Move your money

Dec 30, 2009 18:05 UTC

Arianna Huffington and Rob Johnson are organizing a big bank boycott. They want depositors to take their money out of Too-Big-To-Fail banks and put them in smaller, high quality banks.

They’ve launched a new website and have teamed up with Chris Whalen to give folks other options. Whalen’s firm, Institutional Risk Analytics, has a proprietary system that grades banks using FDIC data. Enter your zip code and Whalen provides a list of high quality banks in your area.

It’s a potentially powerful combination. Huffington has wide reach due to her media ubiquity and popular website. Johnson, once a portfolio manager for George Soros’s Quantum Fund, is a successful veteran of high finance who’s spoken out against the danger of derivatives and will head Soros’ $50 million Institute for New Economic Thinking. Leveraging Whalen’s data means the two can do more than simply ask folks to move their money. They can provide better options.

(You can read more about it in this column published at HuffPo.)

I applaud the effort and plan on taking them up on it. Some of my savings currently reside at a TBTF bank, earning nothing, and I plan to move the account shortly.

When bloggers like me talk about creditors holding banks responsible for the risk they take, that includes bank depositors. If you have deposits in a bank — a CD, checking or savings account, for example — you are a creditor of your bank. Moving your deposits out of banks that benefit from too-big-to-fail guarantees is a tangible way you can protest bailouts.

I do have one small quibble with the Huffington/Johnson site, in particular the YouTube video they’ve produced. The idea that fat cat bankers — “Potter” from It’s a Wonderful Life stands in — are solely responsible for the crisis oversimplifies the issue. Plenty of smaller banks have gotten themselves into trouble with irresponsible lending. FDIC’s problem bank list now stands at 552, composed mainly of smaller banks.That’s 7% of all FDIC insured institutions in case you’re wondering.

It also lets the rest of us off the hook. Without willing investors and an assist from Alan Greenspan’s low rates, big banks couldn’t have inflated the bubble. Yeah, many should have known better. But let’s face it, Wall Street bankers aren’t the only ones that are greedy.

I also worry that big banker baiting could lead to violence if/when the financial sh*t again hits the fan.

But again, that’s a small quibble. Huffington/Johnson/Whalen — all great folks I’ve had the chance to speak with in the past — are spot on with this effort.

What truly separates community bankers from the big boys is that they can fail. If they mess up, they end up in FDIC receivership. If they lose, they pay for their own mistakes. That’s why this effort should hold particular appeal to financial conservatives.

If it weren’t for the moral hazard created by deposit insurance, depositors would flock to banks that lend conservatively. In the meantime, the best thing we can do is take our money out of quasi-public banks like Chase, Citi, Wells, BofA, Ally, et al and move them to banks that operate free of government support.

More at Move Your Money.

COMMENT

If you plan on moving away from the “Big Banks” , look over the Credit Unions with easy terms to join. (Some are Very easy to get a account with…)

Ken N.

Posted by Ken N. | Report as abusive

Rob Johnson’s missing testimony

Oct 29, 2009 21:45 UTC

Recently Yves Smith over at Naked Capitalism posted snippets of Rob Johnson’s testimony before the House Financial Services Committee. The testimony he tried to give anyway. Johnson’s commentary was rather trenchant, so I thought I’d click over to get the full version. But it wasn’t where it was supposed to be on the Committee’s website.

Ken Silverstein is on the case and he says it’s “an object lesson in governmental failure.” Turns out Johnson was asked to testify at the last minute and wasn’t able to submit testimony at the hearing. Later when he tried to get it posted to the Committee’s website, at first they dithered and then they refused.

But I’ll let Ken tell the story. He’s a great writer.

As for Johnson’s full testimony, you can read it here. Print it out. Keep it on file. Explains in great detail why, in Johnson’s words, the derivative reforms legislation is “too tepid, too weak, too late…Very industry influenced. We had a crisis and they are pandering to the perpetrators.”

(ht Walker T.)

COMMENT

I’m all for a good conspiracy when warranted but I’ve spent considerable time following congressional hearings and I don’t believe this was a specific plot against Robert Johnson, who was indeed called only the night before at the behest of Barney Frank. I’ve noticed that if a testimony is not available the day before, it never makes it onto the relevant web page, no matter the political complexion of the person testifying. If you go back over several hearings, you’ll see quite a few panelists with no associated hyperlink to their testimony. When asked by the Chairman, they usually say they’d sent it late the day before or that morning. The only way to get a copy is to email the author and ask for one. The papers may well be distributed to the members of the committee but the public is left out in the cold. You can get some idea of the panelist’s testimony from watching the webcast or reading the transcript if and when it is posted but typically panelists only read a summary of their testimony.

Posted by Linda | Report as abusive
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