Is it Time to Foreclose on Your Bank?

3p is proud to partner with the Presidio Graduate School’s Macroeconomics course on a blogging series about “the economics of sustainability.” This post is part of that series. To follow along, please click here. [caption id="attachment_92718" align="alignright" width="300" caption="An Occupy Wall Street march in Atlanta"][/caption] By Mara Slade There has been a lot of talk these days about leaving big commercial banks. From the Occupy Wall Street movement to the “Move Your Money Project” and Bank Transfer Day on November 5th to conversations overheard in the cafes and streets of San Francisco, more people are talking about leaving their big corporate banks. At the very least, they are thinking about it — myself included. And it isn’t difficult to see why. There is a growing consciousness about the culpability of banks in bringing about the financial crisis we are still struggling to overcome. In case you missed it, financial deregulation was brought about by intense lobbying by the financial services industry, with the strong support of the economics profession (note: See Inside Job). The mortgage crisis was brought on by overzealous risk taking and fraudulent acts by large corporate banks that put the homes of millions of Americans in jeopardy and devoured the economic security of the middle class. Joseph Stiglitz, Nobel Laureate and economist, told a crowd of OWS protestors at Zuccotti Park in October that we’re currently experiencing “socialized losses, and privatized gains" and “that’s not capitalism.”  The middle class has seen their sense of economic security eroded through persistently high unemployment rates, the loss of homes, shrinking 401k’s and the impending reduction in essential government services. Which brings me to where I am today — thinking about moving the humble sum of money I have at Bank of America and putting it to better use elsewhere— but where? And what difference does it really make? Big banks can’t tell me how my money gets put to use According to data from the Federal Reserve, Bank of America had $2,264,435,837 in total assets as of 6/30/11, followed by JP Morgan Chase and Citibank.  Yet Bank of America can’t tell me how that money — or more importantly — my money, gets used in any meaningful way. Is my money being funneled into exorbitant bonuses for Bank of America’s executives or is it funding projects that align with my values? Perhaps it's time for Bank of America and other big banks to take a lesson from Triodos, a UK bank that is allowing customers to see how much and to whom they are lending. If banks were really being transparent, they would show us from whom they are borrowing and which collateralized debt obligations and credit default swaps they are holding, as well as what’s in them. Community Development Financial Institutions (CDFIs) provide more transparency as well as access to products and services offered by big banks… According to this article, credit unions have historically held around 7 percent of the consumer banking market in the U.S.  However, trends show that that number is on the rise. While CFDI’s have increased from $7.6 billion to $41.7 billion in the last decade, a Washington Post article explains that after Bank Transfer Day, credit unions reported an increase in share growth of 54 percent. Credit unions now boast 93 million members. In researching some community bank options, I came across New Resource Bank and One Pacific Coast Bank. New Resource Bank issues loans to companies who are committed to “improving their operational sustainability,” and they primarily loan to businesses within the local community.  One Pacific Coast Bank has a commitment to “beneficial banking” and providing access to financial services for the traditionally underserved. Both websites allow you to read about the people and projects they finance.  They offer many of the same products and services commercial banks do with a greater level of customer service, comparable interest rates, online banking options, access to large networks of ATMs and, in some cases, no ATM fees. And deposits are insured by the FDIC. Knowing all this, I’ve made a commitment to close my account at Bank of America by the end of the year. My hope is that others do the same. What would it mean for the global economy if millions of people moved their money from large commercial banks into CDFI’s and there was greater transparency about how our money was being put to use? It would mean that CDFI’s could increase their loan portfolios and finance more local projects. And it would mean that the financial services industry would be forced to accept more regulation and increase their transparency and accountability in order to recover their market share. I don’t know all the answers, but I’d like to think that it might provide a wake-up call to corporate banks that they cannot continue with the “business as usual” behavior that is stifling the American economy. [Image credit: Photo used under Creative Commons from scad_lo] ****** Mara Slade has spent her professional career as a strategist in advertising and design research. She is a first year Sustainable Management MBA Candidate at Presidio Graduate School where she is focused on building the business case for taking the long view. She can be reached at mara.slade@presidioedu.org or you can follow her on twitter @maraslade