Everyone loves to hate the big banks these days. So much so that a national movement called Move Your Money, which encourages individuals to take their money out of our nation’s biggest banks and place it with community banks and credit unions, has enjoyed a groundswell of support since it came out a month ago. Even local banks have noticed.
“We’ve seen the number of accounts [go up] as a result of Move Your Money,” says Mary Anne Carson, marketing director for Santa Cruz County Bank. “It is really making a difference for us, and I think people can feel good about the fact that their funds are going to local banks that will be reinvested in their community’s economy.”
Armed with the old It’s A Wonderful Life parable on local banking, MYM has caught the attention of state government officials in New Mexico and Oregon, but clearly something’s in the air; Santa Cruz County Treasurer Fred Keeley says he hadn’t even heard of it when he presented a new idea to the county’s Treasury Oversight Commission earlier this month.
The concept is simple: invest sizeable chunks of county money into local bank branches. The county’s liquid assets, which on any given day total between $600 million and $800 million, are made up of the year’s allotment of money for school, fire and water districts. Take a portion of that money out of the Treasury bill fund where it normally resides and put it into local banks, Keeley explains, and you have the makings of a familiar program.
“This is one treasurer in a small county trying to create a bit of a stimulus program by providing more capital into the local banking community,” Keeley says. “And encouraging them to push that money out the door to creditworthy borrowers.”
In the next couple of weeks, Keeley says he and his staff will be calling every local bank branch that has Federal Deposit Insurance Corporation protection to discuss investing up to $240,000 in each. The figure sounds arbitrary but it’s not. In response to the economic crisis, Congress allowed the FDIC’s coverage to widen from $100,000 to $250,000 through 2013; Keeley saw it as a risk-free opportunity.
“One of the things people keep saying to me, especially small business folks, is it’s very hard to access credit,” he says. “I thought, ‘Well, if the federal government has expanded the government umbrella where there is literally no risk, I’m willing to make investments up to $240,000 in every banking institution that does business in Santa Cruz County.’”
Although Keeley says he can’t secure any kind of explicit agreement with those banks to lend locally with the new injection of capital, which he estimates conservatively will be $5 million over the next several months, he will emphasize that hope in each meeting. “I’m doing a little nudging,” he says. “I’m bringing a bell to all these meetings: ‘Look, another angel just got his wings!’”
Treasury Oversight Commission alternate Supervisor John Leopold says that although the plan is currently focused on FDIC-insured banks, an item on the supervisor’s agenda in two weeks will approve a change to county investment policy that will allow Keeley to also invest in local credit unions, which are guaranteed by the National Credit Union Association and tend to make more small loans locally. “Any time you can get our money to work for the people who work here, that’s good public policy,” he says. “You wonder why it wasn’t done earlier.”
Santa Cruz Chamber of Commerce executive director Bill Tysseling agrees that credit is still very tight in the county, particularly for small businesses looking get construction lending, inventory financing and commercial real estate loans, but agrees that local banks tend loosen up for local businesses. “When the earthquake came and shortly following there was a terrible recession, the thing that made it possible for the downtown recovery to get started was local banks saying, we’ll push forward even though we recognize that times are bad,” he says. “We’re certainly in every bit as bad a place without the rubble on the ground right now.” Indeed, data used by the Move Your Money campaign shows that while the largest 20 banks are in control 57 percent of the nation’s assets, small banks distribute 34 percent of small business lending, compared to big bank’s 28 percent.
CEO and president of Lighthouse Bank Richard Hofstetter says he talked to cities, the county and UCSC about investing locally long before the Move Your Money movement. “Seventy percent of the market in Santa Cruz is with Bank of America, Chase, Wells Fargo and Comerica. We think we’re a Think Local First community and we’re really not,” he says. “Accessibility to lending and to business growth starts with the deposits. One of the strange aspects of community banking is the support has to be mutual.”
While Hofstetter is supportive of Keeley’s plan, he does point out that $240,000 in new capital will only translate to about $200,000 in additional loans. “Which is better than zero,” he adds quickly. “Now, if it gets traction, then it’s different. If the university did it, and the city of Scotts Valley did it, and the county did it, if all the jurisdictions within Santa Cruz County did it, then all those little drops would help fill a bucket. It’s certainly a good first step.”
Carson at SCCB agrees, saying it could encourage more individuals to start banking locally. “We often hear, ‘Oh, I don’t have that much money to put with you.’ But if 20 people who thought that way did, it makes a huge difference,” she says.
And while Keeley acknowledges that the plan is small in scope, it is an experiment that could grow in the future. He does point out that it differs from the Move Your Money campaign in that he will be investing with local branches of the big name banks as well as the hyper-local institutions. “There’s a local banker there someplace, somebody is the branch manager who lives here in town,” he says. “I say nothing beyond, ‘I will make this deposit. I hope you’ll do your best to lend to creditworthy borrowers.’ Trying to make that personal connection is important to this enterprise.”
