Help create local jobs without spending a dime. Bank local.
Kari Chisholm
In the midst of the meltdown of the global financial markets and the resulting recession that's caused unemployment to spike in Oregon, there's been a lot of talk about how shopping local can help create economic growth locally.
And that's true. As Jonathan Radmacher noted last month here at BlueOregon:
That guy, whose 4-person business painted my porch last year? He’s a great painter, and a really nice guy. And with the construction trade in its present condition, he really needs the work. ... He’s not sending my $500 to China, or to Wal-Mart shareholders. He’s going to pay himself, his wife, and his employees.
But the "shop local!" crusade, as important as it is, still requires you to spend money. And many of us have adjusted our spending patterns to save a bit more.
So here's one thing you can do that won't cost you a dime - and can have an enormous effect on our local economy: Deposit your money in a local bank or credit union.
That's right. By shifting your banking from one of the big national banks to one of the smaller local banks or credit unions, you can actually stimulate the local economy and create local jobs.
Briefly, a recap on how a bank works: Banks take in deposits. They use those deposits to make loans to homeowners and businesses. They make money on the difference between the interest they charge on the loans and the interest they pay on the deposits. (That's a simplified view, but that's the core idea.)
Now, if you're depositing your money with a big national bank, they're going to use your deposits to fund loans all over the country. And big banks like to make big loans to big borrowers.
But if you deposit your money with a small local bank in Oregon, they'll make loans right here in Oregon. Those loans will help small local businesses get the operating capital they need to keep the staff on, pay their suppliers, and keep the doors open.
That's what my little business did a few weeks ago. The transition took some effort - we had to pick a bank, adjust our automatic payments, get new checks - but in the end, it didn't really cost us much of anything.
And you know what else? They actually care about our business. We're no longer dealing with the endless parade of assistant branch managers at the big national bank who never gave a damn about our account. We're now working directly with a vice-president of a local bank, and she even remembers our names. (Yeah, it doesn't take much to please me!)
You know, it's easy to get seduced by the idea that a big national bank is somehow a safer place to put your money. But with the FDIC insuring deposits, there's no risk in depositing your money with a local bank.
And besides, as the Washington Monthly pointed out back in December, in a piece called "Too Small to Fail":
While the behemoths of Wall Street stumble and fall, humble local banks are doing just fine, thank you. ...One reason community banks are doing so well right now is simply that they never became too clever for their own good. When other lenders, including underregulated giants like Ameriquest and Countrywide, started peddling ugly subprime mortgages, community banks stayed away. ...
Not only that, but the local banks behave better, too:
Because the banks tended to hold on to their loans instead of selling them to distant investors, they took care to avoid granting loans to customers who couldn’t repay them. Social pressure also helped to stave off predatory lending. When savers, borrowers, and lenders all live in the same community, lenders don’t write loans that amount to financial crack.
Oh, and incidentally, one more thing for the wonks: I'm no expert in high finance, but it seems to me that the Treasury Department is making a mistake by pumping capital into the same big banks that caused the financial meltdown.
Why not put a bigger chunk of the TARP money into the hands of the small institutions that actually behaved responsibly? It seems to me that we could get this economy moving again by pumping a few more hundred billion into the local banks that actually lend money to the small businesses that employ most Americans. A little more credit to those businesses will help expand payrolls, boost orders, and more.
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Apr 21, '09
We were with a local bank that was bought out by WaMu 12 years ago. Finally got fed up and switch to a small local institution about this time last year.
Apr 21, '09
Just an FYI before you take financial advice from the leading BO "intellectual"
most of the banks that are failing are the smaller ones:
http://www.fdic.gov/bank/individual/failed/banklist.html
Oh and BTW, here's a good read on how leading Democrat Progressive Dianne Feinstein is using the taxpayer bailout money: (Remember Good Democrats Hate Corruption! Buwhahahhaha)
http://washingtontimes.com/news/2009/apr/21/senate-husbands-firm-cashes-in-on-crisis/
7:57 a.m.
Apr 21, '09
Uh Dan... there have been a tiny number of bank failures compared to the size of the industry. And, yes, there are thousands of local banks compared to a half dozen big national ones. Almost by definition "most" failures will be small banks.
Of course, a bank failure hurts its investors - but not its depositors. That's the point of FDIC.
Apr 21, '09
Kari
I am pretty sure that most of the big banks are set up in regions and have region and state Presidents. The deposit dollars you talk about would be used within the region and the state. My advice to anyone, before taking Kari's advice, is to talk with a regional President of a Wells Fargo, Key Bank or US Bank. I am going to suggest that I am a lot more correct on this subject.
Remember, the tellers and loan officers of the large banks are people who live in our communities and help the economy. I don't think we would want to see our neighbor's who work there unemployed.
Apr 21, '09
Thank you, Kari, for this post.
I have been a member of a local credit union for over 15 years and I have never received anything but the best customer service from them. The tellers at my branch know who I am, I get to have a say in how things are run(voting for a Board, etc)and a few months ago when they suspected my account info had been compromised, they called me--I didn't have to wait to figure it out on my own.
