Move Your Money

[Paslode]

This sounds like a interesting concept, take your money out of B of A, Citi, etc. and throw it in your local, home grown bank.

What do number crunchers of the board think?

http://www.thenation.com/doc/20100201/editors

Move Your Money
Editorial

This article appeared in the February 1, 2010 edition of The Nation.
January 14, 2010

Are you angry about Wall Street's reckless excesses? Are you disappointed with President Obama's limp approach to reform? You can change this, acting individually and collectively. Withdraw your deposit and savings accounts from the large banks that brought the system to ruin and were subsequently rescued with billions in government bailouts. Put your money instead in smaller, safer banks or credit unions closer to home--the thousands of community institutions that do not harvest their profits from greed and recklessness.

"Move Your Money" is an electrifying slogan that's lighting up the Internet because it shows people how they can push back against the big dogs of banking. The concept is simple, but this is a big idea that could alter the timid direction of financial reform.

This campaign is potentially more than a feel-good gesture. If coordinated with institutional reform efforts, it could lead to a broad rebellion against the financial system, with citizens reclaiming the power to act directly when politicians are too intimidated by moneyed interests to act in the public interest. Economist Jane D'Arista put it crisply: "We are not a nation of widows and orphans. We have quite a lot of money, and people control some of it. They might ask why they don't control more of it."

The campaign was launched just before New Year's Eve by Arianna Huffington of the Huffington Post and Rob Johnson of the Roosevelt Institute. An influential bank-rating firm, Institutional Risk Analytics, donated a website window (moveyourmoney.info/find-a-bank), where citizens can find banks in their ZIP code that IRA certifies as safe and sound.

In the first forty-eight hours more than 100,000 responded with inquiries. Within a week, people had searched for good banks in 16,631 ZIP codes--nearly 40 percent of the nation. The search tool is now getting 45,000 users a day. Naturally, the corporate media promptly assured readers that "ordinary Americans lack the power to hurt the big banks," as a Washington Post headline put it.

Wrong. The cynics either do not understand banking or misunderstand the widespread public anger. Dennis Santiago, IRA's CEO and managing director, explained that banks compete fiercely for the "core deposits" provided by individual and small business accounts--this stable money is their preferred base for profitable lending. Take away core deposits, and bankers feel immediate balance-sheet stress. Expand the account base for community banks, and they gain greater stability and greater lending power. "Will moving your money have an effect?" Santiago asked. "And by effect, I don't mean making a momentary political statement. I mean making a structural difference to the country's financial system. The answer is yes."

Structural change ought to be the primary goal of financial reform--breaking up the concentrated power held by mega-banks and creating a balanced system of smaller, more diverse lending institutions that thrive by serving local credit needs. Alas, the Obama administration and Congress are pursuing the opposite goal--rescuing the behemoths that failed and encouraging even greater financial concentration. This will lead to more reckless adventures, more "too big to fail" bailouts.

"Move Your Money" is an important model for teaching people how to change a dysfunctional system. The same principle of taking control of your own money is at work in related reform movements. A campaign launched by faith-based community organizations associated with the Industrial Areas Foundation identifies sky-high interest rates on credit cards and other lending as the ancient sin of usury. IAF groups are asking churches, foundations and local governments to withdraw funds from the usurious banks that profit by destroying borrowers. Organized labor, likewise, has launched an aggressive movement to insist on responsible investing values for the pension-fund wealth of working people, urging state treasurers and fund managers to invest for society's interests as well as good returns.

Changing the nature of finance capitalism is a long road, to be sure, and the industry will resist change every step of the way. But the fight begins in earnest when people decide to move their money.

The lack of profitability of the banks core business is why a recent analysis shows that many banks would lose money without the huge fees they charge for overdrafts and missed payments.

[Paslode]

Originally Posted by HowardCohodas

The lack of profitability of the banks core business is why a recent analysis shows that many banks would lose money without the huge fees they charge for overdrafts and missed payments.

