7 Ways to Transform Banking

Each of us can help build a resilient financial system that will serve real people in real communities.
by Fran Korten
Friday, November 12, 2010 by YES! Magazine

Are you as outraged as I am by the Wall Street bankers with their fat bonuses, shoddy mortgages, and financial shenanigans? With the gridlock in Washington, I wanted to know what “we the people” can do to turn our fury into constructive action. So I turned to my friend Jared Gardner for advice. Jared comes from the financial industry and thinks hard and well about how to change the system.

Here are seven things I gleaned from my discussion with Jared about what we can each do to build a resilient financial system that will serve real people in real communities.

1. Move your money.

You may have heard about the Move Your Money campaign. The idea is to move your deposits from a Wall Street bank to a community bank or a local credit union. This is a terrific first step to keep the banksters from playing games with your money. Check out Green America's Community Investing website for ideas on what to do.

2. Move your debt.

Don’t stop with just moving your deposits. Move your debt. It’s in servicing debt that banks make the big money. So if you have a credit card, a car loan, or a mortgage, consider moving them. Find someone at your local bank or credit union who can help you review your debt and see what you could move to a local institution. Your interest payments can build your local economy instead of fattening those Wall Street bonuses.

3. Persuade your institutions.

Do you belong to a church, synagogue, mosque, or temple? How about the place where you work? Or a club or nonprofit where you are a member? All of these institutions likely have money and debt. Talk with the leadership about where they do their banking and encourage them to explore what they could move to a local bank. The First Unitarian Church in Portland, Oregon is considering moving its entire banking relationship from a Wall Street bank to a local bank. And the Responsible Endowments Coalition is urging colleges and universities to do the same. We need to follow these examples and make this a nation-wide movement.

4. Advocate a state-owned bank.

Sadly for the nation, North Dakota stands alone in having a state-owned bank. But that may change. Ellen Brown reports that five states now have pending legislation to create state-owned banks, and more are studying the possibility. The advantages are tremendous. The Bank of North Dakota has kept credit flowing throughout the financial crisis. More important, the state bank keeps community banks thriving. North Dakota has more community banks per capita than any other state in the union. Those community banks serve local businesses, which in turn generate local jobs—a winning strategy in a job-starved market. According to Brown, last year North Dakota had the lowest unemployment rate in the country.

5. Form or join a group.

Working with others keeps motivation high. One good option is a Common Security Club. Chapters are forming in communities across the country. Members find ways to help each other with financial difficulties, discuss the roots of the economic crisis, and advocate policies that will turn the system around.

6. Learn more.

The New Rules Project has a community banking initiative that’s a font of current information on breakthroughs for community banking. Ellen Brown provides regular insights into openings for transforming the banking system. Oregonians for a State Bank is developing allies across the political spectrum who want to strengthen their local economy. And the YES! Magazine website provides a steady stream of stories that spotlight the actions people are taking to build a new economy.

7. Share these ideas.

People of all political stripes are furious with the Wall Street banks. But they don’t know what to do. So tell everyone you know what you’re doing and why. And share this list. Together we can build a force strong enough to transform the banking system to one that will work for us all.

Are We About To Witness The Greatest Banking Consolidation In U.S. History?

Published on 05-26-2010
By Michael Snyder

As the number of bank failures in the United States continues to accelerate, many analysts are warning that we could soon see unprecedented changes in the U.S. banking industry.  In fact, there are some economists that are warning that we could be about to witness the greatest banking consolidation in U.S. history.  As dozens of small and medium size banks have failed, the megabanks have systematically been gobbling up larger and larger slices of market share.  In fact, if current trends continue, it doesn't take much imagination to foresee a future where the entire U.S. banking industry has been consolidated down to between 5 and 10 "superbanks".  So would that be so bad?  Well, yes it would.  It would represent a massive shift in financial power away from the American people to big, global corporate banks.  But if you happen to be a fan of big, global corporate banks perhaps you will really love what is about to happen to the U.S. banking industry.

On Friday, federal regulators seized Pinehurst Bank, which brought the total number of U.S. banks closed this year to 73.  At this point in 2009, only 36 banks had failed.

That means that the number of bank failures has doubled compared to the same time period a year ago.

Is that a good trend?

Well, it is a good trend if you are one of the megabanks that is gobbling up the remnants of these banks that were "small enough to fail".

And the sad thing is that we are likely to see dozens and dozens more small and medium size banks fail in the coming months.

