Ktismatics

4 November 2011

Move My Money?

Filed under: Culture, Reflections — ktismatics @ 1:25 pm

Tomorrow is Move Your Money day, the day when the 99% are exhorted to transfer their cash from banks to savings and loans. I’m sort of clueless about these sorts of things, having only found out about Move Your Money on Tuesday at the Occupy Boulder. The main rationales as I understand them:

Doing business with many small credit unions helps dilute the oligopolistic power of the big banks.

Credit unions are owned by the depositors, not by outside investors, so profits are distributed in the form of lower fees and higher interest rates rather than as capital gains or big bonuses to executives.

Credit unions invest in small businesses more than in global corporations. Small businesses generate proportionately more jobs than giant companies.

These seem like pretty good reasons to participate, although as I discussed yesterday at the Occupy with Jim — a former banker, current “radical democrat,” and fellow blogger — the Move Your Money intervention is rather a “weak tea,” intended to appeal to unregulated capitalist libertarians as much as to left-wingers. My issues are these:

Are there limits on what credit unions can do with the investments they make with depositors’ money? Somewhat repulsively to me, the Move Your Money website invokes George Bailey’s Building and Loan from It’s A Wonderful Life as the exemplar for the modern credit union. Good Old George wouldn’t foreclose on your mortgage and throw you out in the street like that mean old banker Mr. Potter would. But can’t credit unions and savings & loan associations sell balloon, subprime, low-down-payment mortgages to customers just like any other home financing company? Can’t credit unions and S&Ls bundle up their mortgages and sell them to giant consolidators? Are S&L-initiated mortgages any less likely to be foreclosed? I don’t know the answer to these questions, and brief internet research didn’t throw any light on the subject.

Just twenty years ago there was a Savings and Loan Crisis, in which overleveraged S&Ls got themselves into deep shit via risky lending practices and had to be bailed out by the US government. Like credit unions, most savings & loans are mutual companies owned by the depositors. To tell the truth, I don’t know what distinguishes a credit union from a mutual S&L association. The S&L industry was underregulated, and so a lot of hotshot executives got rich quick — GW Bush’s brother Neil was one of the big players in this scandal. It’s my understanding that few additional regulations have been put in place that would prevent a recurrence. I.e., S&Ls aren’t much different from banks in corruption opportunities unless I’m missing something.

Do credit union executives in the aggregate actually earn smaller salaries and bonuses than do their counterparts at the big banks? The big banks are, well, big, with a lot of high-paid people working at any given bank. Credit unions are smaller but larger in number. Do they really pay their executives a smaller percentage of total revenues than do their jumbo counterparts? I used to work for a small mutual insurance company, analogous to a saving and loan in that the company was owned by the policyholders. The CEO and COO both earned big bonuses tied to quarterly sales and profits. State Farm and Allstate are giant mutual insurers: do their execs make less money than, say, the heads of private firms like Hartford and Aetna? I don’t know.

The small businesses to which credit unions extend loans: do they actually charge less for their products and pay their employees better than do big businesses? Based on personal experience I doubt it, but I don’t have any numbers.

When I started writing this post I figured that I’d probably Move My Money anyway, even if I didn’t do it with dramatic flair on Saturday. Diluting oligopolistic power and supporting customer-owned business both seem like better alternatives to collusive investor-owned banks. But recalling the S&L Crisis has given me pause. I’d like to know more before making a decision. Besides, It’s A Wonderful Life kind of disgusts me.

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17 Comments »

  1. I don’t quite get the move your money thing either – isn’t it just ‘create another big bank day’? Maybe I’m wrong, but I haven’t really found a convincing argument for it. There’s nothing to stop any financial institution getting nasty when it wants to play with the big boys – it’s not like there’s much regulations to stop them.

    As for small businesses generating more jobs – hmm. In the UK at least, that can mean the boss is giving his/her friend or relative – or friend’s relative – a job; and on insecure terms too. I made this ‘devil’s advocate’ argument years ago, with someone fighting a large development that would offer work. They were fighting in the name of small businesses in a high unemployment area (they saw themselves as ‘anarchist’, but a lot of their attitudes were quite Tea Party-ish really). These aren’t the kinds of businesses that follow the correct protocols in terms of interviews, qualifications, skills or equal opportunity. They tend to favour their own race or religion, and stick to old-fashioned gender prejudices. Middle-class cronyism – isn’t that part of the problem?

    BTW It’s a Wonderful Life is actually a very dark film to the end. George’s business is proven to be a house of cards. Potter still owns the town, and our hero with a large family has basically been resentful and depressive his whole life (watch how he abuses his poor uncle for losing the money, and then goes home to yell “WHY DO WE HAVE ALL THESE KIDS?” as they greet him at the door). I’m not convinced it ends happily ever after. People remember it in terms of the ending and the Christmas aspect, but most of the film is quite grim and fatalistic.

