Huffington to consumers: Boycott big banks


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There can be few institutions more despised as 2010 begins than big U.S. banks, but what can the average person do about it?


The answer, according to Huffington Post website founder Arianna Huffington and former Senate Banking Committee chief economist Rob Johnson: Withdraw your money.

In a widely read blog post this week, Huffington and Johnson try to stir up a popular revolt by encouraging bank customers to yank their deposits from Bank of America, Wells Fargo, Chase and Citibank and move them to community banks and credit unions.

The broadside complains that the big banks, after being propped up by taxpayer money and government guarantees, have returned to the high-risk activities that torpedoed the economy in the first place, while cutting back on lending to businesses and spending hundreds of millions of dollars to water down proposed restrictions on their operations.

‘The government policy of protecting the Too Big and Politically Connected to Fail is badly hurting the small banks, which are having a much harder time competing in the financial marketplace,’ write Huffington and Johnson, who is also a former managing director at hedge-fund operator Soros Fund Management. ‘As a result, a system which was already dangerously concentrated at the top has only become more so.’

The Financial Services Roundtable, a lobbying group for major financial institutions, said the accusations were oversimplifying the situation.

‘It’s easy to demagogue the industry and paint institutions large, medium, and small, with broad brush strokes,’ the trade group said in a statement issued by spokeswoman Elise Brooks. ‘In the end, sound financial advice dictates that consumers should select the financial institution that offers the mix of products and services that best serves their individual financial needs.’

Community banks traditionally have catered to small businesses and well-off individuals, charging more than their mass-market brethren but priding themselves on better service. Many ordinary folks, however, consider it important to have access to services like large free networks of automated teller machines, which the community banks don’t provide (although some reimburse ATM transaction costs for their affluent customers).

What’s more, financial recklessness was hardly confined to big banks choking on exotic mortgages and toxic securities carved out of them. Many California community banks managed to dig themselves into deep holes by making now-troubled commercial real estate loans during the boom years, especially institutions that specialized in bankrolling home builders and land developers.


The Huffington Post campaign, including a video comparing the big institutions to the villainous banker Mr. Potter in the Jimmy Stewart Christmas classic ‘It’s a Wonderful Life,’ also contains an embedded referral service. The device, supplied by Torrance financial research firm Institutional Risk Analytics, allows users to input their ZIP codes to obtain a list of nearby smaller banks that Institutional Risk rates ‘A’ or ‘B.’

Johnson, currently the director of the Economic Policy Initiative at the Franklin and Eleanor Roosevelt Institute, says the big banks are taking deposits out of communities and essentially using them to speculate on Wall Street.

‘They’re doing proprietary trading, derivatives, things that have nothing to do with their communities,’ he said in an interview. ‘Why are we putting up with them?’

Of the four biggest retail banks, Wells Fargo is the least objectionable, according to Johnson. That’s because it’s not a big player in the market for derivatives, the exotic financial contracts that crippled insurer American International Group and otherwise contributed to the financial crisis.

[Corrected at 6:20 p.m: An earlier version of this post referred to the Financial Services Roundtable as the Business Roundtable.]

-- E. Scott Reckard