Tim Geithner Says to Leave Your Money at Big Banks

But he’s not sure why. During an interview with Mike Allen of Politico, Tim Geithner said that the Move Your Money campaign is a bad idea, but didn’t actually give a reason why. Here’s the whole segment of the interview (beginning around the 3:30 mark):

Allen: “Arianna Huffington has been urigng Americans to move money from big banks to neighborhood banks. Do you think that’s a good idea?”

Geithner: “I don’t, but I do think the following is important that people recognize.”

“But wait, why is that a bad idea?”
“Well, let me say this. Customers of financial institutions should be very demanding in the kind of service they expect, the kind of products they get, the disclosure banks offer, the basic fairness in dealings. So I’m very supportive of customers of banks, of investors in banks, creditors of banks, holding them to very high standards. That’s something that’s very appropriate.”

[Those all sound to me like good reasons to move your money out of big banks. At least, they were for me.]

“Is that campaign hurting?”

“I’m not concerned with her campaign. I agree with the basic principle, again, that we’ve been through a period where I think people are right to expect more of their financial institutions.”

So why exactly is moving your money out of big banks a bad idea?

By James Kwak

82 responses to “Tim Geithner Says to Leave Your Money at Big Banks

  1. How does one demand more of an institution that doesn’t care about my business? Count me in the crdit union camp now. I can’t wait ’til auto-deposit for my paychecks changes and I can close out the account at Chase.

  2. Huffington’s campaign ought focus on getting people to move their money out of banks that also do investment banking.

    I wonder, was it ‘too big to fail’ that caused our current economic woes, or using FDIC-insured deposits for investing in high-risk trading that caused our problems? It seems like the second, for that required the federal government to bail out banks who’s used insured deposits for risky trading.

  3. I love this campaign, but as a realist, I know it does not matter. All of the “little people” put together control maybe 1% of the wealth.

    We need to exercise our power at the voting both, not the teller window.

  4. Do you really want the Treasury secretary to say, “a significant flight of capital from banks that recently required government recapitalization is not a good thing?” On its own, this movement is unlikely to be big enough to matter, but Geithner can neither endorse it nor explain why it isn’t helpful without blowing it out of proportion.

    And, Zic – Given that this all started with the non-FDIC insured investment banks (and AIG), I don’t think you can say that the issue was primarily gambling with FDIC insured money.

  5. Timmy-the-tax-cheat is evil, so his utterances should only be viewed in that light.

    That Obama supports Timmy-the-tax-cheat suggests Obama is a gullible fool when it comes to financial and economic concerns, or he is just as evil.

    I’m all for Moving Your Money.

    I’m even more for withdraw all you money, in cash, from all financial institutions. It’s time for a nice sweet bank run.

  6. Green Eye monster simply has to gooooo! If I If if I were Arianna I would cut the answer to the question and keep it there in front of HP! With secretaries like this duffus who needs better enemies! I thought our democracy was based on institutions not capricious man! And he has the gumption to “threaten the congress if BB is defeated! Good riddance, Timmey

  7. Let me paraphrase:
    …we’ve been through a period where I think people are right to expect more of their treasury secretaries…

  8. I’ve kept my money in local banks. One of them is on the FDIC watch list for making loans in lots of states, which I didn’t know, but otherwise, the big banks had nothing to offer me to want to switch to them.

  9. Your headline is WRONG. The Secretary of the Treasury was neutral in his response–he avoided the question on purpose because he is supposed to be a neutral government agent.

    He basically said that it is up to consumers to demand good behavior from their institutions. Many companies in many industries face public pressure, and Timmeh basically said that that is legitimate. That means that he advocates that you keep your checking account at a big bank? Logic fail much?

  10. Hubby and i moved ours this weekend. Whether it helps a lot or no, it felt really good. :)

  11. I, too, moved out of BofA after they doubled my credit card interest rate. Went to a local credit union and now use their debit card for groceries, gas etc. And they were nice and appreciative of my business and the teller knew 2 of my children in school. Think global, bank local.

