Move Your Money — Or Not

It seems that Arianna Huffington was having dinner with an investment banker, a film maker, and several others and they hit upon a brilliant scheme to simultaneously punish the big Wall Street banks and get business lending moving again: Encourage everyone to move their money to local, community banks.

Felix Samon thinks his unlikely to work, on the grounds that “moving banks is hard, and people are lazy,” but argues people would be better off moving their money to customer-owned credit unions instead.

Now, it happens that none of my family’s money is in the Big Four banks (JP Morgan/Chase, Citibank, Bank of America, and Wells Fargo) that Arianna and her pals hate. We use a regional bank, and international virtual bank, and three different credit unions. But I don’t see what this plan accomplishes.

First off, despite the publicity that the Big Four bailouts received, they’re hardly alone. Indeed, Arianna’s article notes that “America’s Main Street community banks — the vast majority of which avoided the banquet of greed and corruption that created the toxic economic swamp we are still fighting to get ourselves out of — are struggling. Many of them have closed down (or been taken over by the FDIC) over the last 12 months.” Uh, that’s a bailout. And, surely, we haven’t forgotten the Savings and Loan Crisis of the late 1980s, in which hundreds of billions of taxpayer dollars went to bail out S&Ls from bad loans?

Second, we don’t live in Frank Capra’s world. Going to the handy-dandy local bank finder Arianna and her friends created, I see that my choices are one of several branches of two different institutions. But if I wanted to take out a big loan — say, to hire a bunch of struggling journalists to create a right-of-center version of what Josh Marshall has at TPM — I’d have no better luck at Burke and Herbert than at Bank of America. George Bailey doesn’t work at either place and they don’t know me and I don’t know them.

There may well be towns in America small enough that the local banker does indeed know just about everyone. But people in those towns are probably already banking with him, because they’re not big enough for one of the Big Four to bother opening a branch.

So, I’d suggest that you bank where it makes best sense for your needs. How do their fees stack up against the way you bank? Is there a branch located near your home and/or office? What interest rates do they pay on money left in your account? Do you like to make frequent ATM withdrawals? If so, you should look for one with either a ton of branches (i.e., a Big Four) or else one that waves out-of-network fees (e.g., USAA). Do you want to bank electronically? Then the community bank may not be able to accommodate you.

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James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College. He's a former Army officer and Desert Storm veteran. Views expressed here are his own. Follow James on Twitter @DrJJoyner.


  1. Dave Schuler says:

    I used to have my money in a local bank. It was acquired by another local bank 30 years ago which was acquired by a regional bank 20 years ago which was acquired by a national bank 10 years ago which was acquired by Bank of America 5 years ago.

    My wife, too, had her money in a local bank. That was acquired by Bank of America 5 years ago.

    Hereabouts the problem isn’t moving your money, it’s finding a bank that isn’t part of one of the big banks. In some places you may not like Wal-Mart but it’s the only place within a significant distance to shop.

  2. My reasonably local bank was just seized by the FDIC. No loss to me, my CD had it’s yield chopped but that is all. I have 18 months to go pick up my money.

    I think a better plan, one which would get people to move their money, would be to change FDIC insurance, just slightly. Rather than paying 100% of monies under a limit, pay 95% of monies, unlimited.

    People are risk-averse about their cash accounts. a 5% loss is not large in the scale of things, but the risk of it would get them to move to SAFE banks, wherever they are. It would be a large reduction in moral hazard at low cost.