The Case Against the Banks

If you have been at all awake in the last year, and have been watching the news, banks have been at the forefront of multiple scandals.  If you happen to be among the minority of people affected by the economic downturn and thus are not concerned, I would like to attempt to convince you that it does matter.  I have hoping that by the end of this blog you are convinced to drop that Bank of America, Chase, Wells Fargo, big national naughty bank from managing your money.

I used to bank with Bank of America.  I had a Gold account and it was great.  (Long story about how I got that)  A few years into that relationship, some middle manager noticed that I did not meet the requirements for said gold account ($10,000 min balance) and canceled that account and moved me to a more plebeian account worthy of my student life savings.  A few months later, my meager account was barraged with little stupid fees here and there.  Then I was watching some debt documentary, I think it was "In Debt We Trust" where I learned that MBNA/Bank of America was George Bushes biggest campaign contributor at over $900,000.  (Now with Citizen's United ruling, these number is probably pocket change but who knows since donating to Super Pacs shields you from having to disclose who is donating)  I promptly left and never looked back.  This was years before all the craziness began in the economy.

As the economy continued to melt away, more and more evidence is pointing to these banks bad behavior at the source of the economic downturn.  I will spare everyone the details, if you want to know more google it.  Then the Obama administration bailed out the banks with taxpayer money and no rules on how the banks use the TARP bailout funds.  So, they paid themselves record bonuses and continued to pillage the rest of us.

The best way to fight all this is to take your money out of these institutions and put them in places that are not destroying the economy with their business practices.  In November there was a Bank Transfer Day Movement that definately affected Bank of America and Chase.  This had a direct effect on their bottom line as their stock value plummeted.

These big banks are also frequently responsible for the bankrolling of big scale projects that have a destructive effect on the planet such as drilling oil, natural gas, nuclear power, ect.  If you don't like these things, then don't give your money to those banks (and minimize electrical use)

JP Morgan executive Jamie Dimon made news with his testimony of being unaware of a blotched derivitive trade loss by his bank somewhere between 2 and 9 billion (with a b) dollars.
What's a derivative?  It's very confusing... So confusing it seems that most bankers and economists don't understand them, and they are very unpredictable.  Here is a simple explanation:

So how do these big banks do all this?  They do it with our deposits!  Not only that but they can leverage it at a 9 to 1 ratio which means for every $100 deposit they can loan $900.  During the last depression there was legislation enacted called the Glass-Stegall Act enacted to separate banking deposits from being used by banks to speculate on the stock market with those deposits.  (Good idea right, so if stock market tanks, it doesn't take our deposits with it!)  Thus separating commercial and investment banking.  Then in 1999 the Gramm-Leach-Bliley Act struck down sections in the Glass Stegall act that separated commercial from investment banking.  This was signed into law by President Clinton.  This now allowed banks to use our deposits to speculate on the stock market, yet still have the money protected by FDIC insurance, a nice deal!  With your $100 deposit they can speculate with $900 in global markets.  If they loose the money your deposit is still protected.  The problem with all this is that they are speculating with money that does not exist where the rest of us have to use money that does exist if we want to buy stocks, bonds, and other investment banking products.  As all this debt is created, then more money has to be released into the system, but more money in the system means money is worth less.  This is known as Inflation. 

The solution?  Since Congress seems unable or unwilling to properly regulate the banking and finance industry, then we will have to do it ourselves.  We can best do this by not banking with the banks that are causing all the trouble in their pursuit of profits by creating money that does not exist.  Please remove yourself from the following banks: Bank of America, Chase, Citibank/Citigroup, HBSC, Wells Fargo.  Without deposits there is no money to leverage and cause trouble with.  Please change your bank to a small local credit union.

Oh, and be forewarned; if you are out to dinner with me and you pull out a Chase card, I will comment on it and how unAmerican you are acting by giving money to economic terrorists that are causing all the economic troubles.