Human nature is a curious thing to watch when you stand back, remove yourself from the situation, and just observe. If you have ever practiced the art of “people watching” sitting at a park bench or having lunch in a food court, you know exactly what I’m talking about. This morning, as I watch Lehman Brothers go bankrupt and Merrill Lynch get bought out (to potentially avoid the same fate), I’m intrigued to find a few emails from friends asking if they should be worried about their own personal bank accounts. I have paraphrased one of these emails from Friend XYZ’s below:
Matt – What the hell? I get back from vacation and find Wall Street in a mess? What gives? Do I need to put my money under a mattress or what?
The short answer for his situation is: NO!
Friend XYZ does not need to pull money out of his account because he has less than $100,000 in this online savings account, as well as an adequately funded checking account with a local brick and mortar bank. If he had over $100,000, I would suggest opening a new account with a different bank to deposit any remaining funds over $100,000 so that every dollar is FDIC insured. Most of us don’t have this problem, but if you did, you probably have your finances in order to prevent such a problem from arising in the first place.
What I find so intriguing was his reaction to this emotional contagion, or how the emotions of everyone around him swayed his almost stoic personality to near panic levels. For this reason, I often suggest that most people should avoid the daily financial news because it’s so overly dramatized and causes even the most resolute people to get caught up in the “Doom & Gloom” headlines.
Taking this one step further, my big question is…
Would you participate in an old fashioned bank run?
When I think of making a run on a bank, I immediately flashback to It’s a Wonderful Life with Jimmy Stewart. One of the more famous scenes involved poor George Bailey when he has a storefront full of panicked patrons who wanted THEIR money back before THEIR hard earned cash disappeared.
Given recent bank failures, such as IndyMac’s failure earlier this summer, one is suddenly confronted with the realization their bank could potentially fail.
So what would you do?
Would you immediately race to your bank to withdraw your money quickly as possible?
Would you sit back and hope your bank can remain solvent enough to keep their doors open?
Would you rely on the FDIC to insure your deposits?
Would you take out just enough cash to get by and hope things work out for the best?
Fighting Back Against the ‘Too Big to Fail’ Banks
I’m convinced that the current administration will fail to significantly alter the regulatory framework that governs the investment banking community, as well as the fee based business model practiced by the institutional mega-banks. Regardless of the new regulations that will be drafted, or the old regulations that might be reinstated, the best and brightest business minds will always find a way sidestep the regulations (or write in a loophole) to siphon off a few more consumer dollars.
This is the way of modern capitalist world.
If true change is going to take place within the U.S. financial system, it will not be created voluntarily by the Too Big To Fail banks or by your legislators who suddenly have a crisis of conscious for taking too much in campaign contributions.
Real change, not the pie in the sky campaign promise change written by social psychologists, will only come about when a significant number of consumers reject the current business model, and simply stop doing business with the unethical organizations once and for all.
At present, there appears to be enough public disdain for bankers to make it into a reality.
However, most people probably aren’t sure how to go about it. I mean, how do mere individuals make multibillion dollar corporations change the way they do business when they obviously don’t want to change?
Simple. Your business — that they spend billions of dollars in advertising to acquire — is your vote. Each time you give them a direct deposit, make a charge on your (their) credit card, or even swipe a debit card for a cappuccino, you are passively acknowledging that they are doing a satisfactory job.
Personally, I’m done with them. They’re tainted in my eyes.
Perhaps it’s because I’ve never been much for turning the other cheek more than twice. After that, you have to bend over and take one for the team.
And, well… I’m really not into the banks pulling a Pulp Fiction on my ass(ets) any more than I’ve already been ball gagged and #$^@ed.
Multiple Ways to Join the Debtor’s Revolt
Who profits from your interest payments? Banks make a substantial proportion of their profits from the interest payments that you pay every month. So instead of giving 5 to 25 cents on the dollar back to the banks, how about giving it to someone you approve of instead? Open a credit card account with your local bank/credit union or apply for a person to person loan (e.g. Lending Club, Prosper, etc.) so the interest you pay goes to your local economy, or maybe even a P2P Investor.
Bypass the Too Big To Fail Banks entirely. If you have a local community bank or a credit union in your area that you trust with your business, then by all means, use their services. The first thing you should do when you have a moral dilemma with an unethical company is walk away, and find a competitor that meets your moral standards. For example, even if you love your rewards credit card, it doesn’t mean you can’t tell them to shove it.
Never, ever, carry a monthly balance. Why would you give an institution that required taxpayer bailout money even more of your paycheck? If you can’t pay your monthly balance in full every month, just exercise some patience and pay cash once you’ve saved what you need. The personal gratification you will feel will definitely be worth it!
Sign up for email alerts and online bill pay. To avoid credit card late fees, sign up for automatic email alerts as soon as your monthly bill becomes available. After you verify that your statement is 100% accurate, you should pay ASAP. Why wait around and give them a chance to nail you with a bogus fee for being a day late.
Consume Less, Save More. I realize it’s viewed as the anti-American way, but maybe the reason you’re so passionate about the Debtor’s Revolt is that you bought more stuff than you really need. Remember, if you don’t buy it, you never need to pay interest on it (or garage sale it ten years later).