Would 'Bank Transfer Day' make any difference in anything?

Coming up on Nov 5th some activists are trying to organize a nationwide "Bank Transfer Day" where people would transfer their money out of big banks, and into credit unions.  Why on Nov 5?  It's Guy Fawkes Day, which is related to a 1600's era Englishman who wanted to blow up the English Parliament and later inspired a comic book (and even later a movie) named V for Vendetta.  Between the Fawkes mask in the Bank Transfer Day logo, and the choice of day, one can assume their intention is destructive, to cause some harm to the banking system by removing money from the banks.

When we deposit money in a bank account it increases the asset base of that bank.  That is, deposits in bank accounts are carried as assets on the bank's books.  Bank's lend their assets (the money we deposit in the bank account) and earn revenue based on interest (and bank fees) they charge from the loans.  Our money deposited in big megabank accounts increases the power of the megabanks.  If we instead deposited money into credit unions, it would shift power from big megabanks to smaller local banks.

The Bank Transfer Day Facebook page talks about this, the difference between banks and credit unions, and some recent bank reform laws.  Banks are for-profit companies whose Board of Directors are appointed by shareholders, where Credit Unions are non-profit companies whose Board of Directors are selected from members, that is the account holders.  This probably means, as the BTD people suggest, that decisions running Credit Unions are more closely aligned with account holders, than decisions running the big banks.

Maybe we'd have a better world if the credit unions were stronger and the big banks were weaker.  But … the BTD crew is inciting us into committing a mass run on the bank, which would crash the system.  Or are they?  They say that's not their intention, nor is their intention to crash the system.  A mass withdrawal of money from banks seems like the very definition of a run on the banks, and as we know this is something which can cause big havoc.  The Great Depression was caused when a stock market collapse (1929) spooked the population, who tried to withdraw their money (run the banks), to keep the money at home, causing the banking system to have no money and therefore collapse.

That's what they're risking with this call for action - crashing the banks.  The BTD crew suggests in their Facebook page notes this isn't a true run on the banks like what caused the Great Depression.  Rather than keep their money at home, the instructions are to switch from big banks to credit unions.  Money will still be in the banking system, but instead with organizations that are friendlier to real people than the big banks.

What I'm wondering is whether it will make a difference?

This reminds me of boycotts ...  Boycotts tend to have a short blip of an effect, you avoid buying gasoline from the particular brand for a day or a week or whatever, and eventually go back to that brand.  In this case the big banks have been rightfully tarred with negativity due to the 2007-8-9 financial collapse and the mortgage crisis.   Would transferring bank accounts have a similarly short term effect?

I rather doubt there will be very many people switching their bank accounts.  Banking relationships are more permanent, with longer ranging effects, than gasoline purchases.  Right?  There's all sorts of things connected to your bank account, automatic deposits, automatic payments, credit cards, and so on.

The major difference would be a relocalization of banking relationships.  A criticism some have of the current financial system is the siphoning of profits out of a local area to the pockets of remote business owners.  This depletes the financial strength of a given location.  Relocalization calls for buying from locally owned stores, and using a locally owned bank, and maybe even taking the step of creating a local currency.  The point of that is to keep profits within the local community, keep money circulating locally, keeping financial strength in your local place.

Relocalization of this sort is a larger thing than a blip of an event riding the coat-tails of a protest movement that might fizzle out once the snow starts falling.  Relocalizing the economy is a long term large scale project of education and action.

In any case here's a few videos:-

Fox News talking about "Should Wall Street be Worried"?  Towards the middle they start getting riled up about how Dodd-Frank is preventing the banks from doing things, and over the Government acting to Prevent a Bank from "investing their own capital" in whatever they want.  Uh..  Do they not recall how the financial system recently collapsed?  Have banks been reduced to utilities who must follow the edict of government?  That's how banks used to be run, with strictly laid out interest rates that gave banking huge predictability, and safety, but made banking jobs incredibly boring.  Decades of deregulation made banking a more interesting career, but let banks go into riskier businesses, and let banks create financial crises.

The rightful role of Banks probably is more like a utility.  Their job is to manage investment dollars.  This is a fundamental bedrock of society, and if we want that to be a solid bedrock then banks must be tightly regulated.

A local news program going over the difference between banks and credit unions

Protesters from Occupy Santa Cruz wanted to close their bank accounts, but got kicked out of the bank and threatened with the police.

