I voted for Barack Obama, and I continue to wish him nothing but success. But I have to admit, his and Tim Geithner's solution to the banking crisis is exactly the wrong solution. The administration seems to believe the best thing to do is to throw the drunken “money center” bankers into detox, hose them off and put them back in the game.
It's a bit like asking Exxon Mobile to run the Environmental Protection Agency or appointing Charles Keating to head the General Accounting Office.
The strange thing is that others in the administration, particularly those tasked with straightening out the auto industry, are taking the opposite – and correct – tact. They fired the head of GM and cleaned out GM's board of directors for good measure.
That's how you begin fixing stuff that's broke – first you get rid of the folks who broke it. What you DON'T do is hand them billions of free bucks, a hearty slap on the back and a rousing “Now, go get-em tiger!” (Because they will.)
But that's precisely what the administration is doing for America's failed money center banks. The nation’s largest banks are often referred to as money market banks or money center banks. In addition to the traditional markets, to be a money center bank today means to have a global presence as well as heavy involvement in wholesale banking with clients comprising many retail banks and large corporations. Citibank, J P Morgan Chase, and Bank of America fit this description.
Here's a list of America's leading money center banks:
So, it appears we will have to take matters into our own hands. By “we” I mean anyone with a checking account, savings account or certificates of deposit. That, my friends, would be you. You are up at bat. And we're counting on you.
What we need to do is force the administration to do to these tumor-like institutions -- currently hiding behind the myth they are “too big to fail” -- what they just did to GM. Tell them that, since taxpayers are now major stakeholders, they must fire their senior management and either clean up the mess they made or face immediate seizure and liquidation.
And just how are you going to force such a change? It's just this simple.
1)If you bank with any of these money center banks, withdraw your funds immediately
2)Go to this site and find an independent community bank in your area and deposit your funds there instead.
(Credit Unions are another excellent and safe alternative to money center banks.)
That's it. That's the whole enchilada. The outflow of what bankers call “retail funds,” if large enough, will become the final straw that breaks the backs of these bulls in our fiscal china shop.
But, you ask, will my money be safe in a small, community bank?
Of course it will be safe, just as safe, maybe safer, than it was at CitiBank or BofA. First community banks are covered by exactly the same deposit insurance as money center banks. But beyond that, community bankers are community bankers. They live in the communities they serve. They know their towns. And, most importantly, they know their borrowers. Community banks are, for the most part, the last remaining healthy sector of American banking. If they are hurting at all, it's because their customers are losing their jobs, not because they lent a godzillion dollars to some fly-by-night schemer or invested in anything with a AIG logo on it. A good community banker's definition of a toxic asset is more along the lines of farmer Jones wrecked pick up on which the bank holds the paper.
Otherwise these tumor-banks will survive Geithner's weak-kneed chemo treatments to emerge intact to pillage another day.
I don't know if what I am suggesting is legal or not. I remember back in 1983 when I wrote my first story about how a savings and loan was using deregulation to put taxpayers at risk. The thrift's lawyers contacted me at the paper and warned me that they were going monitor withdrawals and, if there were a lot of customers withdrawing their money, they ask that I be arrested and charge with breaking a federal law – still on the books – that made it illegal to spark a run on a bank.