Give Up Your Bank For Lent

On Ash Wednesday, churches in San Francisco announced they were removing $10 million from Wells Fargo and called on the bank, as per the advocacy group Faith in Public Life, “to put an immediate freeze on its foreclosures and repent for their misconduct.” The March 9 New York Times reported that “The Rev. Richard Smith of St. John the Evangelist, an Episcopal church in San Francisco, likened the divestment campaign and public protests to early Christianity’s ritual of ‘reconciliation of the penitents.’ Far from taking place in the private sanctity of the confessional, that rite occurred in public, with the penitent overseen by a priest and required to present himself before a bishop.”

“’It seemed like a parallel to us,’ said Mr. Smith, 62. ‘Our banks have done a great deal of damage in a very public way. So it seems appropriate as we enter into a season of penitence that we invite those who separated themselves from the community to repent with us. It’s basically ‘Ethics 101.’”

The effort is part of several national campaigns to get consumers and community groups to remove their money from the big banks and transfer accounts to credit unions and smaller financial institutions. Travis Waldron at ThinkProgress wrote, “Religious organizations have been at the forefront of movements to get consumers to move their money. The New Bottom Line, a coalition of faith groups, pledged to move $1 billion this year, and before Thanksgiving, churches moved $55 million away from Wall Street banks with pledges to remove as much as $100 million more.”

Occupy Wall Street has been in the lead, as has the Move Your Money project – its website even includes a handy locator that lists credit unions and community banks near your zip code. On the November 5 “Bank Transfer Day,” some 40,000 moved their money out of the nation’s biggest banks, but according to the consulting firm Javelin Strategy and Research, the event actually had a much wider impact. In a January 26 report, Javelin estimated, “5.6 million U.S. adults with a banking relationship changed providers in the past 90 days. Of those switchers, 610,000 U.S. adults (or 11 percent of the 5.6 million) cited Bank Transfer Day as their reason and actually moved their accounts from a large to a small institution.”

The March 2 Los Angeles Times noted, “Consumers fed up with the rising tide of bank fees helped the nation’s credit unions more than double their number of new customers last year… More than 1.3 million Americans opened new credit union accounts last year, up from less than 600,000 in 2010, the National Credit Union Administration reported. That brings the number of credit union members to a record 91.8 million.”

As a result of all this, CNN Money reported last November, “The nation’s 10 biggest banks could stand to lose as much as $185 billion in deposits in the next year due to customer defections, according to cg42, a Wilton, Connecticut-based management consulting firm that has conducted research for several of the nation’s top banks.” Sounds like a lot, but keep in mind those same ten banks hold retail deposits of $2.04 trillion.

Nonetheless, public opinion and the post-meltdown, Dodd-Frank financial regulations have the banks and other financial institutions scrambling, while they continue to scream in protest and lobby on Capitol Hill against the ignominy of reform. On March 12, that $25 billion foreclosure abuse settlement was filed by the federal government and 49 states – Oklahoma was the holdout – with Ally Financial, Bank of America, Citigroup, J.P. Morgan Chase and Wells Fargo. Twenty billion of it will be used to give a break to military and the unemployed, reduce principal for delinquent or near default loans and refinance mortgages already underwater. Another billion and half will provide some small restitution to people whose homes were sold or foreclosed upon. But as the Associated Press pointed out, “About 11 million American households are ‘underwater’ on their mortgages, meaning they owe more than their homes are worth,” but the settlement “is expected to reduce loans for only about 1 million.”

We’re told that the banks, desperate when thrown a lifeline by taxpayers in 2008, are now stronger and better able to weather a crisis than they were. 15 of the 19 largest financial firms passed the Federal Reserve’s latest stress test. Regardless of whether we as individuals could survive, the test asks, according to The New York Times, “whether banks would have enough capital to weather a peak unemployment rate of 13 percent, a 21 percent drop in housing prices and severe market shocks, as well as economic slowdowns in Europe and Asia.”

“The Fed’s stress tests assumed that the 19 banks would be slammed with $534 billion of losses in just over two years. Even after such hits, most banks would emerge with adequate capital…” But one of those that failed was Citigroup, our third largest, the one that took the most government assistance during the meltdown – and this in the wake of last week’s announcement that in 2011 the bank paid CEO Vikram Pandit nearly $15 million in total compensation, including a cash bonus of more than $5 million, his first since the 2008 crash.

What’s more, the Times said the tests revealed to the Fed that, “In business loans — called commercial and industrial loans by bankers — Citi and U.S. Bancorp had the worst portfolios, while Wells Fargo and Fifth Third had the shakiest credit card portfolios. In commercial real estate, regional banks appear to be the most vulnerable.” Swell.

There’s still a lot to be angry about, still good reason to contemplate transferring your money or at least filing with the new Consumer Financial Protection Bureau if you have a complaint about your mortgage, deposit accounts or credit cards. As former Goldman Sachs executive director Greg Smith said in this week’s bombshell Times op-ed announcing his resignation, “It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are.”

Jeff Horwitz at the financial daily American Banker this week exposed J.P. Morgan Chase’s credit card services division, reporting that it “took procedural shortcuts and used faulty account records in suing tens of thousands of delinquent credit card borrowers for at least two years,” sparking an investigation by the Office of the Comptroller of the Currency. “The bank’s errors could call into question the legitimacy of billions of dollars in outstanding claims against debtors and of legal judgments Chase has already won, current and former Chase employees say.” As Rolling Stone’s Matt Taibbi observed, “Countless credit card borrowers would now have collection agents chasing them for money they did not owe,” and in some cases, according to a key witness, Chase actually owed the customer money.