Opinion

Felix Salmon

Is the Huffington bank boycott a good idea?

By Felix Salmon
January 5, 2010

Martha White has a very odd column about Arianna Huffington’s attempted boycott of the big four banks. Her math is simple: the four banks have $209 billion between them in transaction deposits, and the average American bank account has $4,000 in it, which means that in order to reduce the deposit base by 5%, or $10.5 billion, a whopping 2.6 million Americans would need to go through the hassle of changing banks.

But White here is missing the point: bank profits don’t go up with the size of your bank account. Indeed, it’s the other way around: it’s the poorest customers, racking up habitual overdraft charges and the like, which account for the lion’s share of banks’ fees and profits. As White herself writes:

Banks make their money in a lot of ways, such as by collecting fees. For instance, banks are projected to collect $38.5 billion in overdraft fees this year, some 90 percent of which is paid by only 10 percent of the customer base. While the new opt-in requirement for overdraft protection will probably lower this number in the coming years, it’s safe to assume that banks will come up with other ways to extract their pound of flesh. A recent Bankrate study showed that fees for everything from out-of-network ATM usage to account maintenance rose in 2009.

If the people with modest-sized checking accounts started leaving the big four banks for community banks and credit unions, that fee income would fall much faster than the banks’ deposit bases. That’s where the pressure from this campaign would really be felt.

And besides, the total balances leaving the banks would be more than $4,000 per account. People keep relatively small amounts of money in their checking accounts because those accounts don’t pay interest — checking-account funds are better off just about anywhere else, whether you use them to pay down credit-card debt or just invest them in a CD. If customers closed all their credit cards, savings accounts, in-house brokerage accounts, and the like when they left the bank, the net effect would be multiplied enormously.

So I’m still a fan of the Huffington campaign. No, I don’t think it’s going to have much visible effect on the banks themselves. But with luck at least it will help consumers realize how much of their earnings are being pocketed by these enormous bailed-out institutions — and help nudge them in a direction which will improve their own personal finances, even if it doesn’t make an enormous dent in the big banks’ P&L.

Comments
18 comments so far | RSS Comments RSS

I’m afraid Felix is missing the point here too. Boycott campaigns tend to be about PR, rather than about dollars and cents, at least not immediately.

So I’m also a fan of the campaign, despite knowing and agreeing with Felix that it won’t have a dent on the big 4′s balance sheet. It’s good PR for those of us who oppose the banks’ predatory practices, as well as who favor local businesses.

Posted by jian1312 | Report as abusive
 

I never sought out a BoA account. Eighteen years ago, I opened a small business retirement account at a tiny community bank. Eight mergers and acquisitions later (I can list them from memory), I am now a BoA Premier customer. That status doesn’t really buy me much (well, they pay the annual fee on my AmEx black card), but that one account has over the years blossomed into a dozen or so others. Still, I never wanted a BoA account, but it was mine through acquisition. I wonder how many others are in the same boat.

Posted by Curmudgeon | Report as abusive
 

Sad outcome for me trying to Transfer money from BofA to local Bank here in Bank of Lake Oswego, in Lake Oswego Oregon. Bank manager here did not seem to have any interest in me wanting to deposit money in his small local bank. Very rude manager, I tried, was great concept, but will just leave my money at BofA. Small banks here are kind of Mickey Mouse! Sorry Huffington!

Posted by hwydude | Report as abusive
 

I moved my accounts twice in the past decade as my mid-sized bank got swallowed up. My third bank was a growing regional – WaMu.

It grew to the point where I considered changing, but by that point, my wife and I had joint and individual personal accounts as well as a business account. Without a precipitating event like a buyout it was easier to just stay put.

The first link I ever followed to Felix’s blog was a warning about WaMu. Given that my aggregate exposure was well beyond the current FDIC limits, I was worried. Within three weeks I spread my accounts out defensively across the big banks. [I owe Felix a bottle of the west coast red of his choice for that.]

Now, post-acquisition by Chase, I find myself a customer at three big banks that I have actively avoided in the past. Even without Arianna’s leadership I’m interested in moving my money away from them.

I took a look at the credit union finder that Felix posted last week, but it wasn’t very useful. When I entered my zip, it returned a couple of out of state CUs and none of the ones that advertise locally. Google was better from that perspective. But I’d still like to see some kind of independent rating.

Posted by Tentakles | Report as abusive
 

What needs to happen ts that credit unions need to start picking up the GOOD mortgages – the ones from people like me who have never made a late payment and who have excellent credit.

