...it doesn’t make sense to be the customer of a small-enough-to-fail institution. This doesn’t apply to small depositors at retail banks, of course, who are federally insured. But for institutional clients, whose funds are uninsured, the moral-hazard trade here is clear...[explained at the link]Via The Dish.
And the big banks don’t particularly want all those retail-deposit funds — they’re getting precious little interest on them, and they come with all manner of expensive obligations to mail out statements and provide smiling service at teller windows and generally do the whole customer-service thing, which as we all know big banks are very bad at. Historically, they’ve done what they have to do on that front because they’ve been able to extract all manner of overdraft fees and interchange fees and the like, but that fee income is shrinking now, thanks to Dodd-Frank, and the fact is that millions of small bank accounts are actually unprofitable now for the big banks, and those banks won’t shed many tears if those customers go off to a credit union instead...
10 December 2011
"Big banks don't want your money"