  12. The one percent is no doubt accurate but do you really believe that that one percent can keep those big banks profitable in their checking and credit card and cd business?

  13. What I find amazing, is how the wealthy get the less fortunate folks to vote against their best interests.

    Thousand of people out protesting to defend the rights of the trillion dollar healthcare corporate empires??? How does that happen?

  14. I’m in the process of moving out of B of A after a very frustrating , infuriating on line chat with an Associate in India who could not understand why I became alarmed when her verification question was what is my drivers licence number. Since I don’t have and never have had a drivers licence and she couldn’t come up with another verification question I called my local branch to get what I needed.

  15. Why does anybody discuss Geithner on the merits?

    New York Fed 2008
    Not A Regulator

    And my favorite:
    http://www.smh.com.au/opinion/obamas-economic-saviour-savaged-as-keating-lets-rip-20090306-8rk7.html

    The emperor is indeed naked, and he does not shower often enough.

  16. Actually:
    “Allen:…Do you think that’s a good idea?”
    Geithner: “I don’t, but…”

    He’s not neutral, he said he doesn’t think it’s a good idea. Which I’m quite sure is what he honestly thinks.

  17. He doesn’t think its a good idea to move money from big banks BECAUSE the participated in TARP. In general, he is neutral to size of institution. That is my read.

  18. Yeah I’m with AJ and GenXWho, I think this is Geithner being neutral on the Huffington movement–he doesn’t agree it’s a *good* idea, but of course he can’t be quoted in an interview telling people where to not bank!

    Meanwhile, he doesn’t say it’s a *bad* idea, he reframes it as, “you should bank where you get good customer service,” which, with a broad interpretation of “customer service,” is actually fairly compatible with said movement.

  19. The voting booth is too crude an instrument for this — you only have one vote that covers a lot of issues, some you are for and others you are against.

  20. From Mike Konczal:

    Prop Trading is when a financial firm uses its client’s deposits or borrowed money to invest for its own profit. What many financial institutions have decided to do is take a normal business line and plop a hedge fund in the middle of it. The boring insurers AIG are the leading example of this, but it is everywhere. Many of these hedge funds do very complicated, highly leveraged bets: they bet spreads on bonds will converge a penny, like Long Term Capital Management did; they bet you’ll see short-term mean reversion in stocks; they bet that after an earnings announcement by a company there will be “drift” in the stock price for an additional week. (There’s more – we haven’t even gotten to volatility estimates.) Chasing these statistical ghosts are all worth a penny or two, but if you are highly leveraged that can be a lot of money earned or lost quickly.

    Or they can be doing normal gambling in the marketplace, buying financial instruments that they think will go up or down. Since they are also trading for clients, there is that awkward conflict of interest problem, where you may ask them to underwrite something, or trade for you, and they can also trade themselves ahead of your information.

    Here’s the question: Should we as taxpayers provide a safety net for either of these activities? I’ll leave it up to you as to whether or not prop trading makes markets a better thing; to the extent that it does it is certainly well compensated, and well provisioned for by the private market. What we don’t want is internal hedge funds to be leveraging up and gambling using money that comes with a safety net for preventing devastating bank runs that is provided by taxpayers. In any institution, but especially financial ones, money is fungible. So putting up “walls” to silo off these different functions within one company won’t help us – we actually need to spin these functions out.

    The perfect economic storm seems, to me, to be a combination of things, including using FDIC insured funds for private bank trades.

  21. So why exactly is moving your money out of big banks a bad idea?

    The obvious answer of course is Timmy G is probably loaded up long on JPM, C and BAC and doesn’t want to lose a bundle.

    Of course he could always fall back on his probable million shares of GS

  22. The big banks do not want or need small depositors. Tim knows this full well and considers the entire thing a joke but he has to say what he does because that is what has to be said.

