Big Banks Are Still Sassy, but Their Branch Offices Are Running Scared

As the big banks shrink in assets by their own choices, average Americans can help them shrink to a size where they're no longer Too-Big-To-Fail. Because somewhere ahead is a tipping point, where they become Small Enough To Fail.
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I open and close a lot of bank accounts, and things have changed in the last three years. You can smell the fear when the branch manager comes over to pump your hand for a $1,500 opening balance, and you can't close out an account with a $4.26 balance without an "exit interview."

The dress code has been upped; disappearing are the Silicon Valley-style golf shirts with logos worn at Washington Mutual (before the Feds gifted WAMU to Chase Bank). Though it's not quite back to suit and tie, you can see that the counter people are more formal than they were a few years ago, and the desk people are positively New York City/San Francisco chic. Either someone is cracking the whip, or the branch employees have decided "worst dressed, first laid off."

The fear at the branch level can be easily explained by the pie charts below. The significant shift in accounts from 2009 to 2010 does not represent a mass of new accounts opening at credit unions and small banks. On the contrary, the total accounts in the U.S. has been steady at about 130 million for several years. So fewer accounts at the big bank branches means less transactions, and less need for labor, and that means layoffs on the way.


Note that the 2009-2010 change is not a projection, like some poll of uncertain voters before an election. It is history: these voters have already elected to move their money -- and done so.

The projection for 2011 is still a projection, but is actively tracked by Michael Moebs, an economist & CEO of Moebs Services. If the 35-65% ratio is not exact at the end of 2011, the continuing trend is nevertheless clear -- towards credit unions and small banks.

If the branches are running scared, why are the CEOs sassy? There are three reasons -- call them Plan A, B, and C. Plan "A" is certain, "B" is likely, and "C" is near-certain.

Plan A -- stiff monthly charges for checking accounts and sometimes even savings accounts -- is already failing. That's one reason people are moving their accounts out of big banks.

The big/small institution gap in overdraft fees seems to be having the same effect, as customers learn they can get on average 25% lower overdraft fees at credit unions or regional banks -- along with lower ATM fees.

The big bank CEOs don't care much, because new federal regulations roping in their "right to rob" have crippled their profits on small accounts. From the CEO's point of view, if the customers won't pony up the higher fees, then let them take a hike to somewhere else.

Plan B is exactly what the branch employees fear: layoffs. Big banks would love to have us all go online and close all their branches, but that isn't going to play in either Peoria or New York City. So they'll probably move towards the branch-in-supermarket model and cut back on employees. Since many people distrust supermarket branches, that may further accelerate the momentum of accounts moving to local institutions.

Plan C is for the big banks to simply shrug off the loss of the increasingly low-profit small checking accounts, and go back to the Federal feeding trough for more low-interest or zero-interest loans that they can re-lend at a profit in big transactions.

And this is where the opportunity comes in to exercise good citizenship: as the big banks shrink in assets by their own choices, average Americans can help them shrink to a size where they're no longer Too-Big-To-Fail. Because somewhere ahead there is a tipping point, where they become Small Enough To Fail -- and that is where they lose much of their tremendous political clout in Washington, DC.

The power is yours to use. This is not a political election, where you wonder if your one vote was the vote that actually counted, the one that tipped the needle. These are dollars, and each dollar is a vote that moves a huge pendulum. (If you doubt, look back at the pie charts. The change from 2009-2010 was not a result of big money moving to small banks. It was the result of average Americans making their own choices.)

So close your big bank account. If they want to know why, politely tell them that you are helping eliminate banks that are too big to fail. And then drive down the road to your local credit union or small bank, and open an account with the pleasant people there.

Important Note: Credit unions and small banks on the whole have not been reckless like big banks. However a few have been. An online search tool for sound smaller institutions is at

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