Are those big banks that offer 'Free Checking' or all banks in general? The reason I ask is a lot of people balk at paying a monthly account fee, yet those same people many times pay a higher overdraft fee than I would at my bank were I pay a monthly account fee.

Originally Posted by Paslode

Are those big banks that offer 'Free Checking' or all banks in general? The reason I ask is a lot of people balk at paying a monthly account fee, yet those same people many times pay a higher overdraft fee than I would at my bank were I pay a monthly account fee.

"Free checking" can't be free. Most are not as astute as you.

[Peregrino]

We left BofA just before the bailout; moved everything to PFCU and haven't looked back. PFCU isn't exactly "neighborhood" but they're close (for the military community anyway) and they've treated me right for 20+ years so it was time to reward them with the rest of our business. My rationale was similar to that of the author - smaller, more principled, and a more responsible business model. Based on other's comments in previous threads, I'm assuming USAA engenders similar loyalty. The funny thing is - the wife is the one who actually closed our accts at BofA. When she announced her intention, the female account executive she was dealing with closed the door and they had an "extended" chat. Seems she was nervous too, for the same reasons, and she worked there!

[Paslode]

Originally Posted by HowardCohodas

"Free checking" can't be free. Most are not as astute as you.

Not only are my fees less....But for $18 a month they know me by my first name, not by account number. They are very friendly and they always call me if something is up with my account.

And I am a small, small almost invisible speck on the account list.

[nmap]

I think it's a good idea. The smaller banks have, at least for me, been much more flexible and accomodating. I've heard good things about USAA. And it might be worthwhile to consider Pentagon FCU. I have been pleased with Pentagon FCU.

[LongWire]

I am very happy with USAA, not only for Banking but my vehicles and home owners as well. I don't hit the ATM alot by the pay you back the ATM charge for at least 10 times a month (I think). Never had a problem.

One of my cards was used fraudulently this past year, and as soon as I realized it I let them know. The froze the card, issued me a new one, and payed me back within 2 weeks.

No Complaints, and their interest rates aren't bad either.

[Utah Bob]

Originally Posted by Paslode

Not only are my fees less....But for $18 a month they know me by my first name, not by account number. They are very friendly and they always call me if something is up with my account.

And I am a small, small almost invisible speck on the account list.

Ditto. Dumped the big dog banks about 5 years ago. Much more satisfied with my local bank.

[Over]

I know its not a small local bank, but USAA has been incredible to deal with over the past 15+ years. Great benefits with them include the reimbursed ATM fees since they don't maintain their own ATMs, free online bill pay, and two bleeding-edge technologies (Deposit@home and Deposit@mobile) (*for qualifying account holders). D@home allows you to use a scanner connected to your home computer to deposit checks to your account. D@mobile is the same, but you take a picture with your iPhone (BlackBerry version rumored to be on the way). You get a confirmation number, funds are available immediately and the only thing left to do is shred/void the check. They've worked flawlessly for me and eliminated the one gripe I had about USAA--having to mail checks in order to have them deposited to my USAA account.

If you want to see how these work, check here:
Deposit@mobile
Deposit@home

[JJ_BPK]

I have used USAA and the IBMSECU for 40 years with no problems. For the last 10 yrs, I have moved more to USAA because the CU is very conservative with loans. They do not compete on interest rates, as they are trying to give their depositors good returns. IBM'ers happen to be very good savers..

BUT,,, The initial note about moving out of the BIG banks into small locals was the thrust..

This I disagree with. We have a local bank(actually I think it's three) that has been part of a bubba crowd that supported a bunch of local land developers. They were lending money to buy & build outrageous vacation resorts and maga-buc$ homes,, without any thought to actual need... One guy was actually calling the bank president and TELLING him to put money in his account to cover land purchases,, AFTER he bought and sold a piece of land.

This probably does not happen in every small town,, BUT I can envision a bubba crowd using the local small family owned bank to manipulate the system for their personal gain.

The problem with small banks doing what the large banks do is they do not have the liquidity to cover bubba's FU's.

