Vote with your wallet
In 2008, America was in shock seeing the stock market crash, the housing market collapse, and a $12.8 trillion-dollar bailout of financial institutions many felt were 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, and the anger was evident in the national mood. 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% and/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 “Move Your Money.”
The Move Your Money Project actually started several years ago, but had not gained significant momentum until last year, when consumers began to voice their anger and outrage at the very largest for-profit financial institutions, who had been bailed-out with billions in tax-payer dollars, and rather than using those funds to expand credit to communities in need, instead sat on this cheap money and tightened their lending standards. With historic 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 to finally moved people to question the role of their so-called trusted financial institutions and 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 in Lake Bluff, IL. 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 and 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 you money goes and what is used for.
Convenience over accountability…
Our culture has taught us that convenience is primary tool when making decisions as opposed to accountability and fairness. Just as we make other choices; purchasing food, clothing, and transportation. Convenience is often the factor that carries the most weight in our decisions rather than ethics. This comes with many consequences – often at the expense of the environment and disadvantaged communities. Hopefully, in the future accountability and transparency will be a primary motivation for consumers 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: Community Development Financial Institutions (CDFIs), a national network 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 profiting shareholders, 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, and the impact that choice can have in their own communities. Rather than letting too big to fail institutions gamble away their hard-earned cash, people are choosing to exercise their power as consumers and speak with their wallet. In banking this means find the smart, responsible alternative for you, your family and your community, and community development banks and community development credit unions are a logical choice.