    Comment by W.Kasper — 4 November 2011 @ 8:08 pm

  2. I didn’t know that this same idea was also being pitched in England, but I see on wikipedia that the UK too has credit unions. Those benevolent financial institutions grew out of something called “the friendly society movement,” which sounds a bit ominous. I once read a Consumer Reports review of vacuum cleaners which found that any model with the word “Quiet” in the name tested louder than average. I agree about Wonderful Life, although I’m sure I’d have reacted the same way if my Uncle Billy had lost the deposit. George and Mary’s fake smiles at the very end give me the willies. Jimmy Stewart is great as always, as is Lionel Barrymore.

    Comment by ktismatics — 4 November 2011 @ 9:37 pm

  3. Yeah I rarely saw Jimmy Stewart give a bad performance, even in a bad movie.

    Credit Unions in the UK started off as a kind of half-assed ‘soft’ socialist thing, and are still fairly small-scale compared to big banks. But then the Co-operative started off that way, which is just a corporation like any other now (its brand is ‘ethical’). The Co-op’s huge in Manchester (where it began) – banks, supermarkets, funeral homes, insurance etc. all over the place. Building societies started out ‘friendly’ when they were just there for mortgages and savings, but the government ‘big banged’ them – letting them expand, getting into all the shit that led to the mess we’re in now. Northern Rock being a particularly disastrous example.

    Comment by W.Kasper — 4 November 2011 @ 10:35 pm

  4. I share some of your concerns about moving the money around, and like you, even thought I have a raised eyebrow, I still, on balance, think it would be better to move the money than to keep it in with the Big Guys.

    Comment by erdman31 — 4 November 2011 @ 11:40 pm

  5. So, keep me posted?

    Comment by erdman31 — 4 November 2011 @ 11:40 pm

  6. Will do, Erdman. I think I’ll eventually decide based on financial costs versus benefits to me as a customer rather than larger political-economic considerations. You and I have previously discussed the buy-local idea, so you know that I’m less enthused than you. Most small businesses want to get bigger, entrepreneurs and venture capitalists want to package start-ups for resale to the big boys. It’s sort of ironic that the push to Move Your Money to local credit unions has been popularized by an international online campaign. Local, multinational, virtual — I don’t think it’s the location of a business that’s important, but rather the financial environment in which they operate and the objectives they seek to achieve. Still, the non-profit cooperative seems intrinsically better than the for-profit, investor-owned business structure.

    On a related note, Ross Wolfe’s blog alerted me to this hilarity from HL Mencken which begins “Let the farmer, so far as I am concerned, be damned forevermore.”

    Comment by ktismatics — 5 November 2011 @ 10:30 am

  7. I think I’ll eventually decide based on financial costs versus benefits to me as a customer rather than larger political-economic considerations.

    i DID NOT for a second doubt you´d be willing to sacrifice your petit bourgeois ass for some higher cause, just as I´m sure ¨PARENTAL ADVISORY is not going to give up on his dole to
    help pay for heating at Occupy.

    Comment by Center of Parody — 9 November 2011 @ 7:11 am

  8. You’ve nailed it, CofP. The whole Move Your Money scheme is pitched to bourgeois occupiers, the ones who have some money to move. And self-interest is integral to the MYM pitch: because credit unions don’t earn profits for investors or pay out big bonuses to execs, they can charge lower fees for credit cards and pay higher interest rates on deposits. Wall Street is responding to the protestors’ demand: some of the big banks are cutting their fees in order to earn back your business. Have you re-occupied Amsterdam lately?

    Comment by ktismatics — 9 November 2011 @ 8:08 am

  9. At least the credit union offers customers a better deal than the big bank does. If I were to buy locally-grown veggies from the farmers’ market I’d be paying twice as much as the supermarket charges. Then there’s fair-trade coffee, which might have a $2 per pound markup for maybe paying the growers in Colombia an extra 5 cents. Causes like this appeal to the bourgeois, who can afford these markups as a cheap price to pay for soothing their consciences. There’s not enough arable land around here to support the local population if all the food had to be grown locally. And the “fair trade” symbol on a can of coffee offers no legal assurance that the company actually pays the growers more, or that the growers pay their workers more.

    Comment by ktismatics — 9 November 2011 @ 9:57 am

  10. I don’t know why you bothered censoring my name from Mutton Muppet’s comment. Him and the other foaming mutant are as predictable as they are mind-numbingly banal. They just gibber the same four or five ‘celeb’ (?) names as substitutes for their own essential nothingness. Any event that takes place must always refer back to the same repetitive crap they cling to like lab rats. It’s not even interesting enough to be pathetic.

    I’m sure it can reoccupy much more than Amsterdam with its fat diseased backside. Maybe it can poison the bankers with its pus.

