Move your money
Over dinner just before Christmas, web publisher Arianna Huffington, former Senate Banking Commitee chief economist Rob Johnson, and others cooked up the idea of a viral campaign to encourage people to vote with their money against the big banks, by simply moving their money to smaller, local community banks. The idea turned into Move Your Money, with a goal "to help limit the power of the big banks and create a more sane, stable financial system."
The group just published a new website, www.moveyourmoney.info, and turned out a promotional video based on clips from Frank Capra's populist classic "It's a Wonderful Life," in which Jimmy Stewart stars as the head of a small local Savings & Loan Association struggling against the conniving banker, Mr. Potter. The Move Your Money website has a very helpful tool that allows you to enter your zip code for a list of the local community banks in your area that are FDIC-insured, have a bank rating of "B" or better, and are not owned by any of the large national banks.
Why support small community banks over big banks? MoveYourMoney suggests that "[c]ommunity banks are typically more conservative about how they manage their money, they’re more closely connected to the people and businesses who live near them, and they’re more inclined to make loans they know will get paid back." Beyond that, "[i]f you leave your money with the big banks, they will use it to pay lobbyists to keep Congress from fixing the system" the MoveYourMoney video reminds us.
For more on MoveYourMoney, take a listen to the Democracy Now interview, 1/4/10, of MoveYourMoney co-founder, former Senate Banking Commitee chief economist Rob Johnson. (Audio podcast at www.democracynow.org or via iTunes.)
After a comeback based on "taxpayer lifelines and other support from Washington," the six largest banks "have already made more than $50 billion in the first three quarters [of 2009] and are on track to deliver a year of hefty profits -- and bonuses -- that could rival those of the boom years", reports the NY Times ("Doubts on Regulation and Renewal Hang Over Wall St." (1/1/10)) The Wall Street bank Goldman Sachs "expects to award its employees $23 billion in bonuses -- the most in its history", says the Times ("With Bigger Bonuses, An Upside for Banks," 1/1/10)).
Alongside immense bonuses for bankers, the banking industry has repaid the American public for its lifeline to the banks by cutting back on lending to consumers and businesses. "The banking industry has throttled back lending for the last 15 months, draining more than $3 trillion of credit from the economy", reports the Times. ("Doubts on Regulation...") Wall Street has also "beef[ed] up its financial lobby in Washington to win big concessions. Among other things, the industry is working to ease rules governing derivatives and to weaken a proposal for a consumer financial protection agency", says the Times.
In a packed launch party at the Northampton Brewery November 30th, Pioneer Valley Local First unveiled its new Local Business Guide / Building Sustainable Communities, a free guide to over 200 local and independently owned businesses in our region. PV Local First is hoping to encourage Pioneer Valley (MA) residents to "Think Local First" and support local businesses when they buy goods and services.
Some banks have rushed to raise credit card interest rates and fees before the full provisions of the Credit CARD Act of 2009 come into force next year and restrict their ability to increase rates on existing debt. (See "Legislators push to have credit card reforms effective sooner", USA Today, 10/9/09, "Credit Card Issuers Raising Rates Ahead of New Law", Washington Post, 7/2/09). The banks are taking advantage of Congress's provision in the Credit CARD Act that delayed implementation of key consumer protection provisions until February 22, 2010 -- causing Massachusetts Representative Barney Frank to propose legislation to move the law's deadlines forward into December of this year. (See "Congress Seeks Faster Implementation of New Credit-Card Rules", Wall Street Journal, 9/23/09.)
Congress passed the Credit CARD Act in May, restricting rate increases on existing debt and creating certain other protections for credit card users. In one more telling example of surrender to Wall Street and the banks, however, Congress refused to set an outright cap on the interest rates credit card companies could charge. (For the failure of the law to set a cap on interest rates, go to Bloomberg Politics / Law, "Karen Gross Discusses Consumer Financial Agency," 10/30/09 [audio podcast] available via iTunes; "Consumers hit again as some banks raise credit rates, fees", USA Today, 7/1/09, and "8 major benefits of new credit card law", Bankrate.com.)
In March of this year, Independent Vermont Senator Bernie Sanders had proposed an outright cap on credit card and other consumer loan interest rates at 15% -- the same loan limit imposed by federal law on loans by credit unions. (See Sanders Senate speech on the need for this loan interest cap on YouTube.) More >>>
Since at least the early 1970s – with the first Earth Day in 1970, the publication of the seminal work, The Limits to Growth in 1972, and the first oil crisis with the Arab oil embargo of 1973 – the question of the long-term sustainability of our economic order has been on the table, from the standpoint of energy, resources and the environment. The question of the long-term financial and social sustainability of our economy had been repeatedly raised long before that.
On top of the specter of the Great Depression, post-war financial crises again and again raised doubts about our economic system's financial sustainability. The devaluation of the dollar and the collapse of the Bretton Woods framework in the early 1970s, the Savings & Loan crisis of the 1980s, the Mexican peso crisis and bailout of the 1990s, the implosion of the dot.com speculative bubble in 2000, are just a few of the many examples of such recurring crises.
The current financial crisis is not the only post-war manifestation of the unstable nature of our economy, it is merely the most recent and most dangerous one. If we do not make fundamental changes in the direction of the economy, it will not be the last such crisis, perhaps not even the worst. (For a more detailed discussion of the current financial crisis, and resources to help understand its roots, go to our Financial Crisis page.)
At the close of this first decade of the new millennium, a convergence of crises – financial, climate, energy, and others – has raised the question of the sustainability of our economic order from nearly every standpoint. Millions of people are for the first time questioning the very nature of our economy.
Compared to the 1970s, the context for this question is a new one. Now we are looking at the world after 1989 and the collapse of the Berlin Wall and the Soviet system. The limitations of a central command economy experimented with by the Soviets, albeit in a distorted and barbaric form, are painfully evident, even to previously uncritical members of the political left. On the other side, the current financial catastrophe has also made painfully evident the dangerous limitations of entrusting all to the “free market.”
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