Let big banks die...let smaller banks thrive?

[Chunkee]

What about the banks that have been somewhat fiscally responsible? Credit Unions, Smaller Home Town banks etc... If the larger banks go belly up...could not the smaller ones thrive?

I have a BofA account...If I took my business to a local credit union, would that not help the LOCAL economy and help the bank that did not make poor decisions, squander money, and pay CEOs ungodly amounts of money and bonuses? Would this work? Let the behemoths die off and let the little guy get a chance to grow a bit?

 

[Jiggz]

Only if the smaller banks have friends in the Capitol Hill or WH! This is the reason the big banks are getting bail outs!

 

[fallout man]

Originally posted by: Chunkee
What about the banks that have been somewhat fiscally responsible? Credit Unions, Smaller Home Town banks etc... If the larger banks go belly up...could not the smaller ones thrive?

I have a BofA account...If I took my business to a local credit union, would that not help the LOCAL economy and help the bank that did not make poor decisions, squander money, and pay CEOs ungodly amounts of money and bonuses? Would this work? Let the behemoths die off and let the little guy get a chance to grow a bit?

I'm seriously considering this angle as well. There are lots of nice local non-fuck-up banks within walking distance, and BofA is anything but a friendly place to bank. I've sucked up their bullshit convenience charges for years out of laziness and their prolific ATM's, but I'm finding myself using ATM's less and less these days. Even with the ATM surcharges, I'm betting that I'll pay less for the "convenience" of having a checking account by taking my business elsewhere. Fucking snakes.

 

[MovingTarget]

"Too big to fail == Big enough to be split."

Lets do this. Smaller local banks have better service and employ more people than if they merged into larger banks.

 

[blackangst1]

Originally posted by: MovingTarget
"Too big to fail == Big enough to be split."

Lets do this. Smaller local banks have better service and employ more people than if they merged into larger banks.

Im not sure what you mean by "employ more people". Does it take 30 employees to run a BofA branch but 38 if it was a local bank? What do you mean? It doesnt matter what the bank brand is, it employes locals. Right?

 

[miketheidiot]

Originally posted by: blackangst1

Originally posted by: MovingTarget
"Too big to fail == Big enough to be split."

Lets do this. Smaller local banks have better service and employ more people than if they merged into larger banks.

Im not sure what you mean by "employ more people". Does it take 30 employees to run a BofA branch but 38 if it was a local bank? What do you mean? It doesnt matter what the bank brand is, it employes locals. Right?

pretty much what you explained, local banks tend to be less cost efficient, for a variety of reasons. Employing more people is not an unqualified good thing, especially if that coudl be done better by fewer.

 

[miketheidiot]

oh and letting the big ones fail woudl kill alot of the small ones, and small banks can't do alot of what the large banks do: ie large scale finance

 

[GuitarDaddy]

Originally posted by: blackangst1

Originally posted by: MovingTarget
"Too big to fail == Big enough to be split."

Lets do this. Smaller local banks have better service and employ more people than if they merged into larger banks.

Im not sure what you mean by "employ more people". Does it take 30 employees to run a BofA branch but 38 if it was a local bank? What do you mean? It doesnt matter what the bank brand is, it employes locals. Right?

Yes a local bank will employ more than a branch bank because it employs senior management (Pres, etc...) plus they have additional dutes like clearing and reconciling that would not be done locally with a branch bank.

I would love to see a return to local banking, as I grew up my Dad was a bank officer and for most of his career banking was local and he loved it, as the bank merger craze took over by the end of his career he was VP for a mega-bank and he hated his job, all the things he loved about banking were gone

 

[fallout man]

Originally posted by: blackangst1

Originally posted by: MovingTarget
"Too big to fail == Big enough to be split."

Lets do this. Smaller local banks have better service and employ more people than if they merged into larger banks.

Im not sure what you mean by "employ more people". Does it take 30 employees to run a BofA branch but 38 if it was a local bank? What do you mean? It doesnt matter what the bank brand is, it employes locals. Right?

A small community bank will have to hire folks to run their IT side locally, for example. A huge conglomerate bank has a broad IT department in place that takes care of their branches all over the country. The same goes for advetising and art design, marketing, public relations, etc. A consolidated IT department that services several offices nationally will have less employees per client than a local outside contractor who expands as they get more business.

