Is it time to say no to the big banks?

Fed up with your bank? From the reaction to yesterday’s post about sneaky bank fees and a threat to free checking, we’d say many of you are.

Arianna Huffington has a solution: Change to a community bank. In a post written with economist Rob Johnson at The Huffington Post, she advocated that people close their accounts at the big four banks and open accounts at small community banks.

The idea is simple: If enough people who have money in one of the big four banks move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it's meant to be. It's neither Left nor Right -- it's populism at its best. Consider it a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest.

The Huffington Post includes a video mashup of scenes from Frank Capra’s “It’s a Wonderful Life” with news clips about the current financial crisis. It links to a Web site, www.moveyourmoney.info, which has a box where you can enter your ZIP code and find a highly rated community bank.

A follow-up post shared some readers’ stories and noted that readers also praised credit unions.

• Bing: Lessons from 'It's a Wonderful Life'

The Move Your Money movement has gained lots of attention since Huffington and Johnson announced it Dec. 29.

Edward Harrison at Seeking Alpha doesn’t agree with the stark delineation Huffington makes between “good” community banks and “bad” big banks. “Obviously, it’s not so stark a difference in reality,” he writes. “After all, reckless community bank lenders fail every week, don’t they?”

But, he sees some value in the movement:

On the whole, I applaud the effort because a large part of the anger people feel stems from powerlessness in the face of the obvious crony capitalism and kleptocracy which our elected officials foster. This is a great way to both give people a sense they are empowered and to give politicians and Washington a sense that people mean business on this issue. Maybe it will effect change.

In an article in American Banker, Heather Landy noted that the campaign’s Web site had attracted 176,000 unique visitors in its first week and that the movement had more fans on Facebook (5,393 today) than Bank of America, Citigroup and Chase combined. She quoted Cam Fine, president and CEO of the Independent Community Bankers of America, as saying community bankers are thrilled about Huffington’s push.

However, Fine is skeptical it will have any significant impact.

"Community banks are going crazy over it. I haven't had one banker email me that had something negative to say about it. They just love it," he told Landy. But he also said, "I don't think the Huffington Post article is going to disintermediate the nation's 15 or 20 largest banks from some significant portion of their funding. I think it will run its course and be another interesting little episode among many during this financial crisis."

Policy analyst Anthony Randazzo, at the Out of Control Policy blog of the Reason Foundation, provided a thoughtful point-by-point analysis of why he doesn’t believe Huffington’s push will solve bank problems -- though he agrees with some of her points.

He notes that big banks grew because they provided services that small banks couldn’t, and that small community banks also made bad loans. Plus, he notes that big banks haven't “slapped America in the face” by reducing their lending, they have tightened lending in an acknowledgement that years of loose lending were a bad idea.

He writes that, in theory, there is nothing wrong with more people shifting their cash to community banks.

But it is not going to solve bank problems. When you look at the philosophy behind the Move Your Money movement, there are some very flawed presuppositions mixed in with very accurate criticisms. Unfortunately, the misguided views are representative of a wide number of voices in the pundosphere and on Capitol Hill -- and if they continue to drive banking reform, the end result is likely to be reduced competition, retarded innovation, and a missed opportunity to get back on a path to prosperity and economic growth.

The Move Your Money movement reminds us of Suze Orman’s response to credit card companies raising interest rates and fees: If you don’t like the way your credit card company is treating you, pay cash. She also has advocated moving to credit unions. MSN Money columnist Liz Pulliam Weston explains here why credit unions might be a good choice.

So should you take your money out of the big banks and move it to community banks and credit unions? It depends.

Do you like the service you’re getting from your bank? I find the service at my local branch of Big Bank quite good -- though the telephone support from the national office is terrible, and the bank’s organization makes it impossible for the two arms to work together. On the other hand, my credit union, which is great with car loans, has poor support for online banking. My savings account is at an online bank because the interest rate is significantly higher. If you’re an ATM user, the cost of ATM withdrawals may be the deciding factor.

Jim Wang at Bargaineering believes in shopping local, and he, like Suze, doesn’t see any point in spending your money with businesses that treat you badly. He writes:

I don’t like how the video demonized the larger banks but I do like the message. If you don’t like how a store is behaving, boycott it. Plenty of people avoid Wal-Mart because they don’t like their business practices. If you don’t like how a bank or credit card company is treating you, take your business elsewhere. Don’t complain, don’t rant, don’t shout into the heavens … because they don’t care. If your money is still in your account there, they won’t listen to you because they already have what they want -- your $$$.

Are you ready to move your money in protest? Or to get better service? Do you think Huffington’s campaign will have an impact on how big banks are treating their customers? Or do you think other tactics would be more effective?

Related reading:

• Ditch your bank for a credit union
• Banks have declared war on you
• 10 things your bank won’t tell you