    Comment by W.Kasper — 10 November 2011 @ 6:00 pm

  11. Hey Mr. W, good to see you again. CofP saved me the trouble and censored your name for me.

    I’ve not been back to #Occupy in a week. Have you been following Ross Wolfe’s documentation of OWS at his blog Charnel-House? He lives in New York and is rather contemptuous of most of the OWS dithering, including the banal and corporate bullet-point “Blueprint” churned out in committee work. His alternative vision statement actually seems true to the title: something different to envision and a different way of seeing. He’s heavy-handed at times and overly fond of metaphor; e.g., “The tradition of all dead generations weighs like a nightmare on the brains of the living.” But I can picture the fun he’s having writing sentences like that. Here’s the link.

    I wondered why I hadn’t included Charnel-House in my blogroll, inasmuch as Ross has commented here at Ktismatics and I often read his posts. Now I remember: in prior posts he has excerpted portions of private emails without his correspondents’ permission. This violation of personal privacy has earned for three blogs their single-sanction removal from my blogroll, a gesture that has served mostly to attract accusations of sanctimony. Anyhow, I like what Ross has to say in that post.

    Comment by ktismatics — 10 November 2011 @ 6:27 pm

  12. Yeah I read that. Some useful criticisms, but perhaps a bit too severe according to Bolshevik theology. Wolfe’s interesting now and again, but a bit too ‘TL; DR’ with that tiny font and somewhat Aspergian* in that ultra-dry writing style. Or maybe that’s just the ‘young Hegelianisms’ of his outlook.

    (*This may explain the insensitivity to privacy. Libidinally different to the chronic sociopathy/psychotic howls of you-know-who.)

    Comment by W.Kasper — 10 November 2011 @ 9:03 pm

  13. Right — he does ramble on, and his stuff about Soviet architecture is an idiosyncratic enthusiasm that doesn’t do it for me. He was hilarious in interacting with Levi Bryant on Marxism, but that’s when he published the private correspondence. I suspect he’d be a pain in the ass in a committee meeting.

    Comment by ktismatics — 10 November 2011 @ 9:44 pm

  14. He’s a member of ‘Platypus’. A small leftist sect with some notoriety (they basically see imperial aggression as the righteous march of Hegelian destiny). There’s a list of disses in the final paragraph here:

    http://en.wikipedia.org/wiki/Platypus_Affiliated_Society

    Comment by W.Kasper — 10 November 2011 @ 10:16 pm

  15. That’s helpful. I skim some of the referenced critiques of Platypus and think “that makes sense,” then I look at the rebuttals and find them sensible too. It’s disturbing to me that what reads like a well-reasoned position, or even an idiosyncratic rant, might actually be the regurgitation of a doctrinaire position held by “a small leftist sect of some notoriety.” It’s perhaps stereotypical bias to reduce the far left to a congeries of these small sects continually schisming off from each other — I’m reminded of Vargas Llosa’s novel The Real Life of Alejandro Mayta. Maybe OWS is trying to counteract this perception, and perhaps this reality, by appealing to a broad base, building critical mass rather than taking firm positions, brewing weak tea instead of stout.

    Comment by ktismatics — 11 November 2011 @ 10:37 am

  16. All kinds of lefty sects are swarming onto this Occupy thing to ‘show them the light’ (or rather, take credit if it goes well, disassociate themselves with a “told you so!” if it goes badly – the old routine).

    Personally, I hope anarchists remain the dominant influence, if only to offset ‘vanguardism’ (ie. exhausted Bolshevik fantasies), and/or professional ideologues looking to get some grease for their profiles from all the attention. I’m not naming any names, but both angles have been predictable. Sects or sub-celebrities engaging in their theological bickering should remain a side issue.

    Comment by W.Kasper — 11 November 2011 @ 7:51 pm

  17. A plus for the credit union mutual company is “one member, one vote”: ownership and voting rights are spread evenly across depositors, regardless of the amount on deposit. Some savings & loans operate as mutual companies, others are stock companies in which voting rights are proportional to deposit amounts. In looking into this issue I found a paper summarizing the results of several empirical studies on the relationship between ownership structure and management decision-making in S&Ls. In comparison to stock companies, top management of mutual companies tend to exhibit in proportionately more “expense preference behavior”: higher salaries and perqs for themselves, nicer offices, additional support staff, etc. The stock bonus incentives offered to managers of stock companies are driven by profitability, so they have more of a tendency to impose austerity measures within the firm. This is hard to believe, given the enormous salaries that CEOs of large companies pay themselves, but much of it takes the form of profit-based bonuses. Presumably this is why mutual companies and public-sector industries like education have established performance bonuses for their management personnel. By simulating profit targets in non-profit businesses, it’s expected that managers will be motivated to cut salaries and staffs just like their counterparts in stock companies. It seems that both management compensation structures provide managers to operate more on the basis of self-interest than for the good of the workers or customers.

    Comment by ktismatics — 15 November 2011 @ 7:56 am


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