Move Your Money

Worried about America is on a downward slope, with hard times, growing unemployment and a sour economy? You’re not alone. For her new book, Move Your Money co-founder Arianna Huffington outlines why she fears America is becoming a third world nation. It’s not all gloomy, though: she ends the book with advice on how we can bring America back to prosperity, and it all starts with you.

The big banks and credit card companies are not on your side, and when we start taking control of our own finances we affect the national financial system. As Arianna says, “the greatest antidote to despair is action.” Move your money and help make a better country.

Winning the lottery may seem like a great way to make a quick buck, but a recent academic study showed that, for many people, winning the lottery has no effect on how they manage their finances, and just pushes problems further down the road. The same is true for Wall Street megabanks and the government bailout: giving banks huge amounts of cash, no strings attached, does not change their habits that got them into the mess in the beginning. That’s why financial columnist Don McNay wants us to say “no” to the bailed-out Wall Street banks and move our money:

I’ve been promoting concepts designed to help Americans create wealth without Wall Street.

The first is moving your money away from Wall Street. If you take your money out of the “Too big to fail” banks, you are reducing their political power. [...]

If we keep on moving our money, eventually the people in Washington will have the backbone to tell Wall Street, “No.”

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We appreciate Don’s support, and agree that it’s time to make a change. If the big banks won’t learn, it’s up to us to teach them a lesson.

Virg Bernero, the current mayor of Lansing, Mich., and a candidate for governor, wants to do something about the credit squeeze the major banks are putting on local businesses and families in his state . As part of his campaign platform, he has proposed moving hundreds of millions of dollars out of the major banks and even starting a state-owned bank, much like the Bank of North Dakota. The Detroit News reports:

“We’re not going to invest in Wall Street if they’re not going to invest in us,” Bernero told about a dozen citizens at a Lansing coffee shop. “We’re going to take our money out of Wall Street and create the ‘Main Street Bank.’

“This is the fight: Main Street vs. Wall Street — it’s not just a slogan. We’re going to get banks to work with people instead of taking their homes from them.”

Bernero has said he wants to establish a state-run bank to make loans to small businesses that cannot get help from the commercial lending market.

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The Bank of North Dakota is the only state-run bank in the nation, which has been thriving during the financial crisis, and is part of the reason North Dakota has emerged relatively unharmed.

Other states like Maryland, Minnesota and New Mexico have tried to adopt resolutions prioritizing local banks that help communities, but unfortunately a full legislative docket prevented them from reaching the floor.

Nationwide, states and cities keep about $230 billion in the largest banks for their various operating expenses. If more states hop on board and make moves to keep that money with local banks and credit unions, the benefits reaped by communities would be enormous.

In any healthy free market system, businesses that don’t compete are supposed to fall by the wayside as their opponents offer better, faster and smarter service. We all know that’s not what happens in the world of banking, though; when some banks become “Too Big To Fail” they get bailed out by the government. Former small-town banker Katy Welter explains why being small enough to fail is actually a good thing:

When small banks fail, they don’t bring America down with them. Unlike notoriously “too big to fail” commercial bank monstrosities, the government sees little reason to assist small banks. If the American economy is a forest, then a small bank’s failure is a lone tree tipping. When a large bank teeters on insolvency, it threatens a ravaging forest fire. Big banks fail less frequently, as Federal Reserve Chairman explained on September 2, not because they’re better run, but because they aren’t allowed to fail. And they aren’t allowed to fail because their failure threatens to uproot entire economy.

Effectively, then, big banks are holding the American economy hostage — pay up, or else. Bernanke may have no choice but to rescue to them, but you do have a choice. You can move your money to a local institution that offers lots of upside when it succeeds (for example, they promote small businesses and make more local loans) and minimal impact when it fails. Typically, a failed small bank is acquired by a larger bank, usually through a deal brokered by the FDIC. Moreover, contrary to popular belief, when a small bank fails, your taxes do not pay for the lost deposits (deposits are lost because that money has been loaned out to borrowers who cannot repay). Banks insure your deposits through regular premium payments to the Federal Deposit Insurance Corporation (FDIC). Yet, when large banks fail — or even threaten to fail, as we’ve seen — the global economy cowers and could collapse. There isn’t enough insurance in the world to guard against that loss.

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One of the main reasons that the economy is still in the doldrums is because of a pervasive lack of trust. People don’t trust banks, banks don’t trust their customers, and many people are reticent to start investing again. Dr. Vivian Norris de Montaigu, a filmmaker working on a documentary about Muhammad Yunus, who won the Nobel Peace Prize for his work on Microfinance, agrees. She has seen firsthand how important trust is in building credit, and thinks that it’s time our financial system had a makeover to make it trustworthy again.