    The big banks do not want your deposits. They want to lend you money. That this most fundamental of all banking concepts is beyond the imaginings of most people is very sad. Don’t take my word for it. Walter Wriston the father of mondern multi national banking from his perch as CEO of Citi said, “We do not want to help our customers save more. We want to help them spend more”.

    To a bank a deposit is a liability and a loan is an asset. On your deposit they can make perhaps 2%. On your loan the sky is the limit, sometimes.

    It’s fine if you quit your BAC, or C, or JPM account but if your a small fry it doesn’t hurt them. You are doing them a favor. Still do it. Credit Unions are often no longer what they were. Small co operatives not seeking profit. Many have been consolodated and have become mini banks meant to profit the management. If you seek a CU find one that is free standing. Not affiliated with out of town branches and certainly none that are state wide.

  23. Because propaganda works. The only rule that matters: repeat, repeat, repeat-no matter the truth-and never give the other side of the issue. Thank you FOX for proving Goebbles correct.

  24. Could you please provide some links to corroborate your assertions, both on the TBTFs and the credit unions. Am interested.

  25. Devil’s Advocate/Only Half Joking: His Turboness is thinking long term: if the TBTFs shrink (and most importantly top management salaries sink), what will become of TT’s next cushy job?

  26. Well, for me, the main reason not to move my money out of a big bank is I like having access to a lot of ATMs and branches that don’t charge me fees to use them.

  27. Also, there are costs (primarily time, but also likely money when you forget to change the automated billing on one of your accounts and you end up being charged a late fee) in moving your accounts from one bank to another. It makes perfect sense not to encourage people to move their money for no good reason other than spite.

  28. Q: “Do you think that’s a good idea?”

    A: “I don’t,…”

    Doesn’t sound neutral to me. Reading fail much?

  29. Personally, I like spite as a reason. It is the only reason I needed to ditch all the big banks last year and I have never regretted it.

  30. F*ck ‘em if they can’t take a joke.

  31. Run, Run, Run from big banks.

    Remember, it’s not just your money. You have to move your personal and business credit cards, and not just from BofA or whatever, but from any company that is a subsiderary of the big bank! Do your homework.

  32. In response to “access to a lot more ATM’s”, most credit unions belong to the Co-Op ATM group and combined, there are more available and free ATMs for members than all the ATMs Bank of American can offer – over 28,000 of them. So, check for the Co-Op relationship at any credit union ATM…also any 7-Eleven and Costco ATM, for that matter, as they are also part of the Co-Op.

    Search for a Co-Op ATM here:

    Mobile: Text your location – address, intersection, or zip code – to MYCOOP (692667)
    Online: Search location. Find directions. Send to your phone.

  33. Oh yeah? How about customer “no” service?

  34. Tim Geithner does not work for, or have any concern about the best interests of the American people. Tim Geithner works for and shields and advances the finance oligarchs exclusively, and Goldman Sachs particularly. So any advise a predatorclass viper and thieve like Tim Geithner offers is suspect. All the more reason to move all our accounts out of the predatorclass TBTF oligarchs, and into local Credit Unions, or local banks.

    Tim Geithner speaks with a forked tongue!!!!

  35. Not sure which pill you swallowed there Nemo?
    The best way to exercise your vote is with your $$$’s. Everyone you give to the corps that keep screwing you is a vote asking for more.
    Vote with your dollars!

  36. i walked on a chase mortgage that i had put 30% cash ($130,000.) down and a 820 credit score, walked away from a chase CC with a $40,000. limit had for 15yrs, never carried a balance. chase is the most evil company alive, worst that monsanto and maybe P&G. they are the biggest predators on earth, they are wiping out america’s families that don’t have anywhere to go or live, like i had. their underwriting is dispicable. it was difficult to not have a credit card but it is easier for me to live with myself not being a hypocrite.

  37. The 1% of wealth “might” be close to true. But not 1% on the money supply. If alot of the small people moved their money, hundreds of billions of dollars would go to local regionals and send a very stark message to Obama et al just like Massachusetts did recently.

