I remember back in school, when we talked about the Great Depression, one of the causes that was mentioned was that the Federal Reserve Bank was tightening the reins (increasing rates and restricting who can borrow) when it should have been loosening them to spur the economy.
Unfortunately, in today’s world of interstate and international banks, corporate banks have an even greater influence on the economy now than the Fed did back then. And just like then, they’re tightening the reins, sucking the vitality out of communities for the sole purpose of looking good for their investors on Wall Street.
A perfect case study exists in my hometown. What once was the independent Shawano National Bank joined a few other area banks to become Valley Bank. Valley Bank, was, in turn, absorbed by the multi-state Marshall and Illsley (Which also acquired Security Bank a few years later). Then the international BMO Harris swallowed them.
Bottom line, BMO ended up with a lot of accounts and loans of individuals and businesses who actually set up their accounts and loans with other banks. Months after the BMO’s takeover of M&I, the checking account I had set up with Security Bank when I went off to college (started from the savings account I closed with Valley Bank), which had never cost me before, started costing me $7 per month–after I dropped from the mid-level tier my account had been at to the cheapest account they had. Avoiding the charge required either a $1,000 balance (if you don’t have that much, you don’t have that much), other accounts with more than that, or $400/month in electronic deposits (most businesses, including the one I worked for, don’t have enough employees to justify setting up electronic payments, and I wasn’t making $400/ month, anyway). A little over a year later, they upped the charge to $10. That’s $120 per year for the privilege of having a checking account–and I might write two checks a year, if that. Given my average daily balance, and depending on how you calculate it, I am being charged from 100%- 1,000% interest–to use my own money. How is anyone supposed to put money away if the bank is taking more than you have? Yet, even in this world of electronic funds transfers, how can you not have an account to receive the occasional paper check that comes along?
To put that in perspective, around here, $10 will buy you a sit-down dinner, grandstand seating at one of the best dirt-track half-mile speedways in the region, half of a season pass to the county fair (or two days’ admission), a pair of hand-knit mittens from the senior store (probably a scarf, too), three DVD’s from the electronic resale shop, or groceries for a meal for four (pork steak, yes; beef–depends on the cut).
Why am I still with them? Simple. They own all the ATM’s in town, and banks in general have reduced lobby hours so much (My parents remember when people used to go home on Fridays, have dinner, then come back to town, cash their checks, and go shopping. Then banks started closing at 6:00 and earlier on Fridays, so people started cashing their checks, going home for dinner, and staying home.) that I can’t be sure of the lobby being open when I need money–the downtown lobby isn’t even open on Saturdays. So I rely on ATM’s, and the cost of using another bank’s ATM would probably build up even more fees than the $10/month the checking account costs.
So, still with them, even though they have the primary blame for my being unemployed from my job of eleven years. Like I said, they absorbed a lot of other banks’ accounts, including the mortgage on my employer’s cinema. For those of you who don’t follow what’s going on in the movie industry, the “Big Six” of Hollywood had a “gentleman’s agreement” to be 100% digital by January of 2013. The date gradually got pushed back, but the writing was on the wall: upgrade your projectors or go dark. When my boss first started looking in to it, around 2010, systems were $100,000 and up. But he didn’t like the interest on the loans banks offered, and decided to wait. Waiting was good–and bad. As next-generation projectors were installed in bigger cinemas, used first-generation equipment was becoming available around $40,000, give or take how much labor you could get done yourself in readying your booth (digital projectors require an absolutely dust-free environment, and lamps are about three times the wattage of those used by film projectors). But to the banks, digital projection equipment is still unproven technology; they’re less willing to give a loan for something they fear might depreciate into nothing before the loan can be paid. BMO, which owned the business’s loan, refused to extend funds at any interest rate for this live-or-die equipment purchase. On December 1, 2013, we shut the projector down for the last time. In March, it went to sheriff’s auction, where–as happens with so many foreclosures–the loaning bank bought it for the remaining value of the loan, about $109,000.The building has been empty ever since. Given how hard it is to run a one-screen cinema in the first place, there’s little chance someone will make the investment to get it running as a theater again (my boss said the only way to keep it afloat would be as a non-profit; without taxes it might be able to make ends meet), and it’s doubtful anyone will want to mess with the old-style (the building is eligible for historic registration) sloped floor in converting it to another use. Likely, it will deteriorate and see the wrecking ball sometime in the next decade.
A business neighbor, just three buildings away, is a camera store. I can still use “is” as I write this, but I doubt I will be able to much longer. The business has been around for several decades, and it’s second owner–unable to keep up with the rapidly-changing digital models (many are discontinued after a six-month production run) and the “big box” discount prices–had gradually converted it to a framing shop/pottery gallery (he had been a commercial potter, and now taught art). He’s still one of the few places that stocks 120 film and can make a contact print of a glass negative. His bread-and-butter lately has been VHS-DVD transfers (he not only charges less than Walmart and Walgreens, but monitors the process to make sure there aren’t any tracking issues) and custom framing. I walked past his store yesterday, and discovered a automobile-style “for sale” sign in the window. In the “make” field he’d written “BMO.” In the “model” field, he’d written “screwed me.”
(I might also mention that he was in the same checking-account boat as me; in his case, he was a substitute teacher, and some of the schools would only pay by direct deposit, so he needed a checking account to receive the deposit. A day’s subbing might be an $80 –$10/hour x 8 hours–check. Then take away income tax, gas money for a school that might be 50 miles away, and now $10/month for the privilege of receiving it. And he might go months without getting called to work.)
Of course, I doubt BMO Harris is unique in their practices. You’ve probably heard of the lawsuits surrounding the foreclosure practices of banks like Bank of America, Wells Fargo, Citibank, Ally/GMAC and JPMorgan Chase. But BMO is the big fish in my town, and, as I’ve said, scooped up a lot of other bank’s accounts when they moved in. They’re sucking this town dry, inserting big-city cost-of-living fees into a community that doesn’t have big-city paychecks to support them.
I’ll wager there are hundreds, if not thousands of Shawanos throughout America, facing the same drain on their economies. And this drain goes mostly unseen by the politicians and various “fixers” that hop from metropolis to metropolis, enjoying “economical” $30-$50 dinners.
Banks enjoy the luxury of being a basic need of our civilization without the economic protections against becoming an excessive financial burden that government maintains for physiological basic needs (like SNAP programs for food and rent-controlled housing for shelter). There’s simply no such thing as a low-income checking account, even though the Government itself encourages, in some cases, requires electronic funds transfers, which in turn require a bank account to receive. And banks can afford to hire the priciest lawyers (politicians, too) to create conditions favorable to their bottom line.
A small-town bank has to deal with their customers at a small-town level. An international bank can suck communities dry, one after another, with policies that work for their high-value, metropolitan customers and shareholders, with near-total impunity, confident that even if the customer is 100% right, they will never be able to afford to fight them. If we want to stop the income disparity from growing, we need to break the big banks.