Who's angry about finance?

January 10, 2010 9:19 AM

NYTimes Editorial about the need for financial regulation, and the current lack of productive outrage at Wall Street. Huffington Post attempts to create a "social media" movement to move money out of the big banks.
posted by ®@ (34 comments total)

The outrage got channeled into the tea party movement, paid for by the people who profited from the collapse, to a certain extent. Channeled into the tea parties and rendered incoherent. And delegitimized for a lot of people because of that.

Since this is a confusing topic, people were able to take the outrage and confuse everyone about who to blame. Pretty slick.
posted by delmoi at 9:28 AM on January 10, 2010 [2 favorites]

I'm going to ignore the Huff Post thing because its pointless. Money is fungible, it has to go somewhere and what do you think the small banks are are going to do with it?

The NYT piece is absolutely utterly and totally spot on (ex- the pointless Rubin/Sandy tangent). The irony is that the times' coverage of the crisis is so absolutely inept they have been totally unable to lead the charge for regulation. The coverage falls into two camps - Morgenstern et al - who are constantly outraged, incapable of differentiating stupidity from evil, and usually just wrong. The you have the DealBook/Sorkin crowd who have essentially become a propaganda arm of the financial establishment. Its really really outrageous and frustrating.

Combine that with the fact the administration views regulatory reform as low priority (not totally unreasonable as Healthcare and National Security aren't exactly unimportant) and we've got the situation we've got. And it sucks.
posted by JPD at 9:33 AM on January 10, 2010 [2 favorites]

This must be why my housemate walked into my room yesterday telling me I should ditch my major bank for a credit union.
posted by dunkadunc at 9:37 AM on January 10, 2010

If I read you right, delmoi, you're suggesting that the capitalist bosses decided that public outrage over their misdeeds could be effectively dissipated by engineering a diversionary social movement. (No doubt they conceived this plan around a massive polished table while they laughed evilly over their cigars.)

It seems to me that the major sins of the financial industry were not of sinister, deep-level planning but of chucking their excess leverage at whatever would get them rich for the moment. And most of this was signed off by the MBA grads at their desks downstairs, with the top-level guys signing off. In other words, no one was thinking beyond immediate gain here. That's sin enough without there having to be a vast and subtle conspiracy.

At the risk of generalizing, I always doubt the explanations involving calculated, far-seeing, highly-coordinated evil. Most evil outcomes are consequences of simple-minded, narrow thinking by specialists with too much latitude over other people.
posted by argybarg at 9:42 AM on January 10, 2010 [2 favorites]

yes a run on the banks that will solve our financial woes
posted by synaesthetichaze at 9:52 AM on January 10, 2010

Bank runs are driven by fear. This is different.
posted by ryanrs at 10:03 AM on January 10, 2010

Huffington Post attempts to create a "social media" movement to move money out of the big banks.

I'm sorry. I am not posting the color of my money to Facebook.
posted by brundlefly at 10:04 AM on January 10, 2010 [4 favorites]

JPD,
I have to agree with you on all your points except the one about the Huffpo. I try to spend my money in a way that is consistent with my beliefs, and if enough people do this, it makes a huge difference. I would like the large banks not to be "too big to fail", and would hope this would go some way towards that. I understand that the large corporations are who do the most business with these banks, and chance of them refusing to do business with the large banks is as high as the chance that I will win the lottery (especially since I don't buy tickets).

The point of the idea is not really about the banks, but maybe to let people feel empowered, since the government has failed time and again recently to help anyone but large business.
posted by annsunny at 10:14 AM on January 10, 2010

I'm in favor of this social media movement, which I expect will have all the force of an internet petition.
posted by found missing at 10:18 AM on January 10, 2010 [1 favorite]

I'm sorry. I am not posting the color of my money to Facebook.

Why not post The Color Of Money to Facebook instead?
posted by dw at 10:23 AM on January 10, 2010

Bank runs are driven by fear. This is different.

Certainly, but I don't see how the consequences would be any different. That is, if any significant portion of depositors actually went and did it. Which I doubt will happen.
posted by synaesthetichaze at 10:23 AM on January 10, 2010

I'm going to ignore the Huff Post thing because its pointless. Money is fungible, it has to go somewhere and what do you think the small banks are are going to do with it?