If you look at the list of bank foreclosures, I suspect you would find that it was not the manipulations of a BOA that caused their foreclosure.. But rather Uncle Lugie, loaning cuzin Bo, to pay for Aunt May-Lyn's investment in to corn futures, because they all voted for Al Gore...(substitute your own local bubba story as required)

Big banks and Small banks are not the problem. It's little pencil dick bean counters that think they can fool the world with their accounting 101 tricks to make themselves bizzalionairs..

Invest in those you trust,, not friends, and certainly not relatives...

Adder: Little banks made lot-n-lots of home loans to marginally un-loanable individuals,, because they knew they would turn around and sell the loan to a big outfit. Something to think about. If your bank sells your home loan, they could care less if it ever gets paid...

My $00.0002

[MackallResident]

I use a relatively small bank, it is the state employee's CU in NC. I have a higher interest on my checking accounts there than I would in savings at other larger banks! I love small banks, every time I journey back to Aberdeen, NC someone in my bank still remembers me.

I am not much of a number cruncher, I just pay my bills, and if I have any money left over after those, and all retirement contributions, I try and hold on to it.

[The Reaper]

Been using a big bank, a small local bank, USAA for insurance and credit cards, plus Pentagon Federal CU off and on for more than 30 years. The funny thing is that the small local banks here when I was growing up turned into the mega banks BoA (formerly NCNB) and Wachovia (formerly First Union) over the years.

PFCU's auto and home loan rates are the best, and their credit cards are worth looking at as well.

We rolled our construction loan over to a conventional mortgage with them, and their rates were the lowest we could find. None of the large or small banks could touch it, or even get within a point and a half of the rate. Very flexible terms. Only problem was they were very busy and hard to get a human on the line. We made closing date, but only with a couple of extensions. I would highly recommend them, if you are eligible.

TR

[Rumblyguts]

For those interested, here's a link for an hour's-worth of a call-in program that Mr. Johnson did on Wisconsin Public Radio this morning. The listen and download links are at the bottom of the first paragraph.

http://www.wpr.org/cardin/index.cfm?...2008%3A00%3A00

[6.8SPC_DUMP]

Great thread and comments as usual. I don't consider myself an expert in anything, considering what QP's are to warring or Mr. Harsey is to knife making, but I hope this is helpful to some.

The major threat to local banks, as opposed to national banks, is their balance sheet risk is centralized to that one community. For instance, if a local bank depends on a Military base for the income on mortgage payments from those stationed there and that Military base closes, even a very sound balance sheet may collapse. Accordingly, local banks in MI, CA, NV and AZ were particularly hard hit in the mortgage meltdown.

National banks can better mitigate this risk because they have branches in many different communities. They also will be more likely to have branches in other countries if that is an issue.

Personally, I prefer the model of non-corporate Credit Unions.

Credit unions are not-for-profit institutions exempt from both federal and local taxes. Therefore, they can charge below-market rates on auto, home, and signature loans, while offering higher interest rates on savings and checking accounts.

You maybe thinking: "Well the below-market rates on home loans is what caused all these problems thanks to Fannie Mae and Freddie Mac using the Community Reinvestment Act - so why the hell would I put my money there?"

So what makes non-corporate credit unions any better? I'll put the long winded answer at the bottom of the post*, but, their lending doesn't remotely resemble this process and even in the morgage meltdown it was rare for a non-corporate credit union to go belly up, dispite loans being centralized to that one community. I personally think the morgage melt-down hasn't ended so it's a safer bet in my eyes.

They are member-owned cooperatives, which get their operating funds from shares purchased by individual owners, who are members. Members get paid dividends out of the earnings made on the interest of approved loans. Because they are member owned non-corporate credit unions are among the most conservatively run financial institutions in the U.S.

They also benefit from the same FDIC coverage as any other bank.

The National Credit Union Administration web site if interested, but talk to a professional, this is just my .00000002. Link

Temporary Changes to FDIC Deposit Insurance Coverage
The standard insurance amount of $250,000 per depositor is in effect through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor.

