Why I Don’t Bank With the Biggies Anymore
Wednesday, March 21st, 2012I finally did it. I closed my accounts with one of the largest trillion-dollar banking and financial corporations in the land. But, it wasn’t easy. It took me six months after I had first made the determination to do so. And I was also beset by all the reasons that people don’t close business with behemoth corporations while they socially and politically chastise them all the time.
It has now been over a year since Ann Minch, a resident of Red Bluff, CA caused a media-frenzy over Bank of America raising the interest rate on her credit card balance to 20% plus from 12.99% despite there being no change to her integrity as a debtor. They did this to protect their margin and profit in the face of mounting bad debt. Ann was furious that they dared to do so while subscribing to billions in government bailouts. After appearing on Fox News and having her story covered by The Huffington Post she subsequently launched the ‘Debtor’s Revolt’ calling her fellow citizenry to march and shift their business from these unscrupulous banking behemoths to perhaps more conscionable local and regional banks. The response was mute and the public’s interest waned fairly quickly. There are reasons for this.
Firstly, it’s very inconvenient to change bank accounts especially when bill payments and auto-debits are tied in. And there’s the credibility rebuild one has to do with a new bank. Secondly, a lot of the Bank of America and Chase Bank branches used to be smaller local banks that were acquired over time. A lot of familiar people who’ve worked there for years and whom we’ve become well acquainted with and sympathize with still work there no matter which corporation owns the bank.
But then, I felt compelled that I had to do something as a citizen’s duty. Before the economic recession had hit, there already were behemoth financial companies (combinations of banks, investment houses and insurance companies). The ones that faltered during the crises, like Citigroup, had to be rescued with taxpayer money because they were ‘too big to fail’. Others, like JP Morgan Chase, folded in Washington Mutual and Bear Sterns. Even as the public and government decried the ‘too-big-to-fail’ state of the market, the fact is that we have tread further into this territory. This lead to even further thinning of the pack and for an oligopoly-like state-of-the industry to emerge where a few handful of banks and financial corporations own a lion’s share of the market. The top five banking companies now house more than 30% of the country’s deposits. It’s disconcerting that so much of the monetary system is exposed to so few entities. Mergers and acquisitions, though they have a place in the scheme of things, can become a quick-and-cheap way for corporations to cut costs and expand market share while squelching competition from the market. More so, people do (as they always have) associate authority and security with size; some comments I read on Ann Minch’s blog when she launched the Debtor’s Revolt was that people didn’t feel secure moving to smaller regional banks. In fact, there is little truth here. Banks are pseudo private-enterprises – the pricing on their loans and deposits is largely determined by the Fed and given the social sensitivity of people’s deposits and livelihood, deposits are more or less protected by the government. With all the failed banks in the crises, big and small, not one penny of deposit money has been lost. The Fed has been securing suitors for failed banks, cutting sweet deals and sharing in loan losses.
For me, watching big Wall Street and national banks lining up for bailout billions and then turning around and paying their executives millions in bonuses was the last straw. Besides, behemoth entities are woefully inefficient and threaten the market’s competitive integrity. It’s a sure way of sowing the seeds-of-destruction. If government has been in bed with the perpetrators and now finds itself morally bankrupt to do anything sound in principle, then citizens have to fill in the void, even if it’s infinitesimal in scope. Well, with Ann Minch, I know of at least one other person who has taken the step. For now, I’ll be doing my banking with a billion dollar bank, albeit a much smaller billion dollar bank. And, oh yes, as a side note, I have also cancelled my two credit card accounts with large banks, both at 20% plus (so much for the idea of cheaper delivery of goods and services by large integrated economies-of-scale corporations).
Author Bio: Amer Chaudri is a 16 year veteran of the banking and finance industry where he has worked in diverse roles and management positions including back-end planning, front-end sales and financial management. He is the author of “Diatribe: A Scathing Journey Into the Heart of the Corporate Financial Culture”. He wrote the book in 2010 on recent history in the financial and banking worlds leading up to the contemporary economic and financial crises. You can purchase a copy of the book at http://Amazon.com by following this link: http://www.amazon.com/Diatribe-scathing-Financial-corporate-digressions/dp/1608444740/ref=sr_1_1?ie=UTF8&s=books&qid=1289738769&sr=1-1
