis. They also have the country’s only state-owned bank, the Bank of North Dakota. All state agencies there deposit their funds into BND, which pays a competitive interest rate paid to the state treasury. Deposits from agencies and the public create a healthy reserve for the bank, which generates low-interest loans “to promote agriculture, commerce and industry in North Dakota.” For over 80 years, until its government sold it off, Australia’s Commonwealth Bank was another successful public model. A candidate in the Florida Democratic primary for governor has made creation of a Bank of Florida a central theme of his campaign.
How many billions of dollars could be saved or generated outright by leveraging New York State’s accounts and assets? How much could we save in local property taxes by refinancing debt through a state-owned bank? A county bank? State and local pension funds around the country now total $2.4 trillion, and management fees and transaction costs paid to big financial firms cost an extra $20 billion to $45 billion a year.
I don’t begrudge banks fees for services. After all, we are not Communists. But if the Wall Street banks won’t end their marauding against us, then we should systematically withdraw our patronage. It’s nothing personal. It’s only business, just as the big banks see their relationship to rank and file Americans.
Michael Miller is a freelance writer, designer and strategic consultant who has worked in state and local government. He lives in New Hyde Park.
Michael Miller is a freelance writer, designer and strategic consultant who has worked in state and local government. Email: email@example.com