When you put your money into a small local bank, you're putting money (more than less) into your local community of local folks whose livelyhood depends on small contracts from local businesses.

 

[Ozoned]

Originally posted by: Chunkee
What about the banks that have been somewhat fiscally responsible? Credit Unions, Smaller Home Town banks etc... If the larger banks go belly up...could not the smaller ones thrive?

I have a BofA account...If I took my business to a local credit union, would that not help the LOCAL economy and help the bank that did not make poor decisions, squander money, and pay CEOs ungodly amounts of money and bonuses? Would this work? Let the behemoths die off and let the little guy get a chance to grow a bit?

Heh heh. You mean the ones that were smart enough to sell their high risk shit to the big banks?

 

[blackangst1]

Originally posted by: GuitarDaddy
Yes a local bank will employ more than a branch bank because it employs senior management (Pres, etc...) plus they have additional dutes like clearing and reconciling that would not be done locally with a branch bank.

Originally posted by: fallout man
A small community bank will have to hire folks to run their IT side locally, for example. A huge conglomerate bank has a broad IT department in place that takes care of their branches all over the country. The same goes for advetising and art design, marketing, public relations, etc. A consolidated IT department that services several offices nationally will have less employees per client than a local outside contractor who expands as they get more business.

When you put your money into a small local bank, you're putting money (more than less) into your local community of local folks whose livelyhood depends on small contracts from local businesses.

Makes sense.

 

[MovingTarget]

Originally posted by: blackangst1

Originally posted by: MovingTarget
"Too big to fail == Big enough to be split."

Lets do this. Smaller local banks have better service and employ more people than if they merged into larger banks.

Im not sure what you mean by "employ more people". Does it take 30 employees to run a BofA branch but 38 if it was a local bank? What do you mean? It doesnt matter what the bank brand is, it employes locals. Right?

No. What do you think happens when companies merge? Large scale layoffs almost always immediately follow. Hell, I'd go so far as to say that it is a primary motivation for merging - having an excuse for firing lots of people. You need more management, HR, PR, clerical workers, etc. to run multiple, smaller banks/firms than the exact same institutions if they merged. Take the recent Regions/Amsouth merger for instance. Two banks that operated in nearly the exact same geographical areas that were deadlocked in competition. They competed, and consumers won. When they merged, a LOT of people lost their jobs and hte local economy here took a big hit. Consumers lost.

 

[MovingTarget]

Originally posted by: miketheidiot

Originally posted by: blackangst1

Originally posted by: MovingTarget
"Too big to fail == Big enough to be split."

Lets do this. Smaller local banks have better service and employ more people than if they merged into larger banks.

Im not sure what you mean by "employ more people". Does it take 30 employees to run a BofA branch but 38 if it was a local bank? What do you mean? It doesnt matter what the bank brand is, it employes locals. Right?

pretty much what you explained, local banks tend to be less cost efficient, for a variety of reasons. Employing more people is not an unqualified good thing, especially if that coudl be done better by fewer.

Well, it isn't an unqualified good thing, but it has its advantages. It puts more people to work in the local/regional economy, which is really what we need right now. Also, smaller companies are more accessible both in the physical sense and the metaphorical sense as they must pay more attention to their needs to keep up with thier compentition. It is also "insurance" against a failure because one big bank failure is bigger than the failure of one smaller bank.

 

[dullard]

I don't think I believe the premise of your arguement. The smaller banks often were worse than the bigger banks when it comes to being fiscally responsible. Small banks are terribly inefficient (see the discussion about more employees in posts above). Thus they have much higher costs and more reasons to fall for the get-quick-rich schemes that dominated banking in the last decade. Plus, look at the list of banks that failed so far in 2009: FirstBank had only 4 branches; National Bank of Commerce had 2 branches; Bank of Clark County had just 2 branches; etc.

I'm not saying that small banks were worse than large banks. I just don't know the data in that much detail to make that claim. But I do disagree with your yet unproven claim that small banks are definately better when it comes to fiscal responsibility. Show me proof and I'll change my tune.

