In 2008, America was in shock; we had witnessed the stock market crash, the housing market collapse, and a $12.8 trillion-dollar bailout to the very financial institutions responsible for the economic crash. We were paralyzed, unable to see past the madness and despair. At first, our national response was minimal. Americans had lost their homes, jobs, everything. However, from that desperation and pain came action and movement! People began to organize in order to decide their own fate, not leave it up to the 1%or a complacent government. Action came in many forms: marches in streets, letter-writing and media campaigns, peaceful occupation of public spaces, and of course the “Move Your Money” campaign.
The Move Your Money Project actually started several years ago, but last year, it gained significant momentum. Consumers began to voice their anger and outrage at the very largest for-profit financial institutions, who had been bailed-out with billions in taxpayer dollars, sat on this cheap money and tightened their lending standards, rather than using those funds to expand credit to communities in need. With historically low interest rates set and held by the Federal Reserve system, profit margins became slimmer and many banks responded by increasing their fees across the board, much to the ire of many fed-up consumers. This action was a catalyst that finally moved people to question the role of their so-called “trusted” financial institutions. On November 5, 2011, over 600,000 people moved their money totaling $80 million dollars out of traditional banking institutions into credit unions and community banks across the country. In addition to that single day of action, over the last few years, over 4 million accounts have moved from the nation’s largest Wall Street banks according to Moebs Services, an economic research firm. They also project an additional 12 million people will do the same in the next two years.
This mass-exodus from the big banks is by no means accidental. It shows the overwhelming, yet untapped energy of the American people who have grown discouraged with a government that was unwilling or unable to enact true, meaningful financial reform. Many of their reasons for this are clear: consumers are looking for ethical practices, re-investment in local communities, fewer fees and more service, and the end of “Too Big to Fail” financial oligopolies. Naturally, people began focusing on credit unions and community development banks, institutions that have the public interest in mind and seek to strengthen local communities. At these community-focused institutions you actually know where your money goes and what is used for.
Convenience over accountability…
Convenience can be many Americans primary financial decision-making criteria; many time it can trump accountability, fairness, and ethics. This comes at a cost – often at the expense of the environment and disadvantaged communities. Big banks place branches and atms on every corner but they predatory fees from overdraft fees to atm-fees moreover they do not offer financing to low-income communities. Since they are convenient and accessible they are left unchallenged. But it doesn’t have to be this way. Consumers can choose to focus on fairness and accountability when making financial decisions.
What to do?
Today we have a choice whether we know it or not. There is a parallel financial industry functioning on the fringe: the Community Development Financial Institutions (“CDFIs”). CDFIs are a national network of community development banks, loan funds, and community development credit unions (CDCUs). These are institutions with a primary mission to strengthen vulnerable communities and invest locally.
Banks and credit unions are regulated depository institutions; banks by the Federal Deposit Insurance Corporation (FDIC) and credit unions by the National Credit Union Administration (NCUA). Credit unions offer many of the same services as banks: mortgages, car loans, personal loans, small dollar loans, credit cards, savings/checking accounts, international money transfers, Individual Development Accounts (matched-savings accounts), retirement planning, financial literacy education and budgeting, affordable savings and checking accounts, and credit and debit cards with low minimum balances and flexible terms. They are not-for-profit financial institutions created to serve their local communities and members first. Unlike banks, which can serve any customer that walks in the door, credit unions are restricted to specific fields of membership.
This means that consumers have more options than ever with respect to their primary financial institutions, and a major selling-point for many is that the money they deposit in their credit union stays local within the specific field of membership. Rather than shareholders profiting; income earned at a credit union-dividends are returned in different forms from free services to better interest rates or to expand services in the community.
Making the choice to bank at a credit union or a community development bank creates a multiplier effect for the local communities being served, and ultimately in the entire the financial system. When you invest in a community development financial institution you are investing in job creation, building schools, developing housing and financing small businesses.
Some banks may be “too big to fail,” but consumers are waking up and realizing they have a choice where they put their money. Rather than letting too big to fail institutions gamble away their hard-earned cash, people are choosing to exercise their power as consumers and Vote With Your Wallet instead of your feet!
By Elizabeth K. Friedrich & Rafael Morales