Don't unbuckle your seatbelt yet. The economic crisis is not over, and the dysfunction at the heart of our banking system remains. Unemployment is soaring and signs are beginning to point toward the dreaded “double dip” in the residential housing market. During this current cycle big banks have grown bigger and more powerful, and now they seem completely out of touch with the needs of the economy.
The fundamental problem we are facing is that our banking system does not serve us very well, even in the best of times. There are two main reasons to have banks: (1) to facilitate business growth and (2) to help families attain financial security. Do big banks do either of these today? Big banks consume the economy; they do not facilitate its growth and recovery.
Community banks, on the other hand, are linked to their communities through their depositors and borrowers. They prosper when their communities prosper. They are truly aligned with local households and borrowers. This connection between community banks and their customers is the foundation for small businesses, and it is vital to our economic recovery.
Small business lending is impeding our economic recovery, and though this crisis has made it worse, the availability of credit for small businesses has been shrinking for a while now. Big banks do very little of this lending, while local banks excel at small business lending. Research has shown that regions with more small banks are also home to more small businesses, and as small business goes, so goes our economy.
So how do we change our course at this stage of the game? We must move our money. It is time to break up with big banks and move both our savings and our borrowings to local institutions. This exodus from the big banks has not been felt by the big banks yet, but the impact can have a profound effect on community banks with a surge in deposits and lending.
It is time we stopped waiting on our government to facilitate the recovery and take matters into our own hands. If change begins in our wallets, we can make a difference.
Submitted by Squar, Milner, Peterson, Miranda & Williamson LLP