Why I Left My Big Bank

There are three ways to vote in this country. You can vote in an election. You can vote with your feet. And you can vote with your money. If one way doesn’t work, you can try another. This is good to know and remember.

If you are as frustrated as I am by how Washington has failed to end the “heads we win, tails you pay” regime of our major financial institutions, then listen up. I’ll tell you what I’ve done. You may want to do the same.

Yes, a few of our banks are “too big to fail.” But we can fix that. We can make big banks smaller. All we need to do is move our money from a big bank to a small bank or credit union.

This is not a new idea. It is a movement with a name: Move Your Money. The July issue of Consumer Reports provided a list of possible benefits, including lower interest rates on loans and credit cards as well as higher yields on deposits.

So I’ve moved my accounts from the bank I’ve done business with for decades. I did this with great reluctance because the employees of the bank— the tellers and floor officers— have always been straight-up and helpful.  I hate the idea that some of them may suffer while the big dogs continue to get bonuses.

But moving our money may be the only way to push back on the “Hood Robin” policies of our government and the cozy relationship between our legislators and the mega-banks.

My decision to make this change wasn’t a quick one. Changing banks is a big hassle. You have to change all your automatic deposit arrangements. You have to change all your automatic payment arrangements. You have to redo all those electronic fund transfers for EFT bill paying. And you have to keep cash in two accounts while you make the transition.

I started to think about doing this two years ago. That was when Bank of America bought Merrill Lynch. I understood it as a necessary rescue, but I was stunned when former Chairman Ken Lewis referred to Merrill as the “premier” financial services firm. I can think of many descriptors for Merrill, but “premier” is not among them. Merrill is part of the problem.

I’m not alone in this view. Here’s Michael Lewis quoting master short seller Steve Eisman in Portfolio magazine. Lewis also quotes him in “The Big Short,” his wonderful book about the insanity of Wall Street.

“We have a simple thesis,”Eisman said.“There is going to be a calamity, and whenever there is a calamity, Merrill is there.”

The urge to move became more serious last December. That’s when I went to get a home equity credit line to build a pool. The mortgage on our house, held by Bank of America, is only 40 percent of the recent purchase price. Exercising the full credit line would have brought the debt to value ratio up to 69 percent, assuming the pool added no value. The interest rate Bank of America advertised every day in the lobby was 4.49 percent.

Since I had a long history with Bank of America, strong cash balances, a top credit rating, multiple sources of income, could have built the pool with available cash, and would happily arrange for automatic payments, I had the silly idea that I would qualify for their 4.49 percent rate.

But I was wrong. For me, the rate was going to be 5.99 percent.

Later, I learned that about the only way you could get the 4.49 percent rate was if you had no first mortgage. I’ll let you decide whether the posted rate is less than forthright. For me, it was a sign that Bank of America management still couldn’t identify a good customer.

At Charles Schwab, I borrowed the money at 3.99 percent.

So, I’ve done my bit to end “too big to fail.” One account went to Charles Schwab.  Schwab, like Fidelity, could be used as a model for the Limited Purpose Banking discussed in a March column. Another account went to Broadway Bank, a family-owned bank with a branch in little Dripping Springs Texas, not far from the tiny Burns family homestead.

Next week: How you can move your money and get paid to do it.