The funny thing about the populist Move Our Money movement is that the banks really don’t want deposits right now because they are awash in cash and don’t know what to do with it.
In an article from American Banker, it was revealed that:
“The industry certainly doesn’t need more deposits today,” Fred Cannon, the chief equity strategist at KBW Inc.’s Keefe, Bruyette & Woods [an investment bank specializing in financial companies], declared at an American Banker analyst roundtable last week. “The Fed made sure of that. The industry is awash in liquidity, which has turned into a problem for many banks across the country.”
It seems that bankers are actually trying to discourage new deposits:
“We keep driving down the rates on our deposits, but every time we do that it seems like more deposits come in,” Michael Bauer, the chief credit officer at Community Bank Shares in New Albany …
“We’ve had to suppress deposit growth a little bit,” added Mark Long, the president and CEO at First Commercial Bank in Sequin, Texas.
It seems with nowhere to place the money, deposits are expensive to maintain:
[F]ederal deposit insurance is costing banks $1 for every $1,000 in deposits they hold. Banks are also incurring at least $200 in annual overhead costs for each checking account, regardless of whether a balance is $100 or $10,000, … And those costs exclude any interest payment to the customer. The current average interest rate on deposits is 0.57%, which banks have to pay regardless of their need for liquidity… At Oct. 31, the excess liquidity deposited at the Fed by banks amounts to $1.5 trillion, earning a rate of 0.25% …
There is a lack of loan growth which has resulted in a low loan-to-deposit ratio:
Nationwide, that ratio was 73% at midyear, according to the FDIC’s quarterly banking report. That translates into roughly $8.86 in deposits for every $6.37 in loans on banks’ balance sheets. Those funds have to go somewhere if a bank wants to make any money… 72% of all deposit inflows from January to June were moved to the Fed, according to the FDIC.
Move Our Money is a bankers’ dream.
Spoken like true government subsidized welfare queens! Why do we need deposits when we can borrow at 0% from the US Treasury and the Fed.
Let us all bow heads and thank our Galtian job creators for their selfishness that has led to such robust economic growth!
What is funny is that in yet another poorly researched attempt to ridicule a popular uprising, the author mistakenly conflates small Community Banks with too-big-to-fail Money Center Banks which are the target of Move Our Money.
A quick scan of Move Our Money’s “about” page reveals: “We’re working… to move $1 billion out of the big banks, specifically focusing on JP Morgan Chase, Bank of America and Wells Fargo.”
Meanwhile, the very banks quoted in the American Banker article are where the consumers are being urged to transfer their funds via a “community bank locator” linked on the Move Our Money site here.
Please file this post under (unintended) “Humor”.
Oh, Buck.
“I think community bankers also know that over time the biggest value added they have is going to be sticky deposit relationships,” Cannon [the expert from Keefe Bruyette] said. “We’re in this kind of Catch-22 period of deposits in banking in the U.S. where you don’t want more of them, but you do want those relationships over time.”
John Stumpf, the chairman and chief executive of Wells Fargo & Co., recentlydefended his bank’s efforts to keep bringing in deposits. “If you were short term in your thinking you could make that argument” that Wells is taking in too many deposits, he said at an Atlanta Press Club meeting last month.
You need to think things through more, Buck. The money is going to small banks and they don’t need the money nor does Wells.
Let’s think this through together, Jeff. If money is going to small banks that don’t want the money, how can you then characterize Move Our Money, who’s stated goal is to exasperate this very process, as a “banker’s dream”?
Your blanket “dream” statement only makes sense if deposits were being pulled from banks in general, and so my guess is that you mistakenly assumed this was the goal.
Or perhaps your have a more cogent explanation?
It won’t hurt the big banks, small banks, or any banks. The move is futile but they don’t understand that. As Hammertime says, they should put it under their collective sleeping bags if they don’t like banks. Not that that would bother the banks either. The MOM folks think they are hurting the Big Banks and favoring Small Banks but they aren’t. It’s an ignorant and futile gesture of a bunch of populists. Wouldn’t you agree?
The marginal cost of maintaining a checking account is much less than stated. That number is likely calculated assuming all sorts of fixed overhead such as the cost of maintaining bricks and mortar branches, plus CEO compensation, etc.
Instead of move your money it should be withdraw your cash. Of course the banks do not have the cash on hand. That would get their attention!
Welcome to ZIRP forEVAH!
Banks can’t get a yield, and so their business model is breaking down. People want less risk, so they are preferring bank deposits to bonds or equities.