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GUEST COMMENTARY: Move your money to a better bank

Thursday, December 22, 2011 | 3:35 p.m. CST

During a key scene in the classic holiday film "It's A Wonderful Life," savings-and-loan proprietor George Bailey, played by Jimmy Stewart, memorably explains to the townspeople how his business works — that he's not sitting on piles of money just because he runs a small, local bank.

"Your money's not here," George tells the crowd. "It's in the Kennedy house and the MacLaren house and a hundred others. You all put your savings in here, and then we make loans to people to buy homes and cars and other things."

Alas, when you save or invest in big corporate banks in the 21stcentury, the bank isn't likely to explain to you, George-Bailey-style, how your money is going to work in the world. Imagine what it would be like if they would.

"Your money's not here," the bank might say. "It's financing fossil-fuel energy projects that are polluting our environment or helping a corporation move jobs into overseas sweatshop factories. It's in the CEO bonus and the CFO bonus and a hundred others."

As Occupy Wall Street and related protests grew this fall, anger at the giant banks rightfully swelled as well, with a "Bank Transfer Day" declared for pulling money out of the big banks and moving to smaller local banks and credit unions.

But not every news story covering this issue took note of the financial institutions specially designed to play a positive role in local communities.

Community development banks and credit unions — collectively called CDFIs, for "community development financial institutions" — direct their lending toward those who have been overlooked by conventional lenders.

Unlike the conventional banks that contributed to the 2008 global economic crisis by lending out billions in unsound and predatory subprime mortgages that their borrowers couldn't repay, CDFIs take pride in their expertise with lower-income borrowers.

They take the time to get to know their clients, determining what homeowners and small-business owners can actually afford.

With more of a community focus, CDFIs pursue reasonable, rather than excessive, rates of return. They target projects that lift up underserved communities and boost local economies by financing small businesses that perform vital local services.

By contrast, the New Rules Project reported in 2010 that the 20 biggest banks "devote only 18 of their commercial loan portfolios to small business," despite the clear need to spur small-business growth to jump-start our economy.

Where are the big banks directing all their money if they're not supporting small businesses?

For one thing, mega-bank CEOs as a group have seen their pay skyrocket back to 2008 levels and higher. The Financial Times reports that big-bank CEO pay rose 36 percent in 2010, while average workers in private industry saw their pay rise only 2 percent.

If you'd rather see your banking and investment dollars going to improve your own community, rather than lining the pockets of CEOs or financing projects that don't match your values, there's an easy solution.

When you pull your money out of your mega-bank and start banking with CDFIs, your old bank will hear your voice even louder and clearer than if you were standing on Wall Street with a bullhorn.

And you'll be joining a growing movement. Funds invested in CDFIs grew from $5 billion in assets to nearly $40 billion over the last decade.

You can find lists of banks and credit unions maintained by the Community Development Bankers' Association (www.cdbanks.org) and the Federation of Community Development Credit Unions (www.cdcu.coop).

You can use these resources to find your own local "George Bailey" and make a New Year's resolution to make your banking part of the solution, rather than part of the problem.

Andrew Korfhage is Green America's online and special projects editor. www.greenamerica.org


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Comments

Corey Parks December 22, 2011 | 4:21 p.m.

It might also say "your money is next door helping finance your neighbors daughters first car or helped your parents remodel their basement or kitchen.

This article seems to insist that all money in big banks goes to "evil corporations" while all money in small banks goes to local projects.

The author also seem to project that the tellers and bankers here in Columbia are flown in from elsewhere and do not know any of the people that come through their doors on a regular basis. They have strict policies that restrict them from "getting to know" the account holders. I hope the owners my old bank Bank of America and the ones at my new one Landmark do not find out their tellers say my name as I walk through the door or ask how business is going on a weekly basis.

For full disclosure I only have a local bank for my business account as the Credit Union is not set up for business transactions. USAA is my prime bank.

(Report Comment)
Mark Foecking December 23, 2011 | 3:13 a.m.

"For one thing, mega-bank CEOs as a group have seen their pay skyrocket back to 2008 levels and higher."

CEO pay is a tiny percentage of operating expense for any large bank (or small one for that matter). These CEOs could work for free with a negligible effect on any of these banks bottom lines. Mentioning it here simply feeds into the populist class-warfare message of many articles of this stripe.

Banks don't all lend to mega-corporations, as Corey pointed out above. Much of their loans go to finance peoples houses. People have their retirement funds invested in these banks. The practical difference between these banks and CDI's is quite a bit less than the article ststes.

(Just for disclosure, I have no money in any big bank. This is part of the reason the recession didn't affect me much).

DK

(Report Comment)

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