  38. Don’t be silly. The Secretary of the Treasury saying he supported boycotting the major banks would be like the Chairman of the Fed saying there’s a bubble somewhere in the economy.

  39. As James says, customer service is exactly the reason to move your money out of big banks — you’re not going to get good customer service at big banks. Credit unions typically have higher interest rates on deposits than BofA, Citi, Chase, etc. and have lower loan rates. Local banks and credit unions are still typically covered by the FDIC and the NCUA respectively (and if your credit union isn’t covered by the NCUA, you should reconsider it). What could you lose?

  40. Stupid, greedy, fat cat, tax-cheat-Timmy is a sophist.

    We need to get that thru our thick skulls.

  41. Of course the MSM has failed to point out what was, by far, the most important thing the Massachusetts vote showed. THAT THE VOTERS STILL CONTROL WHO CALLS THE SHOTS.

    Of course the question is who controls the voters? The MSM are trying very hard to. The Roberts court is certain that it’s their close friends in corporate America through the MSM. But, does anyone think the majority of voters in Mass. were getting their information from the MSM? I don’t think so. They were getting their information from the blogs.

    So, keep on hammering them, Simon, James & your co-blogers. You’re having a larger impact than you realized. It’s you and your co-blogers vs. the MSM for control of the voters who determine who in turn call the shots in this country. And you won in Mass. Your first of many big wins.

  42. Maybe 1% of the wealth, but what about the maxed-out high-interest-rate highly profitable credit cards?

    What about the fees and charges?

    The big banks make a lot of money through these, from people who don’t have large deposits.

  43. rapier,
    I like your wit. And agree.

  44. Even in the short discussion, my eyes glaze over as Geithner re-exhibits his allegiance to those who have captured him intellectually. No, he hasn’t thought out an argument, and so stands steadfast in his support, even when he lacks a rationale to continue it.

  45. by god i taken my monie outta the backer sack and put it in the bank! rekin Im a bankin feller now!!

  46. In Belgium, by State fiat, ATM machines do not charge fees for withdrawing funds — to their customers or anyone else’s. That doesn’t seem to have cut the number of ATMs in the country.

  47. Sorry. Banks do not make x money off deposits or x money off loans. It is the spread between the rate they lend money at and the rate they pay on deposits. You add to that fees etc and take away charge offs of bad loans and operating expenses, but the core is managing the spread between your loans and funds (deposits).

    Risk taking is in there and that their compensation system never manages correctly at the Wall Street level. I am now enjoying managing at the credit union level.

  48. Sure, Tim. Those the same banks you wanna avoid regulating? Yeah, Tim, I’ll keep my money there. Why not?

  49. James Dexcente

    Oh, wow.

    One reason why moving money into community banks is not a good idea is that community banks are saddled with bad commercial and residential loans that are causing them to collapse at a rate of about 4 or 5 a week. Anyone holding more than the FDIC limit in a community bank would have to be completely out of his mind.

    I read these comments by people who haven’t the slightest idea how banks are regulated or how they are currently performing but absolutely no inhibition about vomiting their misinformed opinions onto the internet and I weep for our country.

  50. Obviously Geithner–or anyone in Geithner’s position, or even close to it–can’t say it’s a good idea. That would be tantamount to agreeing that the big banks (especially the Big C) are still in really deep doo-doo, and only continue to exist because of government backstops. It’s true that the bulk of the profits of the banks don’t come from deposit accounts, not directly, but those core deposits are still important to the capital base they’re teetering on.

    But you’ve got to go further than that–cut the plastic (fees, interest), 401K contributions (more fees, funds to play with), anything that gives them money to gamble with. Hold cash. You want to pull the plug on these bastards? Then you’ve got to go all the way.

    If you say, I’d do it except for my little perks–the atms, the credit card rewards–then just admit they own you, like a domesticated pet that behaves itself to get the occasional treat.

