(photo: Gamma Man)

I’ve written about the revival of the Move Your Money movement alongside the Occupy Wall Street protests. But there’s a second-wave innovation here that has the potential to make the banks take notice in a much more direct way.

When ordinary citizens take their savings out of big banks, it has a small effect, but it would take lots and lots of take-up for that to really hurt those behemoth financial institutions which have such market share. By contrast, when a municipality, particularly a large municipality, moves their money out of a big bank, that can have an impact on behavior. This is particularly true if the municipal governments cite specific reasons, like a failure to modify mortgages for their constituents or a failure to maintain dilapidated, foreclosed properties, for moving the funds. This is now a focus of the bank accountability movement. There have been some early successes, which I noted in that initial post, like the case of the city of San Jose. This is from a year ago:

Yesterday, San José Vice Mayor Judy Chirco, City Councilmembers Sam Liccardo, Madison Nguyen, Rose Herrera and Kansen Chu, and grassroots leaders from PICO affiliate PACT San Jose announced that the city has diverted nearly $1 billion from Bank of America based on the bank’s poor record of modifying loans to stop preventable foreclosures.

The San Jose City Council voted unanimously in December 2009 to make bank’s loan modification performance a criterion in deciding where the city will invests its money. As a result, the City has moved almost a billion dollars from Bank of America this year. In the last quarter of 2009, the City had over $1.3 billion in BofA compared to $417 million in the 3rd quarter of 2010. The City of San José now holds just 20% of its investments in BofA. Bank of America is no longer the largest bank in Silicon Valley.

Just imagine the incentive shifts if a movement like this caught fire. The New Bottom Line, one of the leading coalitions on bank accountability, is trying to pull this off: [cont’d.]

Advocates for the poor are using the Occupy Wall Street protests in city halls to push municipalities to divest from banks blamed by demonstrators for the global financial crisis and persistent unemployment in its wake.

San Francisco’s Board of Supervisors weighed such a move yesterday during a hearing in which activists, including supporters of the local Occupy SF encampment, urged the adoption of policies that would prompt big banks into modifying mortgages for struggling homeowners […]

The New Bottom Line, a coalition of more than two dozen small-business, community and faith-based groups, will introduce so-called divestiture resolutions in more than 50 U.S. cities in coming months, according to Ilana Berger, executive director of the New York-based organization.

While community groups have been pushing such measures for at least two years, the campaign has gained momentum since the Occupy protests began in New York Sept. 17, calling for an overhaul of financial-services laws, Berger said. The campaign’s goal is to cut banks and brokers out of municipal financial- services contracts if they can’t prove they are modifying loans for homeowners in distress.

“People from all walks of life are saying we’re not going to do business with you,” Berger said by telephone. “We’re not going to let you steal any taxpayer dollars until you fix the foreclosure crisis.”

The goal here is to create toolkits for activists to do two things. First, they can self-organize events for individuals to move their money, to generate PR value. Second, they can introduce divestiture resolutions with governments at the city, county and state level, to force them to shift their funds out of big banks which are breaking the law in the foreclosure process. The toolkits provide a level of sophistication for activists who can then walk into a municipal hearing room and explain exactly what they want the locality to do.

We’re talking about billions and billions of dollars at stake for the big banks over this. It has the potential to transform the landscape on housing and the banking industry generally, certainly more than a narrow program for refinancing of certain underwater homes.

I’ve written about the revival of the Move Your Money movement alongside the Occupy Wall Street protests. But there’s a second-wave innovation here that has the potential to make the banks take notice in a much more direct way.

When ordinary citizens take their savings out of big banks, it has a small effect, but it would take lots and lots of take-up for that to really hurt those behemoth financial institutions which have such market share. By contrast, when a municipality, particularly a large municipality, moves their money out of a big bank, that can have an impact on behavior. This is particularly true if the municipal governments cite specific reasons, like a failure to modify mortgages for their constituents or a failure to maintain dilapidated, foreclosed properties, for moving the funds. This is now a focus of the bank accountability movement. There have been some early successes, which I noted in that initial post, like the case of the city of San Jose. This is from a year ago:

Yesterday, San José Vice Mayor Judy Chirco, City Councilmembers Sam Liccardo, Madison Nguyen, Rose Herrera and Kansen Chu, and grassroots leaders from PICO affiliate PACT San Jose announced that the city has diverted nearly $1 billion from Bank of America based on the bank’s poor record of modifying loans to stop preventable foreclosures.

The San Jose City Council voted unanimously in December 2009 to make bank’s loan modification performance a criterion in deciding where the city will invests its money. As a result, the City has moved almost a billion dollars from Bank of America this year. In the last quarter of 2009, the City had over $1.3 billion in BofA compared to $417 million in the 3rd quarter of 2010. The City of San José now holds just 20% of its investments in BofA. Bank of America is no longer the largest bank in Silicon Valley.

Just imagine the incentive shifts if a movement like this caught fire. The New Bottom Line, one of the leading coalitions on bank accountability, is trying to pull this off:

Advocates for the poor are using the Occupy Wall Street protests in city halls to push municipalities to divest from banks blamed by demonstrators for the global financial crisis and persistent unemployment in its wake.

San Francisco’s Board of Supervisors weighed such a move yesterday during a hearing in which activists, including supporters of the local Occupy SF encampment, urged the adoption of policies that would prompt big banks into modifying mortgages for struggling homeowners […]

The New Bottom Line, a coalition of more than two dozen small-business, community and faith-based groups, will introduce so-called divestiture resolutions in more than 50 U.S. cities in coming months, according to Ilana Berger, executive director of the New York-based organization.

While community groups have been pushing such measures for at least two years, the campaign has gained momentum since the Occupy protests began in New York Sept. 17, calling for an overhaul of financial-services laws, Berger said. The campaign’s goal is to cut banks and brokers out of municipal financial- services contracts if they can’t prove they are modifying loans for homeowners in distress.

“People from all walks of life are saying we’re not going to do business with you,” Berger said by telephone. “We’re not going to let you steal any taxpayer dollars until you fix the foreclosure crisis.”

The goal here is to create toolkits for activists to do two things. First, they can self-organize events for individuals to move their money, to generate PR value. Second, they can introduce divestiture resolutions with governments at the city, county and state level, to force them to shift their funds out of big banks which are breaking the law in the foreclosure process. The toolkits provide a level of sophistication for activists who can then walk into a municipal hearing room and explain exactly what they want the locality to do.

We’re talking about billions and billions of dollars at stake for the big banks over this. It has the potential to transform the landscape on housing and the banking industry generally, certainly more than a narrow program for refinancing of certain underwater homes.

David Dayen

David Dayen