WASHINGTON -- While major banks pride themselves on "financial innovation," they always function in a way that stays fundamentally the same: They hold on to people's money and invest it until it's needed by the customer. The nature of those investments -- from 30-year fixed-rate mortgages for qualified home buyers to exotic financial products -- has varied over the years, but banks, no matter how innovative, need capital to make it all happen.
Over the course of the past two years, everyday consumers have been moving that capital out of large financial institutions and into credit unions and community banks. In 2009, major banks controlled 45 percent of checking account business, according to Mike Moebs, an analyst whose firm, Moebs Services, has been gathering publicly available data on banks for 28 years. He estimates that by the middle of 2012 at the latest, the big banks' share of that market will have fallen to a third, representing a loss of millions of customers and billions of dollars.
Move Your Money, a movement that encourages consumers to cut ties with big banks, has picked up momentum as the Occupy Wall Street protests have spread nationwide, channelling citizen unrest and garnering media attention. In the past month, more than 650,000 new accounts have been opened at credit unions alone, according to the Credit Union National Association, a trade group representing credit unions. That compares to 600,000 new accounts in all of 2010.
New Bottom Line, a coalition of anti-foreclosure activists, religious organizations and small businesses, has renewed its push on the Move Your Money theme over the past week. The group says it has overseen the transfer of over $5 million in deposits from big banks including Bank of America, Chase and Wells Fargo to credit unions since Monday.
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Meanwhile, Los Angeles art gallery owner Kristen Christian has organized a nationwide event for Saturday, Nov. 5, dubbed Bank Transfer Day, calling on consumers to move their money from big banks to smaller institutions. The event has attracted a tremendous amount of support online, with credit unions vowing to stay open and do whatever they can to make it easy for customers to switch.
“I was tired of paying outrageous fees to banks for a severe lack of services," Christian said in a statement. "I was tired of having money access determined by a corporation."
To date, her event boasts more than 73,000 official supporters. It has also won over progressive political organizers at MoveOn; the group is not promoting "Bank Transfer Day" by name, but it's encouraging voters to "Move Your Money" on a Nov. 5 "Day of Action." Watch MoveOn's video:
The lack of trust between consumers and major banks reached a flashpoint in late September, when Bank of America announced that it would begin charging debit card holders a $5 monthly fee. At the time, the company insisted that the "economics" of debit cards now made the fee unavoidable, thanks to new regulations that limited the amount banks could charge merchants for allowing customers to use them. The move sparked outrage from consumers, and even led Rep. Brad Miller (D-N.C.) to introduce legislation that would ban banks from charging fees to consumers who move their money to a different bank. Bank of America is headquartered in Miller's state.
"I don't think I'm going to be in the business of telling people where to bank or whether to be at a bank or a credit union, but what I do want is for normal competition to work for consumers in banking," Miller told HuffPost. "Competition so they can comparison shop in plain English to see the features of different products and accounts. And if they can get a better deal down the street, they should be able to do that and it ought to be easy."
Two online petitions gathered nearly half a million signatures protesting BofA's move, one launched by the political advocacy group the Progressive Change Campaign Coalition, and a second by a woman utilizing Change.org. With customers decrying the new fee en masse, BofA said Monday that it had halted plans to charge it.
The company declined to comment on whether or not the "economics" of debit cards had changed over the past month. What has shifted, however, is the political climate. Moebs noted that a bank that qualifies as too big to fail needs to have at least some public support, so that the government will step in and save it if it runs into financial trouble.
For credit unions -- especially chartered banks that are owned by their depositors -- BofA's fees and the Occupy protests have been a financial boon.
"We've had a greater increase in checking accounts already this month than during the entire second half of 2010," Pattie Barrow, marketing vice president for the credit union Suncoast, told The Credit Union Times.
The recent Move Your Money momentum builds on years of activist efforts. At the end of 2009, Arianna Huffington and economist Rob Johnson took to these pages to urge bank customers to move their money out of big banks. Other early organizers included documentary filmmaker Eugene Jarecki, and Nick Penniman, who now heads the nonpartisan Democracy Fund. The movement attracted heavy media attention, including reports in the Washington Post and The New York Times and on "The Daily Show," CBS News, and CNN.
By encouraging citizens to divert their deposits from Wall Street to community finance organizations, Move Your Money advocates hope to limit the economic clout of big banks that sparked today's economic crisis, while empowering small business lending by institutions that did not partake in the subprime bonanza.
Yet the identity of the customers participating in the movement affects whether it will hurt or help major banks. One customer with a significant balance who did much of his banking with BofA described his bank manager begging him to stay.
But other customers won't get the same treatment. Moebs said it costs a major bank between $350 and $450 to operate a checking account for a year because of high overhead costs, compared to about half that for a community bank. Big banks lose money on customers with low balances who only maintain checking accounts.
If he were a big bank CEO on Saturday, said Moebs, "I’d throw a party tomorrow. All of these people are gonna switch and it didn't cost me anything and I’m not getting blamed for it."