…we simply do not trust them anymore, and most likely never will again. So let’s get the investors and board members and depositors to change things, shake it up, remove these guys and put some women in charge, and those in whom we actually have trust again.

Then and only then will America have a banking system worth believing in, and until then, well, it’s pretty much Us against Them. And I have a pretty strong feeling They are going to Lose. Because there are more of us, and we actually are rediscovering our power both politically and economically. Move your money. Call your representatives. Educate your children about the political process. Rebuild your communities and help those in need. There are so many people not finding work after losing their jobs. There is so much good will and energy among young people who want to remain optimistic about their future. America will be whole again and it will be even better now that we have woken up from this fantasy.

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There are so many reasons to move your money, sometimes it can be hard to keep track of them all. That’s why we came up with this set of resource sheets, designed to focus on different issues people might have. Curious how banking locally is better for small businesses? Or why schools should consider where they bank? We’ve got you covered. Check out the sheets below and let us know what you think. Are there other things we should be thinking about? As always, we love to hear your thoughts.

Moving Your Money for Small Businesses

Moving Your Money for Environmentalists

Moving Your Money for Faith-Based & Social Justice Organizations

Moving Your Money for Students & College Groups

Moving Your Money for Political Parties

Moving Your Money for Libertarian Groups

Tips for Online Organizing

Take a look at our other resources.

Included in the government’s new financial reform laws are changes to the way banks make money from merchants during debit card transactions. These changes might make it seem like problems for interest-bearing accounts offered by some community banks, but the situation isn’t so clear cut. Syndicated columnist Scot Burns answers a question about this subject, and explains why moving your checking account to a local bank or credit union is a good idea.

All we know at this moment is that the new regulations will put pressure on bank earning sources, and debit fees to merchants are one of those sources. Another possible solution for your transaction account is to explore the accounts offered at credit unions. Many offer attractive interest rates.

Regardless of what happens, it is a good bet that you will get a somewhat better deal at a community bank or at a credit union than at one of the mega-banks. So I suggest searching for the best deal, then moving your money.

Finally, while it is a hassle to change banks, there is another reason to move your money to a (much) smaller institution: It may be the only way we can protect ourselves from the risk-seeking behaviors of the mega-banks.

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When college students open their first bank account, odds are that they will stay with that financial institution for decades to come. That’s why it’s so important that new students keep their money with local banks and credit unions from the beginning. Beth Sallay, a graduate student in Utah, wrote to the Daily Utah Chronicle to tell her school to keep the big banks out:

Editor:

Every year I am disappointed to see the credit and banking companies setting up tables at the Union for the first week of fall classes. It is especially disheartening that these banks are those that were bailed out but are still practicing business as usual. Seeing them out hustling for business on campus, one could almost assume they were in some way affiliated with or acting on behalf of the university. I would like to see a table for a local bank not on the brink of financial ruin due to incompetence, shoddy business practices and not under a “too big to fail” status. Next fall, the university should be encouraging financial responsibility by banning the bailed-out banks and instead offering space to www.moveyourmoney.info so that these businesses can experience the consequences of their failure.

Beth Sallay,

Graduate student, Instruction and Educational Technology

We agree. That’s why we’ve teamed up with the Responsible Endowments Coalition to help students and schools use their money for good.

Are you procrastinating moving your money because you’re concerned about all the automatic payments for bills and loans? Well, you really have no excuse now. Our pals over at Facilitas have collaborated with the personal finance website Mint to offer a new BankSwitcher tool, which automatically identifies all of your automatic payments and makes switching easier. Best of all, the service is currently free white BankSwitcher is in its Beta phase. Just go to mint.bankswitcher.com to get started

After getting tens of billions of dollars of taxpayer money in the federal bailout, banks are turning around and using that cash to influence Washington. So far this year the top ten bailout recipients have spent more money on lobbyists than any other companies — to the tune of a combined $16.32 Million.

Leading the pack this year was JPMorgan Chase & Co., which spent $1.52 million on lobbying in the second quarter, on top of $1.51 million in the first quarter of 2010, for a total of $3.03 million, according to disclosure reports filed with the House of Representatives clerk’s office.

Citigroup Inc., the largest bank recipient of government funds during the crisis in late 2008 and early 2009, was second. The New York-based bank spend $1.47 million on lobbyists in the second quarter, after spending $1.31 million in the first quarter for a total of $2.78 million.

And Wall Street titan Goldman Sachs Group Inc. was third, with $1.58 million spent in the second quarter, on top of $1.19 million in the first quarter of 2010.

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The pattern will only continue unless we put a stop to it. End the cycle by moving your money to a local bank or credit union.