New York Town Pulls Funds From Big BankTens of thousands of Americans moved their money out of major banks over the past few weeks as part of a nationwide protest against their policies. Now activists across the country are urging local governments to do the same. The Village of Hempstead is one of the first municipalities to take that step.
The Village of Hempstead, N.Y., sounds like a posh resort in the Hamptons. But if you ride the train an hour east from Penn Station, what you'll find is a working-class town of about 54,000 people, more than 80 percent of them African-American and Hispanic.
Nearly a third of local residents are underwater on their mortgages, six times the state average. Mayor Wayne Hall says he heard story after story from local residents who tried to get banks to refinance their loans but couldn't. Finally, Hall got fed up.
"Since Chase was bailed out like all the other banks by our money ... then they could at least help our citizens out by modifying their loans," Hall said. "So we decided that if they can't help them, then we don't need to keep our money there."
Hempstead officials decided in April to take the $12.5 million in the village's bank accounts — all of them with Chase bank — and move them to a smaller competitor. Since then, several other communities in New York state have followed suit, including Freeport and Binghamton.
Hall concedes, however, that it may take more than that to get Chase's attention.
"We only had $12 million in the bank. But if we get $12 million here, million-something here, million there, before you know it, it'll add up to billions of dollars — and Chase will see the light," he said.
Chase declined requests for an interview. In a statement, the company said it's made "extensive efforts" to help borrowers who have fallen behind on their payments, offering more than 56,000 modifications just in New York state.
Skeptics say there's little chance of Chase changing course over a few million dollars.
"I don't think municipalities moving their deposits around is going to have any measurable influence on how home mortgages are serviced," said banking consultant Bert Ely.
He said laws in many states limit where local governments can put their money.
"What the obligation should be first and foremost of the municipalities is No. 1, safety of their funds — which is why they should be in insured accounts, or collateralized accounts," he said, "and then, second of all, trying to earn the best interest rate that they can."
In practice, Ely says, that means local governments often have to work with big banks, rather than community banks or credit unions. Hall says the Village of Hempstead did its homework before moving its money to TD Bank.
"It hasn't made no difference at all," he said. "I still sign the checks, controller still signs the checks. Business as usual."
Buoyed by Hempstead's success, activists are working to introduce divestment resolutions from New York to California.
Ilana Berger of The New Bottom Line, a national coalition that is urging local governments to steer business away from three of the largest banks, says it's not merely going from a devil you know to a devil you don't know.
"I guess I would say there's many devils, but there's devils that are worse," she said. "Bank of America, Chase and Wells Fargo are clearly the leaders. If as industry leaders we can have an effect on them, it changes the whole industry."
Berger and other activists seem energized by Bank of America's recent decision to drop its proposed $5 fee for ATM cards after blowback from angry consumers. If thousands of people could do that, she says, just think what a thousand cities could do.