Business columns: It makes no sense to spank the banks
Many of us may hate the big banks, but alas, we can’t live without them. said Martha White in <em>Slate.com.</em>
Blogger and pundit Arianna Huffington has a new cause, said Martha White. She wants Americans to “spank the banks” by transferring their deposits from behemoths like Citigroup to local lending institutions. Her outrage is understandable, but her strategy is, well, dumb.
What’s the point of a boycott when “transaction deposits”—bank jargon for consumer and business checking accounts and the like—make up only a small fraction of bank assets? And with the average American bank account holding only $4,000, an “unfathomably large” number of Americans would have to join the boycott for it to have even a minimal impact.
What’s more, a boycott of big banks would hurt consumers worse than it would hurt the banks. It’s an enormous hassle to move your money from one bank to another, especially if your banking relationship extends to things like direct deposit and automated bill paying. And even if Americans did shift their money to smaller banks, they, like the small banks themselves, would still need big banks to handle things like foreign-currency exchange.
Many of us may hate the big banks, but alas, we can’t live without them.