Actually, I’m not a bankster. I’m a Progressive working in an industry that is rightly vilified for what has transpired over the last decade. I work in an industry that almost collapsed the global economy. The sad and tragic truth is that the unbridled greed of the Wall Street barons have caused personal suffering on a scale that is difficult to comprehend and absorb. Let me share some insights into how big the Wall Street barons have become and why you should move your money (and loans) already.
Full disclosure, I work for a very small west coast based community bank that shares my personal values and strives to do the right things for our community and is guided by a progressive mission.
I am wrting this diary because I feel horrible about the predictable consequences of unchecked greed and an industry run by ethically challenged CEOs. How many people have lost their jobs due to the greatest recession since the Great Depression? How many people have been kicked out of their own homes? How many people have been forced to delay their retirement as they have seen their 401k and retirement plans vanish? How many college students graduate today with little or no hope at a decent job with a career path and burdened with massive debt? How many people have lost hope that their children’s future will be better than their own?
Many of you on this site know that Bank Transfer Day is slated to take place on Nov. 5. Many of you have taken action already to move your accounts from the big banks to a credit union or community bank. Give yourself a pat on the back. It can be difficult for many to make this move as it does take a little time and some effort for a smooth transition. You got to move your direct deposits and your auto-debits and you got to get new checks and new debit cards and get used to a new on-line banking system. Sure I get it that maybe you got better things to do with your time. Some will never move their accounts because they just like the convenience factor the big banks offer – lots of branches, lots of ATMs, drive up tellers, and slick on-line banking features. For those still inclined to move their accounts, I will share some information that will hopefully get you to finally take that step. A chance to make a statement. You’re done like toast and you won’t let the megabanks earn another dime at your expense.
For starters, let’s look at the overall market share of the megabanks – those institutions with over $100B in assets. The top 10 largest banks in this country control 44% of all deposits as reported by the Federal Deposit Insurance Corporation as of June 30, 2011. Here are the market share numbers for the top 4 banks:
Bank of America 11.8%
Wells Fargo 9.2%
JPMorgan Chase 9.0%
We have heard time and time again that the small business sector has a better track record for job creation than the Fortune 500. How do the megabanks stack up when it comes to providing loans to these small businesses? We generally classify a “Small Business Loan” to be $1 million or less. With this definition, the largest 20 banks in the country provided only 28% of all Small Business Loans as reported by the FDIC for the third quarter of 2009. By comparison, Small Banks ($1 billion in assets or less) provided 34% of all Small Business Loans. Big banks prefer to loan money to big customers as these types of loans tend to be more profitable. The rationale is that it can cost as much money to underwrite and approve a $1 million dollar loan request as it is for a $10 million dollar request.
What about fees? The megabanks love to have your checking accounts simply because they can earn a lot of money from related service fees. When I was employed as a Manager with a megabank a number of years ago, my performance was, in part, measured by the amount of revenue that I could generate from overdrafts and NSF fees. This “fee” income was considered a highly coveted source of revenue for the bank and we were always under pressure to open as many new checking accounts as possible. We weren’t so interested in meeting the needs of our customers and helping them to save money or to plan for their future. A good many of these new customers were likely to manage their money poorly and as a result end up owing the bank hundreds of dollars in overdraft fees again and again. In practice, you could rack up $200 in service fees on a single day even if you were to overdraw your account by only a small amount. The overdraft fee is charged per transaction once you have depleted your funds. That $2 cup of coffee can end up costing you an additional $35 service fee. By comparison, the average overdraft fee for small banks is closer to $25 and maybe even less for many credit unions.
And as you know, banks have been working overtime in the past few years trying to clean up their portfolio of under-performing or non-performing loans. The community banks and credit unions are much more likely to work with you as an individual or as a business owner to get your loan adjusted or modified or have payments deferred such that you can keep your home or keep the doors to your business open. With a community bank, you will often know the loan officer and have a personal relationship with her. If you get in trouble with your megabank, they are much likely to pull the trigger to seize your collateral and write off the losses.
In 1966, there were approximately 10,000 single office banks operating in the United States. As of 2008, the number of single office banks had shrunk to approximately 2500. In a relatively short timeframe, we have seen a dramatic reduction of the local community banker who knew everyone in town and was the helpful neighbor who knew your name and your life story. Think Bailey Building and Loan Association from the classic 1946 movie - It's A Wonderful Life. Now, the megabanks are viritually in every community in America.
And now, due to the negative publicity from their proposed debit card transaction fee and the success of OWS, Bank of America has announced that they will no longer move forward with this plan. I have no doubt that they have seen a sharp surge in customers closing their accounts and I think that this has some nominal impact on their decision. I am only guessing but I suspect that they have heard back from their retail banking managers and it probably wasn’t pretty. Wonderful, people are finally fed up and taking action to divest themselves of modern day robber barons. How about you?
There are lots of resources to help you find a credit union or community bank.