Friday, March 27, 2009

Making the banks run in the direction we want

Remember my comments on Dave Lindorff's column on the big banking conglomerates a few days ago? At the time I said:
How about try something that my household has been doing since the start of the decade - transfer your accounts (checking, savings, CDs, etc.) from the large banking conglomerates, such as BofA, Citi, etc., to local or regional banks. These large behemoths which are being propped up on taxpayer funds deserve to be slain once and for all. A critical mass of customers voting with their feet would make the point better than angry blog posts, fake tomatoes thrown at banking execs on some partisan organization's website, or just doing nothing but knocking back a few beers.

In our case the initial decision to go local was merely a practical one - the nearest branch of any of the big conglomerates to my town is about 60 miles away, and there are plenty of times in which one wants to be able to consult with a real live human being about financial matters rather than merely do everything via the internet. The service we receive is better than anything that I've ever experienced, whatever fees the local bank has are well-below what the big banks charge, and the bank's been thriving even in these tough times. So yes, I'm seconding Lindorff's proposal of a bank run of sorts - a run from the conglomerates that have been gambling with their customers' savings like a bunch of drunken vacationers in Vegas and to banks that are more in touch with their localities. That's precisely the sort of bank run that would - while doing in the conglomerates once and for all - set the stage for a healthier economy. That's some hope I'll take to the bank.
Well, it turns out that Aaron Datesman at A Tiny Revolution has a similar - and probably more effective idea:

Bank of America is the world’s largest financial services firm. It has more than 6100 retail branches and has received about $50 bn in TARP funds, along with an additional $118 bn in loan guarantees. This is outrageous, of course, but it’s also interesting. The firm’s market capitalization is only $19 bn.
Now, I’m not an economist, but looking at those numbers I get the sense that the firm is not really, uh, solvent. In fact, I think it’s a brain-eating zombie bank. So, it’s an interesting thing about how awful everything is, but I think in the current situation we have a lot more power than we used to have. Do you have an envelope to write on the back of?
I’m guessing it takes at least 500 customers to support a branch. $1000 works for me as an average account balance. This totals up to $3 bn. What do you say we all send this letter to our Congresspersons?

Dear Congressperson,
If it’s too big to fail, it’s too big to exist. The nation’s largest banks and Wall Street firms have created a tremendous crisis with no accountability for their disgraceful behavior. Unless the Congress takes immediate action to nationalize and break up the nation’s largest financial firms, including Bank of America, I will withdraw my consent from the financial system. On May 5, 2009, I plan to close my accounts and withdraw my $xxxx balance in cash from Bank of America. This is my right as a citizen and as a depositor. I encourage the millions of my fellow citizens who also have accounts with BoA to do the same on this date.
Sincerely, etc.
cc: Kenneth D Lewis, CEO, Bank of America
Credit to Dave Lindorff (who is absolutely correct), but throwing a fit at the counter of the local branch of an enormous bank is not a stick. An activist-organized bank run, on the other hand, would be a very powerful weapon. Could BoA possibly withstand a billion-dollar bank run? If anybody thinks that the answer to this question is yes, I would love to know why you think this.
We have the internet to use. How could we get this done?
So, here's a tangible plan - a large number of people writing to their congresscritters threatening to withdraw their support of the current financial system by withdrawing their funds from BofA unless the government takes action to nationalize and break up these behemoth banks that aren't exactly solvent to begin with, along with a tangible date for when the mass action would take place (May 5). This is potentially doable.

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