Banking

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The New Rules Project's Community Banking Initiative

Making the Financial System Work for Us

The New Rules Project launched the Community Banking Initiative to provide the empirical and conceptual underpinnings for a community-scaled financial system, which will reduce systemic risk and strengthen local economies, and to identify public policies that can revitalize such a system. Read more background on the initiative.

We'll be posting a growing body of reports, articles, and policy models to this page.  Please sign-up for updates if you'd like occasional emails highlighting what's new.  Also, please consider supporting the initiative with a donation.

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Why Republicans Hate Warren's CFPB But Love Another Bank Regulator

What's really at issue in the fight over the CFPB is not how the agency is structured or how much power it will have, but whose interests it serves. More

And The Academy Award for Cowardice Goes To….

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From all accounts, Charles Ferguson’s acceptance speech was the highlight of the Oscars. After winning an Oscar for Best Documentary for Inside Job, a compelling and searing indictment of Wall Street’s role in the economic crisis, Ferguson injected some much-needed real world relevance amidst the fabulously glitzy proceedings. “Forgive me, I must start by pointing out that three years after a horrific financial crisis caused by fraud, not a single financial executive has gone to jail — and that’s wrong.” More

Federal Policy Threatens Local Banks, a Top Fed Official Says

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A top Federal Reserve official said yesterday that locally owned banks do a better job of serving communities and small businesses, but they are threatened by federal policies that favor their big competitors.

In testimony before a U.S. House of Representatives subcommittee, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City and the Fed's longest-serving policy-maker, said that community banks as a whole have held up better than megabanks over the course of the recession, but warned, "The more lasting threat to their survival concerns whether this model will continue to be placed at a competitive disadvantage to larger banks." More

Taking Financial Reform into Our Own Hands

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With the now-expected passage of the financial reform bill, giant bankssee a golden opportunity to finally put the financial crisis, alongwith their culpability for wrecking our economy, in the rearviewmirror.

But the legislation leaves us at best only modestly less vulnerable to another meltdown.And it fails utterly to confront a deeper problem: even in the best oftimes, our banking system does not serve us very well. More

Credit Unions Hang Tough, See Surge in Deposits

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In the perilous aftermath of one of the worst financial disasters inU.S. history, one might expect credit unions -- which, after all, aremostly tiny by the standards of the banking industry and operated on acooperative, not-for-profit basis -- to be struggling. But data fromthe last 18 months show that the country's 7,600 credit unions are infact outperforming big banks and rapidly expanding their market share.

Since the start of 2009, credit unions have added more than 1.5 millionnew members. Their deposits grew by a whopping 10 percent in 2009 andare on track to grow even more this year.  More

What Big Banks Fear More than the CFPA

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Hanging in the balance of the financial reform debate is an issue that has received far less attention than the Consumer Financial Protection Agency, but is at least as important and probably more so: whether Congress will restore the authority of states to oversee national banks.

If you don't believe me, then take it from U.S. Bancorp CEO Richard Davis, who chairs the powerful big bank lobbying group, the Financial Services Roundtable. In an interview with the Minneapolis Star Tribune editorial board two weeks ago, Davis revealed that the industry's "number one concern" about financial reform is not the CFPA, but rather the power of states to regulate the activities of national banks.

"If we had one thing to fight for, it would be to protect [federal] preemption [of state law]," Davis said. More

Finally, a Bill to Reinstate Limits on Bank Size

Not one to let a good crisis go to waste, Bank of America managed, in the dark days of 2008, to parlay its own insolvency and near collapse into attaining something it had long dreamed of: federal approval to bypass a national law that says that no bank may acquire another bank if it would end up holding more than 10 percent of the country's deposits.

Now, at long last, a new Senate proposal calls for reinstating strict size caps.  It would mean disassembling at least five big banks.

More

Big Banks Want You Back

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Those who wonder whether public anger at big banks and the Move Your Money sentiment sweeping the country is substantial enough to impact these giants need only look at the banks' own marketing over the last few weeks to see the proof.

In a spate of new advertisements and PR maneuvers, the nation's largest banks are working hard to win us back. They are, in effect, standing on our doorstep, flowers in hand, trying to convince us they've changed.

They're using words like "local" and "community," because they know quite well that there's a rival for our affections. A recent Zogby poll found that nearly one in ten Americans had moved at least some of their business to small banks or credit unions. More

Move Your Money and Save

This article was originally published on Huffington Post as part of a partnership with their Move Your Money campaign. 

Bigger banks were suppose to lower costs for consumers. That was the promise made repeatedly in 1994 and again in 1999, when Congress dismantled laws that had long restricted the size and scope of banks, ushering in a wave of mergers that left the industry dominated by a few financial giants.

Just seven years after the Glass-Steagall Act was abolished in 1999, the fees consumers were paying on their checking and savings accounts had skyrocketed, rising from $21 billion to $36 billion. (And these amounts do not include credit card and ATM fees, which also shot up.)  

Today, new data show that big banks still impose much higher costs on their customers than small banks and credit unions do.  Not only are fees lower, but several studies have found that smaller banks and credit unions pay higher interest on savings accounts. 

Moving our money to these local institutions could save us billions of dollars a year.  More

Move Your Borrowing Along with Your Money

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This article was originally published on Huffington Post as part of a partnership with their Move Your Money campaign. 

As we start down the path of breaking up with the big banks and defending our own economic interests and that of our communities, we should think about the whole range of financial services we use.

We need to give thought to both the saving and lending sides of a bank. Each is crucial. On the savings side, community-based financial institutions need our deposits much more than the big banks do. But to be profitable community banks need to convert those deposits into loans. More

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