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Dennis Santiago

Dennis Santiago

Posted: January 6, 2010 01:31 AM

Report From The Move Your Money Front

What's Your Reaction:

My name is Dennis Santiago. I am the CEO of Institutional Risk Analytics, a company that most of the world had never heard of until December 29, 2009. That's the day the country became aware of a tool we donated to help the MoveYourMoney.info campaign. The response to this tool has been inspiring. The large outpouring of a nation expressing itself remains one of the wondrous things about being an American. In this blog, I'll be writing about my observations from behind the computers and analytics. I will try to be factual, educational and maybe even a little entertaining. I hope you enjoy the journey with me.

Today marks the seventh day since the campaign activated the zip code search tool. In the 168 hours that have transpired, Americans have searched for banking alternatives in 16,631 zip codes. With roughly 42,000 zip codes assigned that's just under forty percent of the country actively asking the question "what can we do to effect change?" During this time we've been flooded with questions, which taught us a lot of things. Just so you know, we literally cobbled it together in about four hours and spent another four hours cleaning up the look. Then America got to field test it. During the first 48 hours we spent most of our time bomb-proofing it. You'd be amazed what people will type into a box that says "enter a five digit zip code here." Mischief managed, we were able to shift the system over to its full traffic configuration. Congratulations, America! In those 48 hours, over 115,000 of you stress-tested that tool and in the days since you've been continuing to use the tool around 45,000 times a day.

So the burning question, of course, is "will moving your money have an effect?" And by effect, I don't mean making a momentary political statement. I mean making a structural difference to the country's financial system. The answer is yes, and here's how.

Inside banking there's something called a "core deposit" that every American should know about. These are the most important deposits to a bank. It's the money relied on the most as the foundation for the business. The most important core deposits include the checking and savings accounts of consumers and businesses. Your accounts! All other forms of deposits and advances, and there are a number of them, are less attractive sources of funds to support a bank's lending engine.

For each lending dollar of a bank, increasing the fraction of support for that lending dollar by core deposits (versus other forms of money) means greater confidence and stability for that bank. The effect is less pronounced in institutions that have large fractions of their business model involved in investments that yield income from non-lending uses of funds. This means it's the community institutions focused on purer "classic" banking operating models that get the most bang from your buck ... literally. So if the public shifts a small fraction of the nation's core deposit base into these institutions it magnifies the stabilizing effect on this portion of the financial system. That's provided the receiving bank is already in good shape, of course, and isn't saddled with other problems. That's why the listing tool we created for the MoveYourMoney campaign only shows the best of breed, to our best ability to identify who they might be. In future blog posts I'll discuss other types of banks and the issues facing banks not in the greatest of shape.

As one might surmise, competition for core deposits should be fierce. Congratulations on your first lesson on the inside baseball of banking. Yes, it is fierce. It always has been, all the way back to those proverbial toasters. Don't think for a minute the big banks -- and, yes, credit unions, too -- won't respond to compete for your business with their own 21st century version of toasters to woo you. They are all tough competitors in a tough industry. But that's the point, you see. It changes the game. It's all about the core depositor again and the power of individual Americans to flex the muscle we've always had.

It's the American people that are the "shock and awe" in this. Without you, it's just another embedded video and piece of web enabled software.

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