It’s the financial world’s version of the Tea Party movement, although somewhat less likely to get endorsed by Fox News. A new grass root movement, Move Your Money, is tapping into popular anger over big banks, encouraging consumers to strike back by moving money (and power) out of the pockets of the big banks and credit card issuers and put it into the hands of credit unions and smaller community banks.
Many Americans are still angered over the role the country’s largest financial institutions played in triggering last year’s credit crisis and the prolonged economic downturn that followed in its wake. In consequence, the idea of sticking it to the Man appears to be one that appeals.
Consumers are still smarting from seeing their hard-earned taxpayer dollars put to use to bail out too-big-to-fail banks, only to subsequently get repaid by credit card interest rate hikes as high as a 29.99% APR. Big banks have further endeared themselves to consumers by paying out record bonuses to executives and spending millions to lobby against attempts at financial reform, which seek to introduce greater consumer protections for credit cards and other financial products, and prevent a repeat of past mistakes. And while the party on Wall Street has long since resumed after barely skipping a beat, Main Street continues to struggle with the fall-out from the financial crisis, with unemployment at record levels and the economy on continued government life support.
Meanwhile, the nation’s community banks, which played little or no part in the financial games, which brought the U.S. economy to a near-collapse, like consumers have been struggling in the aftermath of the credit debacle. Over the past year, many have either closed or been taken over by the FDIC, concentrating the power even more in the hands of the big players.
In short, there are plenty of reasons fueling the public sentiment behind the Move Your Money campaign, which encourages Americans to launch their own nation-wide, individual-driven reform by moving their money from the vaults of big banks to local banks and credit unions. Through its website, MoveYourMoney.info, the campaign provides information and resources to help consumers locate more user-friendly, local community banks and credit unions.
Launched less than two months ago, the campaign has quickly picked up steam. The idea instantly went viral on social networking sites, and major news channels picked up the idea as well, with the co-founder of the campaign, Ariana Huffington, appearing on networks like ABC World, MSNBC, and CNN. Within the first week of the launch of the Move Your Money site, visitors searched over 16,600 zip codes-nearly 40 percent of the country. In the first 48 hours, the tool had over 115,000 hits, and in the days that followed, averaged 45,000 calculations a day.
Even entire states have jumped on the Move Your Money train. The state of New Mexico’s house recently voted to withdraw up to 5 billion dollars in government money from big banks and transfer it to local ones.
Will closing individual accounts and opening new ones with smaller banks and credit unions really make a difference, or is it ultimately an exercise in futility? Surprisingly, it could have more impact than what one might think. All banks rely on so-called “core deposits,” as the foundation for their activities. Core deposits can make or break a bank, because they give the bank the leverage needed to fund its operations. Banks can lend (and earn interest on) at least ten times as much money as they have on deposit. So, for each customer who moves $10,000 out of a big bank to a regional bank, the big bank loses $100,000 in lending power, while the regional bank or credit union gains that much. The effect may not be felt so much by big financial institutions, particularly those that have alternate sources of income from investments and other non-lending activities. However, smaller banks and credit unions stand to gain tremendously in competitive power, if the public shifts even a small fraction of the nation’s core deposit base into their coffers.
In addition to the social impact of moving their business to credit unions and regional banks, consumers are finding a variety of other perks as well. Credit unions, for example, are member-owned and not-for-profit, and hence frequently offer higher deposit yields lower loan rates, and much better credit card terms.
Of course, there are practical considerations of convenience: small banks and credit unions may not have as easily accessible or widely distributed ATMs. Online banking may be less sophisticated, and bank location may not be ideal. However, many consumers have found that these disadvantages are easily outweighed by the advantages.