Loan it out for people to buy houses and cars, which is mostly what small banks are supposed to do. Make small loans in the community. That may not be the only thing they do with it.

It's true that "Money is fungible" but it's not fungible between different institutions. If you withdrawal your money from a Citibank account, then Citibank won't have it any more.

When people say money is fungible, they mean money under the control of a single person or organization. If you give $5 to Mary, and tell her she has to use it for food, that frees up another $5 of her other money to spend on something she wants, because money is fungible.

On the other hand, if you decide not to give it to Mary, and instead decide to give it to Steve, then Mary does not have $5 to spend however she wants. Because she doesn't have the money, Steve does. Money isn't fungible between people, nor is it fungible between banks.

Now it could be that Steve owes Mary $5 and so giving the money to him is effectively giving it to her. But if you had given it to her she would have had $5 plus Steve's debt, which she could still collect in the future. And furthermore, when you deposit money in the bank, you're not really giving it to them, you're actually loaning it to them.

I'm not saying the "move your money" thing is a good idea, though. For one thing, these small banks have been going under at an alarming rate. IIRC there have been more then 100 small banks taken over by the FDIC since the financial collapse.

But a big part of the idea is that We have these 4 huge banks, and the fact that they are so large and powerful is a distorting influence on society. It would be good if they were broken up, but because they have such a stranglehold on congress, they're not. Another way to shrink them is for everyone to withdrawal their deposits. It would work if enough people did it, but I doubt it will happen.

It's a collective action problem. It's a hassle to change banks, and there is a risk your new bank could go under, and most people don't know how to check a banks rating to see how sound it is. And there's only a benefit if everyone does it. Governments are supposed to be the way to solve collective action problems, but the big banks have managed to 'intelectually capture' congress. So that's not happening.

If I read you right, delmoi, you're suggesting that the capitalist bosses decided that public outrage over their misdeeds could be effectively dissipated by engineering a diversionary social movement. (No doubt they conceived this plan around a massive polished table while they laughed evilly over their cigars.)

Who do you think started the Tea Party movement? As I recall the first public face was Rick Santelli, a former derivatives trader who worked for CNBC. The guy who really got the ball rolling was Lobbyist Dick Army and his group FreedomWorks

It's not a 'conspiracy' this stuff is all out in the open. There isn't a 1:1 correlation between Bank CEOs and the people doing the tea-party protests, but the people who are paying for it are definitely the types of wealthy people who invest in and have their wealth managed by these huge banks and hedge funds.

Obviously there are liberals and bank CEOs who are democrats, like Jamie Dimon, the CEO of JPMorgan Chase, and the Obama administration actually did work to tamp down outrage about banks (and especially Geithner) in the liberal blogsphere.

But the point is, rich and powerful people, who's interests were aligned with wallstreet paid to get the teaparty movement going.
posted by delmoi at 10:26 AM on January 10, 2010 [5 favorites]

I'm going to ignore the Huff Post thing because its pointless. Money is fungible, it has to go somewhere and what do you think the small banks are are going to do with it?

Could you elaborate on this? Are you saying that they will just turn around and invest it with Citi, BOA, etc al so it is going to end up with the same Wall Street players anyways? Or that personal banking deposits are so low as to have a negligible effect on the overall financial system?

I'm genuinely curious, not challenging the assertion. An ideal financial system would be both resilient and efficient. And if systems theory may be applied to finance...a more distributed and diverse financial network would be more resilient, "too big to fail" is a result of over-concentration (of both money and power) within a select few firms. The movement described in the Huffington Post article seems to be trying to kickstart this change at a grassroots level.
posted by nowoutside at 10:29 AM on January 10, 2010

Certainly, but I don't see how the consequences would be any different. That is, if any significant portion of depositors actually went and did it. Which I doubt will happen.

Well, when there's a bank run the problem is the bank can't cover the withdrawals and so they go under. Presumably, these banks are not insolvent and they could cover the withdrawals. Bank runs are also subject to a feedback effect. Once someone pulls their money out, other people start to worry that the bank will go under and they'll lose all their money. With this, there's no feedback effect for people who have less then the FDIC limit. (in fact, even with banks that went under in '08, there weren't really any "runs" just what were called "walks" where people with more then $250k took the excess out).

