Decoder & The Fool: Why “Bank Transfer Day” will make protesters AND banks very, very happy
Editor’s Note: This is the third in a weekly series of talks between Decoder and The Motley Fool columnist Morgan Housel. You can find all of Housel’s Fool columns, including his most recent, “How succesfull will Bank Transfer Day be?,” here. Read last week’s talk the potential for labor to have its day in the sun here.
1. Perhaps thousands of Americans will transfer their money from for-profit banks to not-for-profit credit unions by this Saturday. (Read up on “Bank Transfer Day” here and read Housel’s column on it here.) But you think this may end up working out for banks AND customers. Why?
Housel: One of the drivers behind [Bank Transfer Day] is people trying to teach banks a lesson. The irony of that is since the financial crisis, and especially over the last three months as there has been a panic about Europe… banks have been inundated with cash deposits. They’ve been seeing a higher inflow of deposits than they can turn into loans.
That’s putting pressure on their margins because banks have to pay [Federal Deposit Insurance Corp.] premiums and overhead costs. And that’s really accentuated by smaller accounts because in the past banks could earn money [from customers with lower balances] from overdraft fees and debit interchange fees and a lot of that has been scaled down through recent regulations…
People are going to be moving to credit unions, and that’s good for them because they’re going to have lower fees, they’re going to have better service, they’re going to have the feeling that they are investing in their community. And then the banks are going to be better off because they are getting rid of their least-profitable or not profitable clients. It helps them stem this tsunami of cash that’s been flowing in that they don’t know what to do with.
2. Your column last week got picked up by several news outlets as criticism of the Occupy Wall St. protests and the concept of “We Are the 99%”. What did you make of that?
I don’t think this will hurt banks the way people hope it will.
I do think it will benefit a lot of individuals who will get lower fees and better service. It’s way over there on the back burner, but I’m thinking of making the switch myself.