I have tried repeatedly to move my mortgage from BOA to one of my three credit unions, but because I’m underwater in my house they won’t do it. Boom, BOA makes hundreds of dollars in interest off me every month.

A few overdraft fees is nothing compared to the mortgage monopoly these banks have. All the focus is on how they’re scamming the government in dropping the bad ones- people forget they they are still making a killing off the good ones. Even the good ones that have been packaged and sold – the banks still have significant stakes in these golden bundles.

Credit unions, step up to the plate and take our money!!!

Posted by Anonymous | Report as abusive
 

You have to be careful of credit unions nowadays. make sure they are federally chartered, not just at the state level. and of late, here in the Tampa Bay area, many CUs have started charging for using your debit card. Be sure to read the fine print. I am another “acquired” BofA customer. Citibank had issued my Upromise credit card (college savings) and it was sold to BofA. Guess it is back to the mayonnaise jar under the porch of Warren Buffet for my money.

Posted by noles2u | Report as abusive
 

Today, Jan. 6, one day after reading Arianna Huffington’s challenge on ‘Banks too big to Fail’ piece, I’m moving all my accounts — checking, savings, credit and debit cards — to a local community bank which received no bailout funds from we, the taxpayers. Thanks for the zip-code tool, Dennis.
Good riddance, BofA. Your customer since 1979 is gone.
Oh, and I just cut my Citi card up, too.

Posted by audios86 | Report as abusive
 

Four years ago I dumped BofA (after 20 years) for a credit union. Two years ago, dumped my CITI and WAMU credit cards. Refinanced three years ago (good credit) and dumped Bank One.
My credit cards, checking and savings are all with my credit union and I couldn’t be happier. Lower interest rates on loans, higher interest rates on checking and savings and outstanding customer service.
I think the boycotts are great ideas but what is the point to go from one crappy too big to fail bank to another?
Find a small local bank or credit union who WANTS your business and go for it.
I’ve not looked back at the TBTF banks and I never will again.

Posted by bikebrainiac | Report as abusive
 

I’ve been a loyal credit union member for 15 years. No reason to change. Best rates, great service, low interest loans and high interest savings rates. Take the time to find one in your city. It will be worth the extra effort to change over.

Posted by lddoane | Report as abusive
 

I think there is another point here. Maybe pulling $4000 from CitiBank won’t hurt them that much, but putting $4000 into my local bank will help my local bank, and my local community. After reading the original article on Huffingpost, I found one of the small local banks, Country Bank in NYC, loans money to small local businesses, and that helps my local community. What percentage is my $4000 to Citibank, and what what percentage is my $4000 to my local bank? And maybe they will make a loan to a small business person who will open a new store where that 5th citibank branch used to be.

Posted by antong | Report as abusive
 

You also need to be careful about the community banks you put your money into. Are they operating under a cease and desist or other regulatory order,what is their CRA rating. Some of these are public at FDIC,OCC,Fed or state websites. Many community banks were as aggressive as larger banks in making poor credit decisions.

Posted by redmoon | Report as abusive
 

here’s some info; credit unions – like all industries – are organized and have a trade association, guild, union, lobby, etc. here it is:

http://www.cuna.org/cuna/index.html

DUE DILIGENCE. given the sheer number of community banks and credit unions, invariably there are going to be variances in service/customer satisfaction.

one way to get FEEDBACK is YELP – for instance, here’s my old college cu:

http://www.yelp.com/biz/university-credi t-union-los-angeles

the reviews for my old cu, imo, are fair and comport to my experience. i’ll say this though; compared to my treatment at the conglomerate banks coupled with their CONSTANT nickel and diming of me, the worst day at my cu is a vacation. jews have a word for what these fat cat bankers are; Shnorrers. greedy. selfish.

last, consider your money as more than a vote – it’s fuel. after all, what’s the fuel of business? now, proportion of customer deposits/checking/loans etc., aside, logic if nothing else tells us that these fat cat bankers DON’T CARE ABOUT US, so, why would you want to help them by giving them the fuel that keeps them alive?

after all, when we found out about big business in south africa didn’t we boycott? come on people, it’s not hard to see the logic, the PRINCIPLE of not supporting wall street.

Posted by lordonlow | Report as abusive
 

As I have been with USAA for more than a decade (and NO, I am not in the military), I have free checking, free bankcard ATM withdrawls (even when used at other banking ATM’s).

ProPublica.org keeps an ongoing list of banks that have received TARP money – so you might want to avoid them.

Due diligence is necessary, but if you spend a little time doing research instead of blogging, etc, you may be pleasantly suprised.