  51. Yeah, imagine how that quote would play on fox news.

  52. Since when is something not being a good idea a statement of it being a bad idea? If all his reasons supported leaving big banks, in your mind, why would you assume he wanted people to stay with the big?

  53. How about the big banks that have 5 Trilion in Enron like off the books investment vehicles. Why would anyone want to support that misuse of leverage.

    Oh wait, the top 5 US banks must have investment banking doh, and are reponsible for the packaging of lethal toxic securities.

  54. James Dexcente says:

    “One reason why moving money into community banks is not a good idea is that community banks are saddled with bad commercial and residential loans that are causing them to collapse at a rate of about 4 or 5 a week. Anyone holding more than the FDIC limit in a community bank would have to be completely out of his mind.”

    And so? There are publicly available lists of institutions that are exposed and vulnerable.

    And in general anyone putting more than the very well-known insured deposit limits is taking a chance with **any** savings institution. I really don’t see what your point is.

  55. Yeah. It’s a better idea to continue funding the beasts that almost brought–scratch that–WILL bring us down, regardless of the government guarantees.

    The government could guarantee that the US will be immune to the laws of thermodynamics tomorrow, but we’d still have a real energy crisis in the works. Same with finance. You REALLY think they can keep levitating the BS the big banks are built on? Really? Seriously?

  56. anonymous_from_6:48

    Regarding your first question, I guess you could disagree, but when somebody says to me “I don’t think that’s a good idea”, I tend to think that is more or less synonymous with (if a bit softer than) “I think that’s a *bad* idea”. I don’t think this is a controversial interpretation of the phrase. Is it?

    As for your second question, I should first point out that I never said I thought all his reasons supported leaving big banks. So why would I assume he wanted people to stay with big banks? Well, I didn’t assume at all. When he was asked if moving money from big banks to neighborhood banks was “a good idea”, he replied that he didn’t think it was. It feels weird to be disagreeing with someone about this–his statement seems very straightforward and not at all “neutral” to me.

  57. Disgree.

    Banks make huge $$$ these days on the fees they charge people for overdrafts and the like.

    They do huge volume business that way.

    So, they do want little people’s small accounts.

    See on this, ironically, the great recent Frontline special on credit cards (but also bank fee-gouging generally), which has lots of footage of Geithner touting reforms. FWIW.

  58. I am actually thinking about withdrawing my money from the social security and medicare lockbox. Any recommendations from liberals how to do this?

  59. Um, not many people have more than the FDIC limit ($250,000 per person, $500,000 for a joint account), you know. If your argument is that community banks are bad because they may go under due to bad loans, you should be talking to a different demographic.

  60. What do you expect from a simpleton who couldn’t work Turbo-Tax?

  61. It’s not that we hurt the big banks much; it’s putting our money into local banks and credit unions that is the action that helps. 1% of a big bank may be 90% of many small local banks. (Hence the terms “big” and “small” or “local”; there’s a difference of scale that many don’t consider.) 1% of a billion is still 10 million, etc. Plus the local banks are far more likely to invest in local projects of all kinds.

  62. I hope you ran up a balance on that Chase CC before you walked. Better to be hung for a ewe than a lamb.

  63. no that would not be my mo. thought about it, though.

  64. James Dexcente

    “($250,000 per person, $500,000 for a joint account)”

    That’s actually wrong, but I guess it’s close enough by your semi-informed standards.

  65. James Dexcente

    “There are publicly available lists of institutions that are exposed and vulnerable.”

    I admit that this made me laugh out loud a little.

  66. James Dexcente

    It’s a good idea to get the best rates possible for yourself as a customer for financial services. And I don’t understand what it is you mean by the big BS the banks are built on. Are you referring to their capital? If so, why do you think that the capital base of small banks is somehow different and more stable than the capital base of large banks (the only meaningful distinction is related whether the potentially non-performing assets are in the form of asset backed securities which must be marked down based on their (now perceived) market value or in the form of loans which are only marked down when they become impaired). Are you referring to fractional-reserve banking? If so, how are small banks not operating under that system? The only the small banks are is subject to less regulation.

