(MintPress) – With the encouragement of members from the Occupy Buffalo movement, the City of Buffalo recently announced that it was withdrawing $45 million from JP Morgan Chase and depositing the funds in a local Buffalo bank. The action symbolized the continued push that the Occupy movement was built upon: Acting against banks that have been deemed “too big to fail.”
In a meeting with the Buffalo Common Council, members of the Occupy Buffalo movement encouraged council members to withdraw funding for the Buffalo Sewer Authority to capitalize on supporting a business within the community. The move also helps the Authority accrue a higher interest rate, from the 0.25 percent it was collecting from JP Morgan to the 0.30 percent it will get with First Niagara Financial Group.
“Not only will the funds earn more interest with First Niagara, a major local employer headquartered in Buffalo, but it also sends a crystal clear message to JP Morgan Chase that the City of Buffalo is not happy with their business practices,” said Buffalo City Comptroller Mark Schroeder in a statement.
In a release provided to MintPress, Schroeder said the decision took time because he wanted to find a local bank that could match or provide a better interest rate for the city.
“I understood the Common Council’s concerns from day one, but as chief fiscal officer, I couldn’t do anything that would cause the city to lose money,” Schroeder said in the release. “Fortunately, we were able to find an interest rate that would make the city more money than what it was earning with JP Morgan Chase.”
The city still has an unspecified amount of funds with JP Morgan Chase, which will remain with the bank, according to Schroeder. He said interest rates and business practices will determine the extent to which the City of Buffalo will do business with the bank.
“We will continue to seek the highest possible rates for the city’s investments and explore the option of pulling more funds out of Chase in the future, especially if the bank’s poor business practices continue,” Schroeder said.
In May, JP Morgan announced that it had lost $2 billion in trading losses that CEO Jamie Dimon said were caused by “errors,” “sloppiness” and “bad judgment.” The bank was also a contributor to the housing market collapse in 2008, which forced the institution to pay out nearly $154 million to settle a civil fraud lawsuit that claimed it misled home buyers into mortgage investments.
The Securities and Exchange Commission (SEC) said JP Morgan failed to disclose to investors that Magentar Capital, a large hedge fund, played a role in choosing securities for mortgages and that the fund stood to make money off of defaults.
Actions similar to those taken by the City of Buffalo have taken place since the rise of the Occupy movement. In February, the city of Berkley, Calif. announced that it was withdrawing all of its $300 million of financial assets from Wells Fargo with the hopes of finding a more “socially-minded” institution to bank with. Members of the Berkley City Council said they were hoping to send a message to the banks responsible for the housing crisis.
“I feel that this is one way in which we can make a statement and push for wider changes and promote better banking practices and more equity in our society,” said Berkley councilmember Jesse Arreguin.
In May, a group called “Oregon Action” testified in front of the Portland, Ore. City Council to encourage the city to move its money from Wells Fargo into locally owned banks or credit unions. In February, Portland Mayor Sam Adams proposed the Responsible Banking Resolution, legislation that would ensure tax dollars would remain in the local economy. It has yet to be put to a vote, however.
The “Oregon Action” group said they are fighting for the cause because of business practices by large banks such as Wells Fargo.
“Portland currently holds substantial money on deposit in multinational banks,” the group said on its website. “Instead of reinvesting our tax dollars into the struggling economy, Wells Fargo has invested in private prisons and predatory payday lenders, and has been exposed as one the worst corporate tax dodgers in the country. Instead of finding ways to help homeowners keep their homes, they have one of the highest foreclosure rates in the country.”
The Occupy influence
The call to reinvest money into small institutions has been heard by both municipalities and consumers alike. Last November saw more than $50 million withdrawn from America’s largest banks in light of “Bank Transfer Day” championed by the Occupy Wall Street movement and created by the Move Your Money Project. The day was organized to act as a demonstration against banking practices of institutions that received bailout money from the Federal Reserve.
A February Javelin Strategy and Research analysis demonstrated the disdain of large banks and the influence of grassroots movements such as Occupy when it said 5.6 million people moved their money to local banks or credit unions in the span of 90 days. The analysis also projected that the top 10 earning banks in America could lose $185 billion in deposits in 2012 from consumers moving their money.
A consulting firm, cg42, has estimated that Bank of America, which could be hit the hardest by the consumer exodus, could potentially lose up to $42 billion in deposits, or 10 percent of its customers.
“Once I started getting involved in Occupy Wall Street, I became much more conscious of my corporate consumption,” said graduate student Ned Resnikoff in an interview with Alternet. “I realized that some of the financial choices I had made without thinking — without even realizing they were choices — were, in fact, pro-neoliberal political decisions. Then I decided it was time to reverse some of those decisions.”
Many of the defections from large banks come as the institutions push more fees on consumers. In March, Wells Fargo announced it was ending free checking in six states by introducing a $7 monthly fee to maintain a basic checking account if the consumer was receiving paper statements and a $5 fee if the consumer received electronic statements. Wells Fargo said it is introducing the fees region by region, but plans to expand the process across the country eventually.
The fee expansion could prove to be a dangerous business model, as Bank of America found out after a fee proposal last year that called for a $5 monthly fee for customers who used their debit card to make purchases. Philadelphia Enquirer reporter Jeff Gelles told Alternet that credit unions saw a spike in customers after the proposed fee increases.
“The Credit Union National Association said … that since Bank of America’s debit fee was announced, credit unions had added 650,000 members – vs. 80,000 in an ordinary month – and $4.5 billion in deposits,” Gelles said.