With this protest, only people who care will move their money. And the whole point is to reduce the size of the banks so they are not running the economy.
posted by delmoi at 10:31 AM on January 10, 2010 [1 favorite]

I don't think for a second that couple thousand checking accounts are going to make a difference to the banks, but from a communications standpoint, this seems to be putting the blame in the right place.

Also, I'm pleased with any "PR" movements that are issue-driven; keeping rich bankers from taking tax-payer-funded bonuses is something that leftists, rightists, and moderates should all be able to get behind (in theory, at least). I don't have the link handy, but I believe there is at least one conservative facebook group with a similar stated aim as "move your money."

All that being said, this is not a movement yet, no matter what Huffington might say. Their group currently has less than a 1000 members -- if they can crack a million, I'd bet someone in Congress will jump on their bandwagon, but they're pretty far from a "sea of change."
posted by ®@ at 10:33 AM on January 10, 2010 [1 favorite]

With this, there's no feedback effect for people who have less then the FDIC limit.

Thanks, that pretty much clears it up for me. I always thought that "bank run" was essentially defined by the feedback effect, such that it could happen to even completely solvent banks if enough people moved their money. It makes sense that people with less than 250K in deposits wouldn't contribute to the whoel thing, and so only those protesting the 'too big to fail' status of the banks would move their money. I do wonder how it would play out in reality though; people will sometimes move their cash around if they think they might not have immediate access to it... i.e., even if they're not worried about losing their deposits outright.

I also wonder if the banks will just come out and say "there's a run on the banks, give us more TARP bucks" even when there isn't. Twenty minutes ago I would have believed them.
posted by synaesthetichaze at 10:42 AM on January 10, 2010

Bank runs are driven by fear. This is different.

Certainly, but I don't see how the consequences would be any different. That is, if any significant portion of depositors actually went and did it. Which I doubt will happen.

Truth is, the big banks don't care about personal checking accounts, and most would be happy if the HuffPo movement had some impact, since personal accounts are notoriously unprofitable for the big banks. (Thus the many fees to recoup the cost of customer service, branches, etc.) It's business accounts they love, since they have higher deposits, higher capital throughput, and tend to stay with one bank much longer than a personal account customer.

In the month prior to Washington Mutual's collapse, there was a slow motion bank run happening -- $1 billion left WaMu in the month of September up until the FDIC drop kicked them into the merger with Chase. It wasn't the Free Checking customers that were the issue, though. It was small businesses pulling their accounts, afraid of a WaMu collapse freezing their accounts.

You want to bring the big banks to heel? Get businesses to leave. Chase could give a rip that they lost some ungodly percentage of WaMu free checking customers with the merger. Businesses and credit cards are Chase's money spinners.

But as for your personal account, just get the best deal and go with it. Usually that's at a credit union, but I've already left one after they gave me the wrong loan and I found their customer service to be woeful. OTOH, the one I'm at now lost $28M last quarter.
posted by dw at 10:53 AM on January 10, 2010

The irritating thing about the Huffington Post scheme is how completely its species of defeatist neoliberalism buys in to the terms of debate of the financial industry it claims to be opposing. It's like something Tom Friedman would come up with — fix the market through market forces! Vote with your dollars! Fuck that. You know what happens when you vote with your dollars? Banks have more dollars, and they win. That's why people fight wars and things so they can vote with their vote. I mean, what's the point in even having a state monopoly on the legitimate use of force if you're never going to take it out of the box?
posted by enn at 10:58 AM on January 10, 2010

In other words, no one was thinking beyond immediate gain here.

Bingo - and why would you expect them to behave in any other way, the way the rules of the game are set up right now? I don't see any way to change except by changing the rules (that is, create regulation) in such a way that it would be more profitable for them to think beyond immediate gain.
posted by DreamerFi at 11:04 AM on January 10, 2010

(in fact, even with banks that went under in '08, there weren't really any "runs" just what were called "walks" where people with more then $250k took the excess out)

That's provably false.