  67. The pragmatist

    Right wing talk radio is all about getting the less fortunate folks to vote against their best interest. And they seem to be very good at it.

  68. The pragmatist

    Many small banks and credit unions have wised up on this and will automatically refund you the fees other banks charge non-customers to use the machines.

  69. All of this will only get worse. The news field is collapsing. Local news is nearly non-functioning. Most blogs simply repeat news gathered elsewhere. Soon we won’t even know many of the problems being generated for which we will have to suffer consequences.

    News is now primarily entertainment, and to the lowest common sense of that word.

  70. From the article: “The IMF is the gun that can’t shoot straight. They’ve been making a mess of things for the last 20-odd years, and the greatest mess they made was in east Asia in 1997-98, so much so that no east Asian state will put its head in the IMF noose.”

    Simon Johnson was from March 2007 through the end of August 2008 Chief Economist of the International Monetary Fund

  71. a lot of bigger small banks have a system and connect with other ATM machines all over the country and no fees applied. mine is called ALLPOINT ATM locator and there is an itunes APP for that, and it is free. comes with a google map get directions using gps, find by zip code, city, state it is better than ice cream.

  72. Are deposits really used for prop trading? Or is this just more conjecture fueled by the media. I keep finding incredible misinformation about the financial industry just about everywhere I look.

  73. He’s actually correct…at least until 2013 when it returns to the original 100k limit.

    Still,most people don’t have over 100k in savings anyway do they.

  74. I don’t know links, but I’ve seen a number of Washington state CUs start acting like banks: BECU is the latest of these. Columbia Credit Union even tried to convert itself to a bank over the objections of its members and was voted down. There are still a lot of old-line CUs around, however, and it’s worth seeking them out.

  75. James Dexcente

    Actually, what he said is not correct and I’m not referring to the $250K number, I’m referring to the way the FDIC looks at what they are insuring. It’s a point that a person not conversant with bank regulation would not understand.

  76. You think as a realist, “I know it does not matter”.

    I t does matter, to me. to us, how our money is used. If not doing business with them is all we can do, then fine. But it IS something.

    I will never let THEM use my money again. I will not support the raping and thievery of the public.

  77. moving money out of big banks is a horrible idea for one reason. FDIC problem bank list has 584 institutions on it and the list is growing. while too big to fail is a massive problem, too little to fail isn’t. As of right now there is NO WAY of knowing whether or not your small bank will be the one to get taken over on Friday. until the dust settles and the playing fields level, its unfortunate but the others are quasi government institutions, and should be treated and paid as such.

  78. Allow me to quote the GEICO caveman when asked if he would like to respond to a similarly-posed statement, “What?”

  79. Marie (Portland, Oregon)

    Time to pinch yourself and wake up Chas. What happened in Massachusetts was a Republican shell game. The guy ran like an Independent but voters will soon find they put another Republican in office. Last time I checked the GOP lied to us about Iraq, about torturing POWs, about how much the war actually was costing taxpayers, the real deficit and the chameleon from Massachusetts is no different. Watch and see how soon he reveals his true colors.

  80. As a 20+ year banker myself, it appears you don’t understand the basics of banking: Gather deposits and loan the majority of them out at a higher rate. Small checking accounts typically are 0 interest and therefore provide the best spread when loaned out. Larger deposits are typically from wealthier, more sophisticated customers who demand a higher rate, and therefore provide a reduced spread (but lower servicing cost). You must have deposits before you can make loans. The loan asset can never be originated without the deposit liability coming to the bank in the first place.

  81. After spending weeks trying to correct a mistake with BofA and being bounced around to several untrained representatives, One even told me that the employee turn over rate was so high at the call centetsm It is almost impossible to find an experienced repersentative I moving back to the small town bank. and when I call I will actually be speaking to someone a few miles down the road not someone in another state or country that is follow a script sheet of procedures.