The FDIC recently announced that the number of banks on its "problem list" climbed to 702 at the end of 2009.  That is extremely alarming considering the fact that only 552 banks were on the problem list at the end of September 2009 and only 252 banks that were on the problem list at the end of 2008.
In fact, the FDIC is expecting so many banks to fail that they are opening up new offices just to handle all the expected failures.  The FDIC has opened a massive 100,000 square foot satellite office near Chicago that will house up to 500 temporary staffers and contractors to manage receiverships and liquidate assets from what they are expecting will be a gigantic wave of failed Midwest banks.  Not only that, but the FDIC has also opened similar offices in Irvine, California and Jacksonville, Florida.

But can the FDIC realistically handle all of these bank failures?

No.

The FDIC is backing 8,000 banks that have a total of $13 trillion in assets with a deposit insurance fund that is basically flat broke.

So if the FDIC completely runs out of money, where will all the necessary funds come from?

From U.S. taxpayers of course.

It seems that we are the ultimate bailout machine.

Meanwhile, the biggest U.S. banks are hoarding cash in preparation for hard times.  In fact, the biggest banks in the United States cut their collective small business lending balance by another 1 billion dollars in November 2009.  That drop was the seventh monthly decline in a row.

The truth is that in 2009, the biggest U.S. banks posted their sharpest decline in lending since 1942.
So what were they doing with their money?

Well, thanks to the Federal Reserve, the megabanks were using the U.S. Treasury carry trade to make huge gobs of cash.  In fact, the little game that they are playing with U.S. Treasuries is working so well that four of the biggest U.S. banks (Goldman Sachs, JPMorgan Chase, Bank of America and Citigroup) had a "perfect quarter" with zero days of trading losses during the first quarter of 2010.

The truth is that the game is rigged to benefit the largest financial institutions, and they are slowly but surely gobbling up the entire U.S. banking market.

Back in 2000, the "Big Four" U.S. banks - Citigroup, JPMorgan Chase, Bank of America and Wells Fargo - held approximately 22 percent of all deposits in FDIC-insured institutions.  As of June 30th of last year that figure was up to 39 percent.

The Founding Fathers of this country warned us of the danger of big banks getting too much power, but we have not listened to their warnings.

Now we have monolithic global banks that are so immense in size that we seem almost powerless to control them.

In fact, the six biggest banks in the United States (Goldman Sachs, Morgan Stanley, JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo) now possess assetsequivalent to 60 percent of America's gross national product.

And there is every indication that they are only going to get bigger and more dominant - especially if there is a major economic downturn ahead.

Unfortunately, that is what a number of respected economists are forecasting.

For example, Bob Chapman of the International Forecaster recently warned his readers that things could get really, really bad by the end of 2010....

It should interest you to know that my Intel source inside the Fed says absolutely no later than November the banking system should implode. Presently 75% of banks have problems and that the top 5 banks will take over all the others in a general nationalization. There is tremendous fear and uneasiness in the banking world.

Now, let us hope that Bob Chapman's source is wrong.  Certainly the U.S. banking system is in a state of complete and total chaos, but hopefully we can make it into 2011 without a complete implosion of the banking industry.

However, Bob Chapman has been in the industry for decades and he would not have put out a warning like this without good reason.  Let us just pray that what this source is warning of does not actually come to pass.

But Bob Chapman is not the only one warning of difficult times ahead.

CNBC recently quoted Brian Kelly, the founder of Kanundrum Capital, as saying that the chances of a global depression breaking out have increased dramatically in recent days....

"Two weeks ago I would give the global depression scenario a one percent chance, but the chances have increased to 10 percent today."

In fact, world famous economist Nouriel Roubini is absolutely convinced that there is a good deal of economic trouble ahead of us....

"We are still in the middle of this crisis and there is more trouble ahead of us, even if there is a recovery. During the great depression the economy contracted between 1929 and 1933, there was the beginning of a recovery, but then a second recession from 1937 to 1939. If you don't address the issues, you risk having a double-dip recession and one which is at least as severe as the first one."

So will the end of 2010 be a very difficult time for the U.S. economy?
Only time will tell.

But what does seem certain is that small and medium size banks will continue to fail in large numbers, and the big dominant banks will continue to gobble up market share.

We are witnessing a dramatic consolidation of the U.S. banking industry, and the only question seems to be how fast it is all going to play out.