Small banks have advantages and disadvantanges. Since I grew up in a banking family, I have intimate experiences with both (note: I personally have never worked in a bank though). Small banks can give you better deals at times, small banks are more pleasant when they greet you by name, etc. But, with a small bank you usually don't get 24-hour phone service, you usually don't get branches open on Sundays and on Saturdays afternoons or the bank being open until 7 pm during the week, you usually don't get useful websites for online banking, and you usually don't get branches all over the world in case of an emergency during a trip. Plus, if you go to a small branch of a big bank, you still can get that personal service and being greeted by your name at the door. For example, I usually go to a small branch of Wells Fargo with I think 2 full time tellers - one knows my face and the other knows my name and says hello and my name as I enter.

The best banking strategy is a combination of banks. Go with a small bank or a credit union for loans or savings if you can get a better deal. Then have your checking at a large bank for the national convenience and great website. But most people want a 1-stop shop. I don't really see any advantage for a 1-stop shop, but they are usually very insistant upon it. Right now I have checking and savings accounts at three different banks and a loan from a fourth (my max was 5 banks, not counting credit cards or other banking products).

 

[Socio]

Originally posted by: miketheidiot
oh and letting the big ones fail woudl kill alot of the small ones, and small banks can't do alot of what the large banks do: ie large scale finance

Yes but some the giant banks are just to big, powerful, and crooked for their own good, we need to let the worst of them die or at least be forced to shrink down to a self sufficient level. You would have still plenty medium/small banks to take up the slack.

 

[Xavier434]

When a bank dies, all of the loans are purchased by other banks if I understand it correctly. If all of the big banks go under, is it actually possible for all of the loans to be bought by others or will it be too much? How would something like that work out legally and economically?

 

[MovingTarget]

Originally posted by: dullard
I don't think I believe the premise of your arguement. The smaller banks often were worse than the bigger banks when it comes to being fiscally responsible. Small banks are terribly inefficient (see the discussion about more employees in posts above). Thus they have much higher costs and more reasons to fall for the get-quick-rich schemes that dominated banking in the last decade. Plus, look at the list of banks that failed so far in 2009: FirstBank had only 4 branches; National Bank of Commerce had 2 branches; Bank of Clark County had just 2 branches; etc.

I'm not saying that small banks were worse than large banks. I just don't know the data in that much detail to make that claim. But I do disagree with your yet unproven claim that small banks are definately better when it comes to fiscal responsibility. Show me proof and I'll change my tune.

Small banks have advantages and disadvantanges. Since I grew up in a banking family, I have intimate experiences with both (note: I personally have never worked in a bank though). Small banks can give you better deals at times, small banks are more pleasant when they greet you by name, etc. But, with a small bank you usually don't get 24-hour phone service, you usually don't get branches open on Sundays and on Saturdays until 7 pm, you usually don't get useful websites for online banking, and you usually don't get branches all over the world in case of an emergency during a trip. Plus, if you go to a small branch of a big bank, you still can get that personal service and being greeted by your name at the door. For example, I usually go to a small branch of Wells Fargo with I think 2 full time tellers - one knows my face and the other knows my name and says hello and my name as I enter.

The best banking strategy is a combination of banks. Go with a small bank or a credit union for loans or savings if you can get a better deal. Then have your checking at a large bank for the national convenience and great website. But most people want a 1-stop shop. I don't really see any advantage for a 1-stop shop, but they are usually very insistant upon it. Right now I have checking and savings accounts at three different banks and a loan from a fourth (my max was 5 banks, not counting credit cards or other banking products).

Banks open on the weekends after noon on Saturday? I can't name one, large or small. Besides, smaller banks can often provide the same services if they pool with others. We aren't just talking about banks with a handful of branches. We are talking about banks up to regional size, which can be very well capitalized. They can be more inefficient as they need to provide their own managerial overhead, but we are claiming that is a good thing. Smaller banks have proven to be no more susceptible to the same get-rich quick schemes, but when they do they can't do near the damage to the economy. It is of course easier to come up with examples of when they do fail as there are simply a lot more of the smaller banks around.

 

[LegendKiller]

Question:

If we let the big banks "die", then all of the equity is gone since debt holders are the ones who are able to get their money out first.