And in these crazy financial times, I have never once worried about my money. In fact, the father of one of my good friends works at my credit union and has said that with all the trouble the large institutions are having, more and more people are transferring their accounts over to smaller credit unions, which seems to me to make them even more stable.
9:58 a.m.
Apr 21, '09
The deposit dollars you talk about would be used within the region and the state. My advice to anyone, before taking Kari's advice, is to talk with a regional President of a Wells Fargo, Key Bank or US Bank.
First, your advice is laughable. When I went to talk to Wells Fargo about moving my business there, I couldn't get past the 24 year old in the nice tie.
Second, while you're right that big banks are typically organized regionally there are no rules or regulations that require them to segregate deposits into funds that generate loans in the local regions where those deposits come from.
Third, yes, no one wants to see our friends and neighbors who work for big banks go unemployed. But let's be honest about how this works: Banks get big because they get efficiencies of scale. They can centralize much of the back-office operations - or even cost-effectively off-shore them. By raising the question of bank employment, you've inadvertently given me another argument: By depositing your money with a local bank, you're more likely to create local bank jobs, too.
Apr 21, '09
Cool - so, local banks managed to dodge the Democrat pressure to lend to marginal borrowers who couldn't afford to pay them back. Thank goodness. Just goes to show how avoiding the reach of Democrats makes you stronger and better.
Apr 21, '09
I guess it bears repeating - greed knows no party affiliation. I would love to bank locally, but try to find a bank in this state that pays 2.5% on a 6 month cd. Sure we have those teaser rate savings/checking accounts which adjust downward within days after opening them.
Apr 21, '09
Oh a job creation thread. This fits. Democrats kill bills to create 42,500 jobs
DEMOCRATS TERMINATE JOB CREATION BILLS FOR 2009 SESSION
As Key Committee Deadline Passes, Job Creation Bills Left Off the Table
Democrats kill bills to create 42,500 jobs
SALEM—With Oregon’s unemployment rate skyrocketing past 12 percent, Democratic leadership has terminated several bills that would have created tens of thousands of jobs and put more dollars back into the state’s struggling economy. Because leadership refused to advance the bills before committee deadlines, the job creation measures are effectively dead for the 2009 session.
“As thousands of Oregonians lose their jobs, Democratic leaders have given pink-slips to bills that would have created jobs, empowered small businesses, and given working families greater relief during this economic recession,” said Senate Republican Leader Ted Ferrioli (R-John Day). “Oregon’s future is at stake, yet Democratic leaders decided to spend more time on bills to increase regulations on businesses and raise taxes on the Oregonians fortunate enough to still have jobs.”
Among the job-creation bills Democratic leaders and committee chairs have terminated this session:
SB 704: Reduce income tax withholding tables by 4.2% to immediately put $100 million back into Oregonian’s paychecks and create 2,500 jobs, without costing government a penny.
HB 3095: Implement the Main Street Incentive Program to encourage home and business owners to engage in capital improvement projects, creating 6,000 new jobs.
SJR 24: Direct state agencies to immediately facilitate implementation of the Western Oregon Plan Revisions, which would create 15,000 new jobs.
HB 3469: Establish a personal income tax credit of $500 per dependent child, and reduce personal income tax rates for low income Oregonians by modifying income tax brackets, which would create over 19,000 jobs.
“It’s frustrating that this Legislature has spent more time debating puppy mills and snack machines in teachers’ lounges than bills to create jobs,” said House Republican Leader Bruce Hanna (R-Roseburg). “While terminating Republican ideas for job creation, Democratic leaders have kept alive bills that do nothing to improve our economy or help our businesses survive and rehire workers. The Legislature’s inaction on job creation will prolong the state’s recession and make our eventual recovery less robust.”
4:30 p.m.
Apr 21, '09
In our enthusiasm to keep dollars local, let us recall that we did have problems, serious problems, with savings and loans in the late 1980's and early 1990's. 745 failed nationally. We had political corruption in the Keating Five. And we had many cases of conflicts of interest in who received loans. Local institutions are not always better.
Apr 21, '09
Credit unions, credit unions, credit unions.
Unlike a bank, at a credit union you actually own a share of the institution, for just a small $5-$10 deposit in a savings account. At a bank you're a "customer" but at a credit union you're a "member." That's a huge difference.
I switched to a local credit union away from WaMu years ago and I've had such great service I'd never go back. Not to mention, I get better rates on savings accounts, and a car loan that beat out all the national banks in town.
Most credit unions now are switching to be "community credit unions" which means you don't have to be employed by a certain company, you get membership by living/working in (usually a pretty wide) area around the CU. Here's a handy tool to find one near you: http://creditunion.coop/
Apr 22, '09
Another vote for credit unions. They tend to offer higher interest on your savings and lower interest rates on your car loan, etc. Part of this is because they pay lower taxes due to their non-profit / member owned status, and part is due to the fact that in most but not all cases, the credit unions did not get sucked into lending money to land developers and homebuilders during this last bubble, so they have fewer loan losses to cover. But be smart, there are some tiny credit unions out there that are unsafe, and even if your savings are insured, your loan arrangements are not insured, such that a "bank failure" will cause you to lose your line of credit and perhaps make it difficult to deal with your other financial affairs.