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Hitting the big banks where it hurts: Shifting demand deposits
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Frank Capra made it clear in 1946.

Big banks are personified by Mr. Potter. Small banks, savings & loans, as well as credit unions are the bailiwick of George Bailey.

And just like in “It’s a Wonderful Life”, it has taken an economic crisis to get the people who depend on Main Street to spurn the lure of Wall Street.

The Credit Union National Association on Thursday announced that since late September some 650,000 people have opened credit union accounts. They have transferred $4.5 billion from big banks since Bank of America upped the ante for greed by slapping a $5 monthly debit card fee on accounts.

I admit I’m not a big fan of Bank of America.

In the 1970s the bank severely cut back loans to small farms and small businesses to become a bigger player in international loans. This is the bank that became one of the largest financial institutions in the world by buying up hundreds of small town banks in California such as the Bank of Manteca.

It was the same decade when I had a photography business and three accounts at BofA when I had $1,500 worth of camera equipment damaged. BofA rejected my loan application outright because it was too small. They weren’t even interested in my mother co-signing even though she had two business accounts with them and several personal accounts. Placer National Bank - a local bank based in Auburn - approved it. They also set up a revolving credit line. Once I was well established, BofA started serenading me. It wasn’t going to happen. Someone who stands by you in bad times deserves for you to stand by them at the very least in good times.

I’m not going to bash big banks per se. Over the years they have often provided me with the lowest rate on car loans. And for all practical purposes they are the only ones with a big enough balance sheet to deal in the mortgage markets.

What I will point out is that the little guys by themsleves may not carry much clout but aggregated they are a major economic juggernaut for the banks. That’s because the amount of money a bank can leverage is based on demand deposits. The more money they have in checking accounts or demand deposits the healthier their balance sheet can be against loans.

There was $460 billion in demand deposits in United States banks in December 2008. And while you may not have more than a couple hundred or couple thousand dollars in your checking account at any time, multiply it by millions of customers and it adds up.

That is why it will make a big difference if enough people shift their money to regional or small financial institutions. It will hurt the big bankers that run with Wall Street and fund their job killing acquisitions and such.

Consider this: During the past four years since the economic crisis started Bank of Stockton, Oak Valley Community Bank, and a host of other local entities including Delta National Bank and credit unions aggressively went after businesses from small employers.

They are the ones that are funding most of the small business activity you see today in our community. That doesn’t mean the big guys aren’t players. But control of critical decisions on loans and such aren’t in the community but are at corporate headquarters far away where their main interest isn’t exactly the economic health of Manteca, Lathrop, or Ripon.

I have no qualms about sending a monthly mortgage payment to Wells Fargo nor do I resent the fact that when January rolls around and my car loan is paid off that BofA will have made a healthy chunk of change off me.

But when it comes to checking and such local intuitions such as Bank of Stockton - which also happens to be the largest bank in terms of holding the most deposits from San Joaquin County businesses and consumers - have always been much more accommodating by not trying to fee you to death.

It’s because they understand they exist only because of Main Street.