IndyMac, which once employed 10,000, fell prey to a classic run on the bank, and regulators singled out Sen. Charles E. Schumer (D-N.Y.) as having helped to fuel massive withdrawals. On June 26, Schumer said in letters to the FDIC, the OTS and two other federal agencies that IndyMac might have "serious problems" with its loan holdings.

"I am concerned that IndyMac's financial deterioration poses significant risks to both taxpayers and borrowers," he wrote. The bank "could face a failure if prescriptive measures are not taken quickly."

That public warning prompted depositors to pull $1.3 billion out of accounts between June 27 and Thursday.

"This institution failed today due to a liquidity crisis," John M. Reich, director of the OTS, said at a news conference Friday afternoon. "Although this institution was already in distress, the deposit run pushed IndyMac over the edge." ~ Link

JIM ZARROLI: Regulators had long been keeping an anxious eye on Washington Mutual. The company, which is known as WaMu, had been steadily losing money for nearly a year, more than six billion years dollars in the last three quarters alone. Then, more than a week ago, WaMu began to experience a good old fashioned bank run. John Reich heads the Office of Thrift Supervision, which regulates savings and loans.

Mr. JOHN REICH (Office of Thrift Supervision): Beginning about the 15th of September and continuing everyday until through yesterday, the bank experienced a serious run on deposits totaling about $16.7 billion dollars over that nine-day period. ~ Link

delmoi, in threads like these, I'm convinced you do more harm than good.
posted by SeizeTheDay at 11:15 AM on January 10, 2010

HuffPo will have about as much success as Firedoglake.
posted by Halloween Jack at 11:25 AM on January 10, 2010

I really like the idea of 'provably false' as distinguished from, say, 'internet false'.
posted by found missing at 11:25 AM on January 10, 2010

Moving the money to smaller banks sounds nice, and I'm tempted to do it anyway. But I have two reasons for doubting it will have any impact.

1) I honestly don't think consumer deposits really mean that much to the top tier banks anymore. I suspect every individual could move their few thousand bucks out of BofA and Citibank, and their deposit base would be reduced, but not be enough to matter to them. Possibly not by enough to counter the money they'd save by just not having to fuck around with us anymore. Close all those stupid branches, fire people, stop advertising, just focus on business banking, where the real money is.

That's intuitive rather than based on any factual knowledge, and I recognize it may be bullshit. I'm sure someone here with real banking expertise will shoot it full of holes any time now. But...

2) If having consumer deposits does matter to the major banks, moving your money into smaller banks won't work because the big banks will just buy the smaller banks. How do you think I ended up with my bank account in the first place? It's not like I ever chose to do business with BofA. The small bank where I did my business got bought by a bigger bank, and then that bigger bank got bought by BofA.
posted by Naberius at 11:44 AM on January 10, 2010

Moving the money to smaller banks has several issues with it
1) they don't have the willingness or the ability to lend out a greater % of funds then do the bigger banks. If they collect deposits more quickly then they can make the loans they'll just use the funds to either invest in other banks or sell the deposits on.

Secondly all the data shows that the bigger banks are actually more aggressive lenders with lower underwriting standards.

Finally a small bank with a very fat loans/deposits ratio becomes a tremendous candidate for consolidation so you end up in a big bank anyway.

But really my point is - punishing big banks is great and all, but kind of pointless. The thing that really really really matters is reforming the regulatory system. People should be focusing their activism on that.
posted by JPD at 12:10 PM on January 10, 2010

Are there any rules that restrict a (for-profit) bank from buying a (non-profit) credit union?
posted by JohnFredra at 12:41 PM on January 10, 2010

I don't know about the massive tables and cigars, but there are in fact a small number of people who's influence channeling ire away from those responsible is undisputed; c.f. the Koch family
posted by digitalprimate at 1:12 PM on January 10, 2010

Are there any rules that restrict a (for-profit) bank from buying a (non-profit) credit union?

The only way to buy something is to pay enough money to the current owners that they'd be willing to part from it. Check out who owns a credit union.
posted by DreamerFi at 1:18 PM on January 10, 2010

>> Check out who owns a credit union.

They're member-owned. I should have googled some more: it seems that on order for a bank to buy a credit union, the credit union must first convert to a mutual savings bank. This requires majority approval by both the directors and members of the credit union. Outlined here. This was approved in 1998, and has happened at least once since then.