Posted by afisher | Report as abusive
 

Perhaps some accuracy about how banks actually create revenue and earn a return would be useful. If the author intends to steer financial matters from his profession from one bank to another; accuracy of how banks operate should be expected.

Banks don’t grow revenue due to their deposits or just earn a return due to deposits. Banks grow revenue by using a percentage of their deposits or through borrowing money to loan money to others’. Bank fees (service charges, over drafts, ATM fees, etc…) are a truly money maker for the bank…but that is under a great deal of scrutiny by both the state/federal regulators and much of the public.

Banking is taking risks in lending money to those who need it to grow their business (build a new factory, new computer equipment, trucks, etc…), buy a home (yes the debacle of our current system), buy an auto or luxury item, AND about understanding that risk in view of the ability to repay the loan. Each bad risk/loan, made by a bank, erodes the real “cash” they have to operate and grow the bank…which puts a priority on their capability to assess risk at the time of the loan, constantly stay abreast of that borrower’s risk, and work diligently when the risk of not repaying the loan begins to increase. Bad loans DON’T affect a bank’s deposit base strength – they are different buckets of money.

We can’t talk in generalities and steer people to smaller institutions with misinformation. The author needs to brush-up on his financial acumen and facts so that his readers….and those followers’ too receive real information and not just emotional jibberish aimed at harming the large banks.

Posted by TheGreenTheBoat | Report as abusive
 

This “boycott” is not about PR, it’s about people taking control of their own money and putting it in an institution that best serves their needs, those of their neighbours and community.

The best choice is to find a credit union. Rarely are the service fees and most often have higher percentages paid on savings.

I think for this to work at its utmost, your IRA’s KEOUGHS, etc… should be transferred to your credit union or a safe, community or even state bank. Every dollar is a vote.

How do YOU want to vote?

Posted by EUROTOM | Report as abusive
 

In December 2008 I finally watched the remake of “Miracle on 34th Street”. It wasn’t uplifting, it was depressing. In the original version Macy’s was owned by Mr. Macy and Gimble’s was owned by Mr. Gimble. The plot line of the new version shows the perversion that has happened in corporate America. Mergers, mega-mergers, no one really owning their own names any more. It’s all about acquisition and then loading it off to someone else.

The spirit of enterprise has been so damaged by the games the corporate money-junkies play.

Posted by EUROTOM | Report as abusive
 

Arianna Huffington is a pathological liar — a fraud, and anything she says is worthless. Being a plagiarist, political flip-flopper and greedy gold digger are not “credentials”. This month, after being sued by bloggers for unjust enrichment and unfair business practices, (for cashing in on the sweat of hundreds of unpaid bloggers), then being made head of AOL’s content and their new PATCH.COM websites, she has the audacity to ask 8,000 more bloggers to work for her for free. In case anyone hasn’t heard of Patch, it’s AOL’s latest attempt to corner the local advertising market, (except they hide the “AOL” brand as it has such negative value.

Under the false pretense of hiring journalist from the declining Newspaper industry, the aging big mouth of conservative, or is it liberal, or is it socialist politics the gold digging interloper decided, “Why pay real journalists when you can con “locals” into blathering online on Patch blogs — for FREE.

So much for the jobs AOL / Patch was going to create.

Worse, days after setting a quota for each of the 800 Patch editors to recruit 5-10 unpaid workers, (from their friends, neighbors and local online community), she has the further audacity to pen an article blaming “our leaders” for not creating jobs.

Arianna, take the money you stole and go back to Greece.

un-America Online stocks have tumbled because of Patch and HuffPo — and that big sucking sound is you and AOL trying to suck the hard work, money and journalistic efforts of REAL Americans into your own pocket.

(And Arianna, if you’re reading this — the heavily retouched photo posted on all the Patch sites along with your disingenuous long boring plea for free labor shows how desperate you really are — you’re 60 years old — that retouch job makes you seem pathetic).

For info about all the lawsuits and boycotts AGAINST Huffington and the AOL/Patch has-been sites you command can be found at: http://patch.framingham.com

Anyone considering taking Arianna Huffington’s advice on business, politics or anything else should read it all.

Arianna, act your age — you’re embarrassing yourself.

Posted by lexipixel | Report as abusive
 

If you really want to effect a change in the system we need to consider boycotting banks all together. Last time I checked cash was still legal tender. Security risks??? Being robbed, loosing our wallet, just check your balance sheet on your portfolio from 2007 till now, and then ask yourself about risk. I´m not saying the coffee can in the back yard mind you but what about a good wall safe?

Posted by FM1962 | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
  •