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“Move Your Money” But Where?

A very interesting movement called "Move your Money"started online last month. This movement encourages people to move their banking business from a big financial conglomerates, who were at the center of the global financial crisis, to community banks or credit unions. The "Move your Money" website provides some valuable information regarding moving your banking business. I just wanted to use this opportunity to provide some information on the U.S. banking system.

Why Move your money?

First, it's a matter of principal and accountability. The big financial conglomerates acted irresponsibly by 1) relaxing loan underwriting standards in an insatiable quest for more mortgage loans to securitize; and 2) ignoring, in the quest for higher profits and higher returns, the concepts of risk management. Then policy makers in Washington fearing a complete economic collapse bail them out (essentially, reward them) with trillions of dollars with "NO STRINGS ATTACHED." And what do these financial conglomerates do? Do they do what is in the best interest of the country? No, they plow/leverage the taxpayer money into more risky trading schemes to earn them record profits. A good thing right? Not really, these "Too big to Fail" financial conglomerates get even bigger post-financial crisis and possibly even riskier with trading schemes. The right thing to do would have been to shed the toxic assets on their books as quickly as possible so that they can start lending again. But noooo.

Since policy makers are either fearful to oppose the financial conglomerates or are owned by them, it is up to us to send the message of accountability. One big way to hold financial conglomerates accountable is by moving our money - changing our banking relationship. Again, Move Your Money website provides very useful information, particularly a Checklist, on moving our money.

Second, move for a better experience. Small financial institutions can offer a much better customer experience than an impersonal financial conglomerates (they really don't need our money anyway). In the case of credit unions, and based on experience, they can offer much lower fees, better rates, and same services than a financial conglomerate.

Who are these financial conglomerates?

Well, these financial conglomerates are typically "Bank Holding Companies". A Bank Holding Company is a bank that is allowed to own more than one bank. As a result of de-regulation, starting with Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 with allowed Bank Holding Companies to own and operate banks in different states and Gramm-Leach-Bliley Act of 1999 which allowed Bank Holding Companies to own non-depository institutions such as investment banks, securities brokerages and insurance companies, "Too Big to Fail" institutions began to form.

The following are the Top 10 Bank Holding Companies based on total assets (as of 9/30/2009):

Financial Conglomerate	Total Assets
Bank of America Corp.	$2,252,813,550
JP Morgan Chase & Co.	$2,041,009,000
Citigroup, Inc.	$1,888,599,000
Wells Fargo & Co.	$1,228,625,000
Goldman Sachs Group, Inc.	$882,586,000
Morgan Stanley	$769,503,000
Metlife, Inc.	$535,192,209
HSBC North America Holdings, Inc.	$390,657,817
Barclays Group US, Inc.	$377,926,385
Taunus Corp.	$368,225,000

And how much taxpayer bailout money did these financial conglomerates receive (note - only 6 of 10 are listed - HSBC, Taunus & Barclays are foreign bank holding companies, Metlife didn't take any):

Financial Conglomerate	Bailout Money
Bank of America Corp.	$45,000,000,000
J.P Morgan Chase & Co.	$25,000,000,000
Citigroup, Inc.	$45,000,000,000
Wells Fargo & Co.	$25,000,000,000
Goldman Sachs Group, Inc.	$10,000,000,000
Morgan Stanley	$10,000,000,000

Source: Propublica: Eye on the Bailout

Cititgroup is the only one that has NOT paid back the bailout money. Also, there were other government programs in forms of bond guarantees and low interest rate loans that greatly benefited the financial conglomerates and are not reflected in the above numbers. This was a multi-TRILLION Dollar effort on the part of the federal government.

U.S. Banking System

Here are two videos I did a couple of years ago:

Where to move

This depends several factors. First, proximity or access to alternatives such as community banks or credit unions. Move your Money website has a directory INCLUDING a list of "most sound" community banks. Second, quality of services provided such as free online banking and ATM networks. Third, the fee structures - what are the various service charges. Shopping around and asking questions are absolutely important.

Moving your money could be a rewarding experience on two levels: 1) sending a message that financial conglomerates must be held accountable and 2) saving money on bank fees, particularly in the case of credit unions.

Good luck.

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