In the years since the 2008 Big Bank bailout, customers of America’s Megabanks have grown increasingly angry.
They are outraged that, though their bank received billions in bailouts from dutiful taxpayers – and though it has gone on to make record profits – it doesn’t pay a cent in corporate taxes.
It can be an unpleasant shock to learn your own bank isn’t playing fair, that it’s exploiting its customers and its country.
Most disturbing for many with whom we spoke was to discover their bank sends profits earned here straight out of Salem to places it will never be seen again; perhaps the bank will hide those profits from the IRS in an offshore account; perhaps it will pay $66 million to name a baseball field in another state; perhaps it will use Salem-earned profits to enrich a CEO who makes 900 times what a local teller earns.
The bank generally won’t use that profit to help the town where the money was earned, because large banks have cut back sharply on the small business loans that help a city like ours thrive. In addition, big banks are discovered committing mortgage fraud, outsourcing jobs to other countries and foreclosing on homes.
To show their disgust, these customers are closing their Megabank accounts and switching to a smaller community bank or credit union in record numbers.
“The beneficiaries of the increased exodus from larger banks are primarily smaller banks and credit unions,” according to J.D. Power and Associates earlier this year.
Among larger banks in 2012, customer defection was between 10 and 11.3%. And 10.3% of customers looking for a new bank chose smaller banks and credit unions – a rise from 8.1% in the prior year.
“One of the best ways one person can make a difference is to move their money,” says Katharine Moore, co-owner of a small family business in Salem who has herself switched institutions. “I look at my community and I see ‘big banks’… destroying it. What’s close to my heart is to keep things local.”
Statistics show that Moore is part of a trend. In 2012, J.D. Power says, “Smaller institutions were… able to attract many of the customers who left the big banks.”
For Roberta Cade of Salem, it’s because “local banks and credit unions keep most of our money in our community… [while] mortgage payments to big banks ultimately go into the pockets of the big bank CEOs.“
Cade points to figures from Oregon Banks Local: although small and mid-sized banks control less than one-fourth of all bank assets in the US, they account for more than half of all small business lending. On the other hand, the largest 20 banks, which control 57% of all bank assets, devote only 18% of their commercial loan portfolios to small businesses.
Bank of America
Bank of America received $45 billion in taxpayer bailout. Although it holds about $2.2 trillion in assets and is the fifth largest corporation in the United States, it paid $0 in income taxes in 2009 and 2010. In fact, although it made $4.4 billion in profits in 2010, it received a $1.9 billion tax refund.
Since 2007, Bank of America has spent over $20 million for lobbying legislators. It currently owns more than 140 overseas subsidiaries to help avoid federal taxes.
By the way, BofA CEO Brian Moynihan made $8.1 million in total compensation last year. That’s more than four times the $1.9 million he was paid in 2010.
Wells Fargo received 43.7 billion in bailout funds.
In 2009 and 2010, it made $24.6 billion in profits. If it paid the stated standard US 35% corporate income tax rate for 2009, it would have enriched the IRS by nearly $18 billion that year. Instead, it paid not a single cent in taxes.
That same year, CEO John Stumpf received 21.3 million dollars in compensation and the company received a tax benefit of 4.1 billion dollars.
Citigroup received $45 billion in bailout funds. In 2011, with a tax refund in its pocket of $144 million (based on prior losses,) it paid CEO Vikram Pandit $14.9 million, in spite of an advisory vote against it by 55 percent of shareholders.
JP Morgan Chase
JP Morgan Chase received $100.7 billion in bailout funds. Since 2009, it has spent over $25 million on lobbyists to influence federal policy. It has over 50 tax sheltered overseas subsidiaries to avoid federal taxes.
The world’s most powerful investment bank, a U.S. company, received $10 billion in bailout money. Then, in 2011, during a time of record profits (2.7 billion in the first three months alone,) it announced it would fire 1,000 US employees and shift their jobs to Singapore. In that year in Great Britain, Goldman Sachs refused to pay outstanding tax and penalties for five years.
This month, Goldman Sachs led an “Investment Grade Top Ten List” by Gimme Credit, a group who defines companies whose bonds are expected to outperform over the next half year. Only three months ago the group UK Uncut accused Goldman Sachs of making a multi-million pound agreement between itself and the head of Great Brittan’s tax chief. The agreement allowed the bank to keep back millions of pounds in back taxes and interest payments. The accusations were backed by the tax agencies’ own internal minutes.
Because of facts like these, here in Salem, Moore and Cade are doing more than just moving their money. They are among a group that has taken time every Friday since June to stand in front of a different Salem Big Bank to try to get this kind of information to their friends and neighbors. Calling themselves ‘Occupy the Banks Salem,’ they approach busy Salemites who do not realize the extent of their bank’s misconduct. They say that most of the people they approach say they’ve already moved their money. Peter Bergel, another among the group, discusses taking control of our local resources. “Rather than letting the 1% capitalize on them and remove the wealth they can generate from our community. We need that wealth here to provide infrastructure, jobs and services for the people who live here. We don’t need to watch it be stolen for the benefit of those who are already too wealthy.”
Cade says she didn’t lose any services when she moved away from her big bank, “and when I moved my mortgage I got a lower interest rate!”
The group emphasizes the qualities that drew them to smaller institutions. Bergel says the group “will begin on Sept. 10 to conduct positive demonstrations outside of local banks and credit unions, urging people to bank there instead of at the large banks.” Their first action was on September 10 at Salem’s Pioneer Trust Bank.
The movement seems to be growing. Last November 2nd, ‘Bank Transfer Day,’ 600,000 consumers switched from their large bank to a more local bank or credit union, according to Javelin Strategy & Research. This year November 2 will be a “National Day of Action” and the activists hope for even greater numbers moving their money.
“Watching so many businesses and factories close because larger corporations and banks either price them out or business, or gobble them up and ship jobs out of this country,” Cade says, “has opened my eyes to the critical need for us to support one another. So I do my best to support local businesses and that includes credit unions.”
* Sources for this story include Oregon Banks Local, J.D. Power & Associates, Center for Public Integrity, Occupy the Banks, CNN, Javelin Strategy & Research and public records.