Another group of protesters, in St. Louis, also prevented by BofA from closing their accounts.

 

The Denver Community Credit Union makes a plea for Credit Unions...

 

 

 

Steve Jobs

Rachel Maddow talks about the Good Old Days when Enron was the worst financial crisis..

Last week Rachel Maddow had an insightful piece about big bank swindlers, the Occupy Wall Street and Bank Transfer Day activism movements, and had Barney Frank on to talk about the Dodd-Frank bill.  Last night she had another piece about the recent history of massive swindles of the American population, focusing on the Enron scandal which should have sunk the Bush43 Presidency, and the later the 2008 financial system collapse.  The cause of both of these problems directly stem from deregulation of the banking and finance system, allowing these institutions to cook the books, make fraudulent transactions, and essentially swindle the population.  The response to those problems was to create two regulatory systems, the Dodd-Frank law and the Sarbanes-Oxley law.  The current crowd of Republican Presidential Candidates want to undo those laws, repeal them, in effect returning the country to the regulatory system that allowed the Enron collapse and the later general financial system collapse of 2007-8-9.

Under the old system Rachel talks us through a deal between Blockbuster Video and a large energy company who wanted to launch a joint venture with Blockbuster related to online video streaming and sharing.  That deal eventually fell through at a loss of $113 million, but that large energy company didn't record it on their books as a loss.  That company, Enron, recorded the $113 million as income and was part of the larger cook-the-books fraud committed by Enron.

Enron was a major supporter of the Republican party, to the extent of lending GW Bush the use of their corporate jet during his 1999-2000 Presidential campaign.  Enron was also in the room during Cheney's secret energy policy planning in early 2001.

Basically Enron was propped up by accounting tricks in a charade of lies and shell companies.  Later in the 2007-8-9 financial system collapse we had a different set of companies running a massive charade of lies, accounting tricks, etc, eventually defrauding the American public of massive quantities of money.

But the Republicans want to undo the modest regulatory stuff that came into being after these problems.  So that these kind of problems can happen again?

Let's be real - the actions of these fraudulent were enabled by decades of deregulation.  I can't imagine that Dodd-Frank or Sarbanes-Oxley did very much to recreate the necessary regulatory structure required for an honest and open financial and business climate.  As Barney Frank said during the prior episode, if the population had been calling loudly enough for tough financial reform, then Dodd-Frank could have done much more.

There have been decades of deregulation and I can't imagine that the Republicans are the only culprits here.  Both Democrats and Republicans have been taking payola from the major corporations for decades.

Visit msnbc.com for breaking news, world news, and news about the economy

U.S. not "trying that hard" on exports according to GE's Immelt - Balance of Trade and economic weakness

Reuters recently ran an interview with GE's CEO Immelt in which he laid out a case that the U.S. economy is weak because the U.S. is not trying hard enough to raise exports.  The basic idea is that it's other countries who are building actual products for export, and that the countries who export actual products are the ones earning revenue.  The U.S. manufacturing has been weakened by decades of globalization moving what used to be U.S. manufacturing to other countries.  I'm sure that General Electric has done their share of offshoring and moving manufacturing overseas, so this is a bit like the pot calling the kettle black.

"We're not trying that hard," Immelt told a Thomson Reuters Newsmaker event in New York on Monday. "We haven't really tried as hard as we can to compete, educate and sell our products around the world, and I think we can do better."

Immelt is a CEO of a major corporation, a life-long Republican, and a top advisor to the Obama Administration on Jobs and the Economy.  Hence what he has to say carries some weight.  He's also part of the 1% right?

The nation's economic malaise, now in its third year, has left many Americans angry and frustrated, Immelt said, and people in power need to empathize.  "Unemployment is 9.1 percent. Underemployment is much higher than that, particularly among young people that don't have a college degree," Immelt said. "It is natural to assume that people are angry, and I think we have to be empathetic and understand that people are not feeling great."

Immelt offers a poorly stated plan for a solution to this:  "The only way to solve this specific problem is growth," Immelt said. "If unemployment comes down, people will feel better. If unemployment goes up, people will feel worse, no matter what goes on Wall Street."

Ah.. if only it were that simple.  Growth!  Right!

Uh.. the reason the U.S. manufacturing is weak is because of offshoring production into a globalized economy.  Sorry, Immelt, but I think your suggestions deserve to be ridiculed.

See:

U.S. not "trying that hard" on exports: GE's Immelt