This is interesting to me in that the bar seems to be set fairly high for a major bank to consolidate credit union(s), and that one can switch to a credit union with a reasonable expectation that they won't just get gobbled back up by BofA later.
posted by JohnFredra at 1:35 PM on January 10, 2010

1) I honestly don't think consumer deposits really mean that much to the top tier banks anymore. I suspect every individual could move their few thousand bucks out of BofA and Citibank, and their deposit base would be reduced, but not be enough to matter to them. Possibly not by enough to counter the money they'd save by just not having to fuck around with us anymore. Close all those stupid branches, fire people, stop advertising, just focus on business banking, where the real money is.

I don't know about the states but over here consumer deposits still fuel the industry and competition among banks and other financial services companies have given savers a pretty hefty margin. 175bps above the official cash rate at the top. Even more for TDs.

Are there any rules that restrict a (for-profit) bank from buying a (non-profit) credit union?

I was originally with a mutual savings bank. We had a listed company that wanted to take over us. They paid $3,246 per member. Considering I paid $10 for my share it was a pretty good deal at the time. I sold my shares in the listed company almost as soon as I got them and they haven't been as high since. The listed company I was with was again taken over by a bunch of retards over east.

I'm back with a bank now but it's a smaller bank in my state operating as a fully owned subsidiary of a larger bank. They give me a pretty awesome deal.
posted by Talez at 3:04 PM on January 10, 2010

FWIW regardless of all the other merits or lack thereof, one thing this did for me is to encourage me to look around at our local credit unions again.

(If you're in the U.S. you can find the credit unions in your own area here.)

I'd tried to find a decent CU maybe 10-12 years ago but none of them that I could find--that I qualified for--quite matched up with our needs and had a convenient location.

But looking again now, I found 3 or 4 that would probably work.

(Some of that is because internet banking, ATM networks, etc. make the location of the local branch a little less important than it once was.)

So if you haven't looked around for a local CU lately, it might be worth a try.
posted by flug at 8:00 PM on January 10, 2010 [1 favorite]

That's provably false.

[quoted stuff about IndyMac]

delmoi, in threads like these, I'm convinced you do more harm than good.

LOL Okay. You do realize that more then one bank went under in '08 right? Look at Wachovia, WaMu, etc. IndyMac was a special case, and in any event they were totally going to go under no matter what. Their entire business model was built on subprime mortgages.
posted by delmoi at 10:48 PM on January 10, 2010

IndyMac was a special case, and in any event they were totally going to go under no matter what.

WaMu was going to go under no matter what. That the FDIC was shopping them was the worst-kept secret in Seattle in the month prior to the closure. Heck, I moved my money out of there four weeks before the end. WaMu was terminal; the run might have cut a week or two off its life and hastened the FDIC along, but there's no way WaMu would have survived the month of October.
posted by dw at 12:05 AM on January 11, 2010

It's business accounts they love

When you pay the big corps through your bank, you get their banking info.

So combine http://globalguerrillas.typepad.com/globalguerrillas/2010/01/journal-ultimate-griefing-in-a-lottery-economy.html
with http://globalguerrillas.typepad.com/globalguerrillas/2010/01/tribal-layers-financial-data.html#comments . Make a web page backed with a DB, publish the info, and start having customers contact the business and sqwauk and feel like you've done something more than posting an idea on the Blue.

HuffPo will have about as much success as Firedoglake.

Or the Solari coming clean effort.


Now you COULD opt to not use Federal Reserve Notes. But this store Ag trading post is the only store front I am aware of that refuses to take FRNs. I'm sure they'll have plenty more in stock once the word gets out.
posted by rough ashlar at 6:23 AM on January 11, 2010

Truth is, the big banks don't care about personal checking accounts
National Irish Bank has written to thousands of its customers this month informing them of a “new style of banking” in which branches will not handle over-the-counter cash transactions.
The letter says branches will no longer handle cash withdrawals and lodgements, night safe lodgements and foreign currency cash. Branches will continue to lodge cheques, drafts and postal orders and issue drafts.
Customers are advised to obtain cash from “ATMs nationwide” or to seek “cash-back” on their debit cards.
posted by rough ashlar at 6:34 AM on January 11, 2010