Last month, the Huffington Post launched a campaign called Move Your Money that urged people to support community banks. The idea is that by moving your money to a community bank, you can help put the “too big to fail” banks on a diet so that they get smaller, while at the same time help a local bank remain competitive. The NPR program All Things Considered took a look at the campaign over the weekend, and talked to some experts about whether it’s worth making the switch.
First, all “movement” talk aside, there are a couple of immediate benefits of community banking for many (not all) consumers: they frequently offer better deals and more personal customer service; and by taking your money out of one of the big six banks, you’re giving it less revenue to lobby against your interests at the government level.
But the host of All Things Considered points out that Move Your Money smells a little like a populist movement meant to let consumers strike back against the big banks that they feel powerless against. A bank analyst named Bert Ely says the idea of “punishing” big banks is absurd, and like spitting into the ocean as far as being any sort of movement to effect change. He admits that he banks with a community bank, but that some customers may not be as well-served at the local level if they move their money without making sure the community bank can meet their needs.
Former IMF economist Simon Johnson counters that it’s not about punishment, even if that’s the first thing people think of when they hear about this idea. (Our first post on the campaign was tagged, “Revenge.”) Rather, moving your money to a community bank is a good idea purely out of self-interest:
NPR: “But why punish the banks if they have almost all paid back what was essentially an investment by the federal government?” [i.e. TARP funds]
Johnson: “It’s not about punishment, it’s about responsibility, about people looking forward, and saying, ‘How comfortable am I with the largest six banks in this economy now having total assets–which of course come from their liabilities, which is money they get from us–total assets of over 60% of the size of our economy, 60% of GDP?’ That’s a big banking system that’s more concentrated than in the past–those same six banks back in the 1990s were less than 20% of GDP.”
Here’s the Move Your Money promo-video mentioned on the program: