by Mark Engler
November 8, 2011
Mark Engler is a senior analyst
with Foreign Policy In Focus and author of How to Rule the World:
The Coming Battle Over the Global Economy (Nation Books, 2008). He
can be reached via the website
This past Saturday was “Bank Transfer Day” (Move
Your Money,) a day of action in which
thousands of people moved their money from “too big to fail” banking titans
into credit unions and smaller regional banks.
While it’s hard to tell precisely how many
followed through on their threats to close accounts on Saturday
itself, over the past month credit unions have added
650,000 new members (as
opposed to 80,000 in a regular month), resulting in more than $4.5 billion
in new deposits.
As Sarah Jaffe at Alternet
ABC News aired a remarkable report
calling the exodus of customers a “bank revolt” and stating, “as of today, 1
million consumers are hurling a lightning-bolt warning at the big banks,
moving their money out in protest.”
Now, a lot of the impact of closing accounts might have been symbolic, and
$4.5 billion might not be all that much money relative to the size of the
banking system as a whole. But, as Salon’s Andrew Leonard
riffing on an old joke,
“$4.5 billion here, $4.5 billion there, and
pretty soon you are talking about real money, even for JPMorgan-Chase.”
All in all, Bank Transfer Day was a pretty
powerful expression of collective disgust by Americans fed up with the
goliath banks. Right?
Well, not everyone agrees. Leave it to the New Republic to publish a piece
of smug nay-saying in which the writer shows himself to be far smarter than
all those who had the nerve to take collective action.
In this case, Simon van Zuylen-Wood, a reporter-researcher for the
magazine, penned an article entitled, “How Bank Transfer Day Will Help the
Banks It’s Trying to Hurt.”
[I]f the executives at the country’s biggest
banks have circled Bank Transfer Day on their calendars, it’s probably
not out of anxiety. Whatever the intentions of its organizers, Bank
Transfer Day may end helping the very one percenters they mean to
At the root of the problem is that many Bank Transfer Day enthusiasts
have overestimated their value to the banks they patronize: Ultimately,
not all bank customers are made equal....According to Jennifer Tescher,
President and CEO of the consultancy Center for Financial Services
Information, banks typically earn at about 80 percent of their deposit
revenue from the top 20 percent of their customers.
In his post, van Zuylen-Wood goes on to explain
that maintaining small checking accounts can actually cost big banks more
money than the accounts generate in profits.
And, owing to the passage of
the Dodd-Frank bill last year, banks are limited in the amount they can
charge in overdraft or “swipe fees” that they previously used to make small
customers worthwhile for them.
Bank of America’s early October proposal to
supplement its lost “swipe fee” revenue using a five dollar per month
charge to holders of debit cards should probably be understood in that
It was designed to be a win-win proposition for the bank:
either it earned $60 per year from each debit card customer with a
checking count under $20,000...or it would drive unprofitable customers
away from the bank entirely (or at least toward Bank of America credit
cards, which have become more profitable than debit cards), to the
benefit of the bank’s bottom line.
If the article were meant merely as an analysis
of the business of handling small checking accounts, I would say that it
makes some perfectly fair points.
But it’s framed as something more than that - as
a piece that analyzes the efficacy of a political action and that argues
that those taking the action are naive. In that capacity, it is model of
crap contrarianism. If I had a dollar for every self-satisfied commentary
written (even by ostensibly sympathetic liberals) about protests being
misguided and ineffective, I’d no doubt be able to join the wealthy elite
that the #Occupy movement has been targeting.
And I expect that I would earn
about 80 percent of my deposit revenue from the New Republic.
The fact of the matter is that, if the big banks wanted to expel customers,
they could easily do so. (Why not a $20 monthly fee for debit card use?)
far from receiving an eager farewell at bank branches eager to shed
small-time depositors, many of those who have descended upon institutions
such as Citibank demanding to close their accounts report
managers who tried to
convince them to change their minds.
Of course, the “move your money” effort is not only a matter of individuals’
decisions about their personal finances. In the context of larger Occupy
Wall Street mobilizations, many people were coupling the closing of accounts
with demands for political change. That’s why others who have swarmed in as
part of group actions have encountered police threatening (or even
Overall, Bank Transfer Day was part of a wave of public outrage, defiance,
and protest that is doing significant damage to the banks’ reputations -
which they evidently value.
As van Zuylen-Wood himself notes:
Ultimately, the Bank of America and its
competitors chose not to go ahead with the five dollar charge, deciding
that the hit to their PR wasn’t worth the potential gains to their
As Diane Casey-Landry, a former CEO of the American Bankers
Association told me, the public outcry against BoA was enough of a
“reputational kick in the chin” that its top competitors - Wells Fargo,
Citibank, and Chase - abandoned their proposed debit fees as well.
What is a day of action in which thousands close
their accounts and denounce the banks as greedy bastards if not another PR
“kick in the chin”?
In his article, van Zuylen-Wood uses selective citation of a source to
suggest that credit unions might not want the influx of new members:
Worse yet, by transferring their money to
credit unions, Bank Transfer Day participants may also be harming the
very financial institutions they mean to help.
banking co-ops are governed by their depositors and are generally more
customer-friendly than banks - although too big a customer base could
threaten that. Indeed, a little more than a week ago, in anticipation of
Bank Transfer Day, the National Credit Union Administration sent out a
memo advising its federal regulators that a large influx of new
customers could lead to long-term problems down the road, reminding them
that credit unions are penalized if their retained earnings fall short
of seven percent of their total assets.
In other words, by inundating
credit unions with a flood of capital they likely cannot profitably
invest, the Bank Transfer Day participants may be pushing those
institutions to abandon the perks that make them attractive, like free
Bank Transfer Day gets one basic thing right: Checking account holders
have a right to take their business wherever they wish. What they
forget, however, is that not everyone will want the business they have
Except that, the credit unions do want the new
business - and they’ve been very vocal about that fact.
The same source that
van Zuylen-Wood cites, the National Credit Union Association, sent out a
press release last week lauding Bank Transfer Day and celebrating the influx
of new members.
It includes exuberant quotes from the organization’s
president, Bill Cheney:
“Many credit unions across the nation...are
making special efforts to tap the surging interest in credit unions,”
“They are conducting advertising campaigns both individually and
cooperatively with others, sending ‘switch kits’ to existing members to
share with family members or other prospective members, beefing up
websites, extending hours and staffing for Bank Transfer Day, performing
e-mail blasts to members, maximizing social media campaigns, putting up
banners in lobbies or on their buildings, offering bonuses to members
who bring in new members, and giving bonuses to members as well,” Cheney
The New York Daily News
quoted another credit
union executive basically saying the exact opposite of what van Zuylen-Wood
wants to convey:
“These are very good times for credit
unions,” said Kirk Kordeleski, CEO of Bethpage Federal Credit Union, one
of Long Island’s largest with 24 branches and $4.4 billion in assets.
“All this conversation about fees has led to a lot of opportunity for
us,” said Kordeleski, who saw a 60% hike in new members in October, to
1550 from 925.
In general, “vote with your dollars” consumer
actions are not my preferred model of organizing.
Moreover, I have no illusions that the amount of
money transferred by small account-holders, in itself, is going to cripple
the banking giants. But my answer to people who raise that point is the same
as my response to people who think that moving your money to a credit union
is merely a lifestyle decision with no real political impact.
The energy of
something like Bank Transfer Day only feeds into other activist efforts and
broadens the constituency supporting regulation of the financial sector. This weekend, activists got thousands of people
to move their money.
Next week they can find a new way to stick it to the