The FDIC’s temporary Transaction Account Guarantee Program provides depositors with unlimited coverage for noninterest-bearing transaction accounts at participating FDIC-insured institutions. Noninterest-bearing checking accounts include Demand Deposit Accounts (DDAs) and any transaction account that has unlimited withdrawals and that cannot earn interest. Also included are low-interest NOW accounts (NOW accounts that cannot earn more than 0.5% interest) and IOLTA accounts. This unlimited insurance coverage is temporary and will remain in effect through June 30, 2010. Link

However, all that is temporarily null and void in the event of a "bank holiday", which may occur at some point; particularly in the event of a major terrorist attack.

For this reason some financial advisors (generally to the wealthy) have encouraged their clients to get out of US based assets and property and conduct their banking and gold storage overseas.

If the US does devalue the dollar it may confiscate gold again, as they did in 1933 under EO 6102, to tie the dollar back to gold. The ban lasted 41 years and was not lifted until three years after the USD came off the gold standard. The "Smart Screening" technology will be effective in detecting in external bodily smuggling of gold as it does not set off typical medal detectors.

It should also be noted that since banks need our core deposits to leverage the amount of money they can have the Fed print for them (or "maintain within the confines" of their already stretched fractal reserve requirements); they fight hard for it and don't like credit unions. Here was the Federal Reserve's purposed idea in 1999 to keep your money (and the money they print from lending money) in banks: The Carry Tax that taxed the value of each privately held and individually marked dollar as long as it wasn't in a bank... Link

Originally Posted by HowardCohodas

The lack of profitability of the banks core business is why a recent analysis shows that many banks would lose money without the huge fees they charge for overdrafts and missed payments.

Great point. It also led to sweetheart leveraging deals like:

The repeal of Glass-Seagull: which enabled the same corporate pyramiding of debt as in the Great Depression, now with the ability to under-write insurance. and;

The Commodity Futures Modernization Act of 2000 (CFMA): In which major dealers of large over-the-counter derivatives transactions stopped being regulated as “futures” with SEC and “securities” under federal securities laws. “Safety and soundness” standards were replaced by “entity-based supervision". Commodity Exchange Act was dead just like the great depression.

What do we have to show for it?

Enron's electricity futures scam, the fraudulent oil futures jump to $140 a barrel early in 2008 and the mortgage melt down.

I wonder if handing control of our monetary policy to a banking cartel who makes interest on our national debt (400 billion a year now and closer to a trillion a year when interest rates raise) and banking lobbyists had anything to do with it?

Here's a rant by Dylan Ratigan I was sent on the "reform" by our "elected representatives". It's fast paced but sound bytes is what they do on these shows. Rep. Perlmutter (D CO.) says it well: "the best reform since the new deal". Well worth the 7 min. IMHO Link

Have a good weekend.
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*It's important to remember that for many institutions regulated under CRA: issuing home loans to people without checking if they had a job, if they had savings or if they were 10 million in debt, was literally standard practice for years.

Also when they issued sub-prime, Alt-A and Option Arms loans they made a higher fee.

The toxic assets were passed along to investors by means of the "securitization process" where these mortgages were pooled together to create a new security that's value was based off of the underlying home's value and mortgage cash flows.

These assets were sold or transferred to an issuer, or special purpose vehicle, which is used to manage the assets and legally protect the company from the assets' obligations. The SPV will then sell the securities, which are backed by the assets held in the SPV, to investors.

During this time Credit Rating Agencies became more focused on the volume of mortgage-backed-securities they approved rather than the fee that they made from each MBS. Also, (because an Act passed that is described below) the credit rating agencies' only requirement to approve a AAA/risk free rating was to make sure that the bank followed its own guidelines. If the bank made the amount of money the person who wanted the mortgage said they had, the sole basis of their decision on whether to approve the loan, the credit rating agencies just needed to check to see if that person actually said they had that much money. They are called "stated income loans" and no one verified the claim.