A blog post urges clients of BofA and others to move deposits to community banks and credit unions to protest what the blog calls a return to risky practices by the big banks.

By E. Scott Reckard

January 1, 2010

There can be few institutions more despised as 2010 begins than big U.S. banks, but what can the average person do about it?

The answer, according to author and Huffington Post website co-founder Arianna Huffington: Withdraw your money.

In a widely read blog post this week, Huffington and former Senate Banking Committee chief economist Rob Johnson try to stir up a popular revolt by encouraging bank customers to yank their deposits from Bank of America, Wells Fargo Bank, Chase and Citibank and move them to community banks and credit unions.

The broadside complains that the big banks, after being propped up by taxpayer money and government guarantees, have returned to the high-risk activities that torpedoed the economy in the first place, while cutting back on lending to businesses and spending hundreds of millions of dollars to water down proposed restrictions on their operations.

“The government policy of protecting the Too Big and Politically Connected to Fail is badly hurting the small banks, which are having a much harder time competing in the financial marketplace,” write Huffington and Johnson, who is also a former managing director at hedge fund operator Soros Fund Management. “As a result, a system which was already dangerously concentrated at the top has only become more so.”

The Business Roundtable, a lobbying group for major financial institutions, said Huffington and Johnson were oversimplifying the situation.

“It’s easy to demagogue the industry and paint institutions large, medium, and small with broad brush strokes,” the trade group said in a statement. “In the end, sound financial advice dictates that consumers should select the financial institution that offers the mix of products and services that best serves their individual financial needs.”

Community banks traditionally have catered to small businesses and well-off individuals, charging more than their mass-market brethren but priding themselves on better service.

But many people want services — such as large, free networks of automated teller machines — that the community banks don’t provide. (Some small banks reimburse ATM transaction costs for their best customers.)

What’s more, financial recklessness was hardly confined to big banks choking on exotic mortgages and toxic securities carved out of them. Many California community banks managed to dig themselves into deep holes by making now-troubled commercial real estate loans during the boom years.

The post by Huffington and Johnson links to a video comparing the big institutions to the villainous banker Mr. Potter in the Jimmy Stewart Christmas classic “It’s a Wonderful Life.” The video page links to a service that enables people to find smaller banks near them that are rated A” or “B” by Torrance research firm Institutional Risk Analytics.

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