If that is the reality, which it is, then where do "smaller" banks get capital, and funding, to be able to lend?

How long will it take for a "small" bank to become a "big" bank, big enough to be able to lend at the volume needed by businesses and consumers?

 

[dullard]

Originally posted by: MovingTarget
Banks open on the weekends after noon on Saturday? I can't name one, large or small.

US Bank: Scroll to #3 Open 9 am to 7 pm Monday through Friday. As a bonus, this branch isn't drive through only (like many other banks with their later hours) you get full teller service at any time it is open. 7 pm is very nice so I can go in after work. Open until 4 pm on BOTH Saturday and Sunday so I can go in on weekends. Also see #2 and #3 in the same city.

Wells Fargo is starting it too. See bank #1 is open until 7 pm on weekdays and 5 pm on both Saturday and Sunday.

I didn't say small banks were any better or worse when it came to fiscal responsibility since I don't have that data. But the claim that small banks were the cure-all was way off base. I had to comment.

 

[miketheidiot]

Originally posted by: Socio

Originally posted by: miketheidiot
oh and letting the big ones fail woudl kill alot of the small ones, and small banks can't do alot of what the large banks do: ie large scale finance

Yes but some the giant banks are just to big, powerful, and crooked for their own good, we need to let the worst of them die or at least be forced to shrink down to a self sufficient level. You would have still plenty medium/small banks to take up the slack.

like most things, you don't understand banking or finance.

 

[Jaskalas]

Originally posted by: Chunkee
What about the banks that have been somewhat fiscally responsible? Credit Unions, Smaller Home Town banks etc... If the larger banks go belly up...could not the smaller ones thrive?

Trickle down economics means the big banks are too big to fail and the small banks shouldn't exist at all because they're more difficult to nationalize.

 

[Dissipate]

Originally posted by: Chunkee
What about the banks that have been somewhat fiscally responsible? Credit Unions, Smaller Home Town banks etc... If the larger banks go belly up...could not the smaller ones thrive?

I have a BofA account...If I took my business to a local credit union, would that not help the LOCAL economy and help the bank that did not make poor decisions, squander money, and pay CEOs ungodly amounts of money and bonuses? Would this work? Let the behemoths die off and let the little guy get a chance to grow a bit?

Have you ever heard of a 'run on the bank?' That is exactly what you would have if the big banks went belly up. You would have a general panic and a total collapse of the banking system.

 

[LegendKiller]

Originally posted by: Dissipate

Originally posted by: Chunkee
What about the banks that have been somewhat fiscally responsible? Credit Unions, Smaller Home Town banks etc... If the larger banks go belly up...could not the smaller ones thrive?

I have a BofA account...If I took my business to a local credit union, would that not help the LOCAL economy and help the bank that did not make poor decisions, squander money, and pay CEOs ungodly amounts of money and bonuses? Would this work? Let the behemoths die off and let the little guy get a chance to grow a bit?

Have you ever heard of a 'run on the bank?' That is exactly what you would have if the big banks went belly up. You would have a general panic and a total collapse of the banking system.

I think this is one key point people miss. Not only will big banks collapse but small banks will collapse also. The entire system will be chaos. Overnight lending will stop, money market funds will stop, companies will be without ANY liquidity. The result of that is insolvency for many major companies within 24 hours. Within 48 hours that would spread internationally as ALL capital market lending halts. Stock markets would probably fall 50%+ within 24 hours.

After the massive amount of equity is evaporated, the global wealth pool would be immensely damaged. Thus, even though the big banks are gone, the little banks (those that survived the run) wouldn't have any ability to lend anyway, since nobody will deposit funds and there is no loans for them to take in order to lend. Nobody will give them equity since everybody would fear a run on that bank.

People say it never got that bad during the GD. Great, but this is an entirely different banking system. Where runs used to be people sitting outside the banks in lines, now at a keystroke hundreds of millions of dollars in liquidity can be gone.

The type of operational structure we have now is awesome when it works and can be downright frightening when it doesn't.

To think that it's as simple as letting big banks fail, having a 2-week market spasm, and then everything moves along A-OK is stupid. It'd take years before the system even started looking like a shadow of its former self. The world probably won't recover for a decade, if not longer.

