Why Bank Transfer Day actually helped banks

In this installment of David Grant’s DCDecorder column, he and The Motley Fool columnist Morgan Housel discussed the Occupy Wall Street group’s Bank Transfer Day, which was held Saturday.

DCDecoder asks Morgan Housel: Why do you think Bank Transfer Day may end up working out for banks AND customers?

Housel: One of the drivers behind [Bank Transfer Day] is people trying to teach banks a lesson. The irony of that is since the financial crisis, and especially over the last three months as there has been a panic about Europe … banks have been inundated with cash deposits. They’ve been seeing a higher inflow of deposits than they can turn into loans.

That’s putting pressure on their margins because banks have to pay [Federal Deposit Insurance Corp.] premiums and overhead costs. And that’s really accentuated by smaller accounts because in the past banks could earn money [from customers with lower balances] from overdraft fees and debit interchange fees and a lot of that has been scaled down through recent regulations …

People are going to be moving to credit unions, and that’s good for them because they’re going to have lower fees, they’re going to have better service, they’re going to have the feeling that they are investing in their community. And then the banks are going to be better off because they are getting rid of their least-profitable or not-profitable clients. It helps them stem this tsunami of cash that’s been flowing in that they don’t know what to do with.

Your column last week got picked up by several news outlets as criticism of the Occupy Wall Street protests and the concept of “We Are the 99%.” What did you make of that?

Housel: It really doesn’t surprise me in hindsight that it was interpreted as a hit toward Occupy Wall Street. That article was showing that if you make over $34,000 per year, you’re in the top 1 percent in the globe. People say “That’s not fair that you compare me to someone in Africa or someone in India.” The hedge fund manager or the Goldman Sachs banker doesn’t want to compare themselves to someone unemployed in Detroit or a single mother somewhere else. It’s all about your perspective.

Many people were really hesitant to compare themselves to people in the Third World without realizing that the 1 percent that they are protesting don’t want to compare themselves to the other 99 percent.

How would you craft a message for the 99%, then?

Housel: What’s important is realizing there are injustices with bailouts, cronyism and money in politics. People should really be upset about them. But they should realize at the same time that the economic system we have in the United States, compared to the rest of the globe, has created more wealth for everybody than almost any other country on Earth.

There are problems in this country. But we really don’t want to upend the entire system. It’s really important that the protesters don’t turn against capitalism but focus on the perversions of capitalism like bailouts and cronyism.

What did you see out of Friday’s employment report, which showed roughly 80,000 new jobs created in October?

Housel: Job growth this year, from January through October, is pretty much the same as it was in 2006, which was the peak year for the economy. And private-sector job growth this year [makes it] the third best year of the past decade.

Having said that, it’s still awful — but it’s been awful for the last decade. It’s still really bad because so many people lost their jobs in 2008 and 2009.

David Grant writes the DCDecoder column for the Christian Science Monitor.