I have my money in a small community bank. The local Bank of America (BOA)branch (used to be a local bank, than became part of Norstar, then Fleet, and now BOA) keeps trying to get me to open an account with them instead. Nope, not going to do it. Here’s why.
At a recent conference held here by the Indiana Bankers Association, attendees said it over and over: our business is plodding and boring and we would not have it any other way.
“Banking should not be exciting,” said Clay W. Ewing, president of retail financial services at German American Bancorp, a community bank in Jasper. “If banking gets exciting, there is something wrong with it.”
It is an ethos squarely at odds with the risk-addicted style of megabanks, like Citigroup and Bank of America, that trafficked in the subprime mortgages and complex financial products that helped drive the country into the grimmest recession in decades.[…]
To spend time with these Indiana community bankers is to step into an alternate universe, where everything sounds a little strange because it makes perfect sense. You hear things like, “If you don’t understand the risk you’re taking, don’t take it.” And, “We want to be around for decades, so we’re not focused on the next quarter.” […]
The steep profits earned by national banks didn’t turn their heads in the last decade because they were inherently skeptical of double-digit growth rates.
“We like a nice, gentle, upward slope,” said Donald E. Goetz, the president of DeMotte State Bank, an 11-branch operation in the northwest part of Indiana.
“This kind of growth, like you see in the stock market” — Mr. Goetz ran his hand through the air, tracing the shape of a mountain range — “that doesn’t interest us.”
Since Reagan and Greenspan and all the “Greed is Good” obsessed Ayn Rand disciples (Milton Friedman, anyone?) in the 80’s and 90’s, the “word” in the financial sector has always been consolidation. Make small firms into medium firms, medium firms into big forms, big ones onto colossal firms which do everything under the sun, from issuing a college kid a credit card he or she doesn’t deserve to underwriting initial public offerings to giving Donald Trump and other developers non recourse loans secured only by their egos. That’s how we ended up with these megalithic monsters like Citigroup, Well Fargo, Bank of America, UBS, etc. With size comes institutional stupidity, greed, overreaching and too much political power with lobbies able to shape banking and financial legislation and regulation to suit their desire to grow and grow and grow until they gobble up the whole world. Or die trying. With size come arrogance, and risk and the belief that you can do anything because you’re “too big to fail.”
Maybe, just maybe, small banks have something to teach their larger cousins. Maybe, just maybe its time to break up the big banks and go back to a small bank model for our financial industry, one that looks before it leaps into risk. One that doesn’t use financial instruments like complex derivatives as chips in the equivalent of a legalized ponzi scheme or casino.
Damn. I sound like a old time conservative, now don’t I?