This isn't a fearmongering post either, it's simple reality of what would happen.

 

[Chunkee]

Originally posted by: LegendKiller

Originally posted by: Dissipate

Originally posted by: Chunkee
What about the banks that have been somewhat fiscally responsible? Credit Unions, Smaller Home Town banks etc... If the larger banks go belly up...could not the smaller ones thrive?

I have a BofA account...If I took my business to a local credit union, would that not help the LOCAL economy and help the bank that did not make poor decisions, squander money, and pay CEOs ungodly amounts of money and bonuses? Would this work? Let the behemoths die off and let the little guy get a chance to grow a bit?

Have you ever heard of a 'run on the bank?' That is exactly what you would have if the big banks went belly up. You would have a general panic and a total collapse of the banking system.

I think this is one key point people miss. Not only will big banks collapse but small banks will collapse also. The entire system will be chaos. Overnight lending will stop, money market funds will stop, companies will be without ANY liquidity. The result of that is insolvency for many major companies within 24 hours. Within 48 hours that would spread internationally as ALL capital market lending halts. Stock markets would probably fall 50%+ within 24 hours.

After the massive amount of equity is evaporated, the global wealth pool would be immensely damaged. Thus, even though the big banks are gone, the little banks (those that survived the run) wouldn't have any ability to lend anyway, since nobody will deposit funds and there is no loans for them to take in order to lend. Nobody will give them equity since everybody would fear a run on that bank.

People say it never got that bad during the GD. Great, but this is an entirely different banking system. Where runs used to be people sitting outside the banks in lines, now at a keystroke hundreds of millions of dollars in liquidity can be gone.

The type of operational structure we have now is awesome when it works and can be downright frightening when it doesn't.

To think that it's as simple as letting big banks fail, having a 2-week market spasm, and then everything moves along A-OK is stupid. It'd take years before the system even started looking like a shadow of its former self. The world probably won't recover for a decade, if not longer.

This isn't a fearmongering post either, it's simple reality of what would happen.

So, tell us sage, What is the solution? What will work? Is this simply a reality to the ridiculous amount of greed our society is formed on? That in our shallowness and prowess for shiney bobbles and expensive coffees and cars that go vrroom, we have denied the reality that it will eventually fail? That our fiscal irresponsibility is due to the betting on what tomorrow may bring instead of preparing what tomorrow may not bring? That the distance between the hard working social worker barely making ends meat, and the nauseating wages a sports person gets for hitting a white ball, gotten so long that we can no longer identify that that notion is not only pathetic, but insane? That we care more about Jessica Simpson's weight gain than our struggling children in school?

Be that as it may, that all your theories on here; "realities"; and those from the other pointy headed momos on here that prostrate themselves as experts...that missing the true etiology of the problem will result in the evasion a true solution.

 

[Xavier434]

Originally posted by: Chunkee
So, tell us sage, What is the solution? What will work? Is this simply a reality to the ridiculous amount of greed our society is formed on? That in our shallowness and prowess for shiney bobbles and expensive coffees and cars that go vrroom, we have denied the reality that it will eventually fail? That our fiscal irresponsibility is due to the betting on what tomorrow may bring instead of preparing what tomorrow may not bring? That the distance between the hard working social worker barely making ends meat, and the nauseating wages a sports person gets for hitting a white ball, gotten so long that we can no longer identify that that notion is not only pathetic, but insane? That we care more about Jessica Simpson's weight gain than our struggling children in school?

Be that as it may, that all your theories on here; "realities"; and those from the other pointy headed momos on here that prostrate themselves as experts...that missing the true etiology of the problem will result in the evasion a true solution.

I will say this. Legend is very much correct about most of the smaller banks being crushed if all of the big ones go under. You would be shocked in regards to how much they depend on them. It isn't like Bob's Toolbox down the road vs Home Depot where if Home Depot went under then Bob would quickly become a very rich business owner. It is far more complicated than that.

Before you ask, I don't necessarily have an answer either other than to tell you that we need to find ways to get people to buy sooner than later in order to break our uncontrollable downward spiral of deflation. In order to do that, the banks need to be lending reasonable amounts to people so they can buy. That also needs this country needs to give people reasons to buy now instead of next year.