51 million Americans, according to the FDIC, have only one bank account, and have resorted to using other sources for banking needs. Americans have left the banking system by millions as Global Perspectives (www.bootheglobalperspectives.com) has repeatedly projected. "The economy has changed fundamentally, and we believe it it doubtful that it will ever return to the 'Pre-Recession' formula" says Ben Boothe, former banker (www.benboothe.com). Over 28 % of households in America now prefer "not" to have a traditional banking relationship with an American bank.
"Our research indicates that a bond of trust was broken with the American people, and many people in the 'Western World', particularly by the giant banking conglomerates such as Citi Bank, Bank of America, Chase and others." said Boothe. "The big banks simply betrayed the fiduciary trust to Americans."
A few examples:
1. Credit Card Abuse: After aggressive opposition to new credit card regulations intending to eliminate high interest rates, and fees, credit card company credit card fees are higher than ever. They have used manipulation of the credit scoring system to continue to justify rates of 29% and additional fees, resulting in the destruction of millions of credit ratings. "The system has developed methods to addict people to credit debt, and then hook them on continual payment systems of 29% (or higher) rates", said Boothe.
2. Bank overdraft fees. It is not unusual for a person to write a $20 check, which if temporarily overdrawn, creates an overdraft fee of $30, plus an additional account fee because the account has been overdrawn. So a if a person, say was paid on Friday, and wrote 10 checks for weekend bills, but the bank didn't give him "credit for funds" until Monday, he could be facing $300 in overdraft fees, not including other linked or associated fees. Banks have broadly doubled, or tripled OD fees since the financial recession, putting a larger financial burden on the American people.
3. Tighter bank lending. Bank income has declined because banks significantly reduced lending, with an understanding that if they keep additional funds in Federal reserve accounts, the government will pay them fees. This essentially rewards banks for not lending, but it also has strangled business growth.
A fundamental economic equation is that if banks do no lend money, they have to offset the lack of income elsewhere. Less lending usually means less bank profit. This could be the primary reason that bank earnings have declined. Banks that do not lend, now make OD fees and other charges to customers a much larger percentage of bank income.
4. Lack of trust in banks. The big banks are perceived as having taken billions of taxpayer dollars, only to continue to exploit American consumers. and businesses Thus, millions of American have "walked away" from the banking system. More Americans have also become aware that banks such as Citi are largely owned by foreign investors, who may have little loyalty to the USA. 7.5% of households state that they "did not trust or feel comfortable dealing with banks" according to the FDIC.
18% of households now use at least one type of alternative service, that is considered a "non bank" service, according to a recent study of the FDIC. 821,000 households have opted out of the banking system, which means that 17,000,000 Americans now simply refuse to participate in the banking system of the United States.
NEW REGULATIONS MAY HELP:
Recently, the new Consumer Financial Protection Bureau, identified one large credit card company as having overcharged millions of dollars to American consumers. This new agency is starting a new round of investigations and is exposing as well as penalizing banks for credit card abuses. The agency is charged with enforcing compliance with federal consumer financial laws such as the Fair Credit Act. Thus far, it confirms what the American people already knew, that the US "big banking" system, is like going to Las Vegas, and playing a game, that is already designed to allow the "house" to win. After years of playing the game, millions of Americans have simply stopped participating in the system.
The broader implications suggest that this means the "Big Banking System" that was designed to make America more competitive with inter national competitors, has lost support. The "Big Bank Theory" has failed. Americans have pulled deposits and no longer feel loyalty to Citi, Chase or Bank of America in a large segment of the United States population. Locally owned community banks still have a higher trust level from Americans, but their numbers have dropped significantly, as the large banks have pressed for laws to force smaller banks to either merge, be consolidated, or fail when their capital runs low.
NOT JUST CONSUMERS, BUT BUSINESS HAS LEFT THE BANKING SYSTEM
We have noticed throughout the USA that more and more business managers have opted out of the banking system as well. Businessmen are finding that insurance companies, private investment firms, investors from Israel, India, Pakistan, Latin America are willing to lend funds to solid American business projects. "Often these alternative sources of lending funds are on much better terms and easier to obtain than traditional American banks have offered." says Ben Boothe.
"It is a new world of finance that has emerged in America." says Boothe.