Should I stay or should I go? And by "I," I mean my money.
September 26, 2008 7:15 PM   Subscribe

I've been meaning to switch from a large national (US) bank to a small local one for about a month now. Is it a good time or a bad time?

A local bank offers some nice perks for employees of my company, and for various reasons it'd be more convenient for me to have my (modest) checking and savings accounts there. But since I can't wrap my head around the current economic situation, I'm not sure whether switching right now is a good idea or not. My instincts tell me I'd be safer staying with the larger bank, but the WaMu failure makes me uneasy. Thoughts?
posted by danb to Work & Money (11 answers total)
You can check the stock price of the local bank to see how stable it is. If it has kept most of its value this year, it is probably safe.
posted by lee at 7:35 PM on September 26, 2008

Your deposits are insured in the US up to $100,000 no matter which bank you choose, so as long as you're talking about regular deposit accounts, it doesn't really matter where you bank. I also don't think you can assume that smaller banks are necessarily better. This list of failed banks includes what appear to be small, local institutions too.
posted by cabingirl at 7:37 PM on September 26, 2008

Piling onto what cabingirl said, the size of the instutution doesn't matter, it's the health of the institution. And further, as she said, unless you're talking hundreds of thousands, your money is safe no matter where it is.

(and stock prices aren't good indicators of financial health- stocks are, at the end of the day, a popularity contest)
posted by gjc at 7:56 PM on September 26, 2008

Yeah, the local bank is FDIC insured, but I thought there might be something else I should be considering. As you can probably tell, I'm no expert here...
posted by danb at 8:12 PM on September 26, 2008

Yes, there is something else you should be considering. That is service.

If you have a problem with your account, or if you want the bank to waive a charge it wants to make, it helps to be able to go in and talk to the person who can get it done. Not someone who says he does not have the authority to do it because his bosses in Cleveland or Minneapolis have to make that decision.

If you want a loan, you want to deal with a local loan officer. You want to deal with a bank that will not immediately shuffle your loan off to a syndicator. Especially today.

And many of these points militate in favor of a credit union rather than any bank.
posted by megatherium at 8:27 PM on September 26, 2008

Is it a good time or a bad time?

The timing is irrelevant, if both banks are FDIC-insured.
posted by knave at 8:29 PM on September 26, 2008

and stock prices aren't good indicators of financial health

Have you seen the prices of the "unpopular" stocks?
The stock price is directly related to viability of a company and the confidence that the market has in its value. It is economics, not popularity.
posted by lee at 8:31 PM on September 26, 2008

I had my main account in NetBank last year. It was taken over by the SEC for being overextended. I think it was the first of the big bank failures. The process was very easy for us. Our account was unavailable for a few hours, but less than a day, and everything was tranferred to Ing bank. If we had stayed with ING it would have been almost seamless.

So, if your small bank goes under, unless everything in the country goes under, you are probably ok.
posted by vilcxjo_BLANKA at 6:32 AM on September 27, 2008

The stock value of a bank relates to its return on investment for stockholders, not its safety for depositors. The 1980s savings and loan scandal involved many small banks that were taken over by a small cabal and used to give cozy loan terms to insiders, whereas today's crisis has notably involved some of the largest banks in the world, so smallness vs. bigness is not necessarily a factor in favor either way.

According to a number of sources, although credit is drying up, it is smaller banks that have pursued conservative lending strategies that are now doing well enough to be able to loan money, whereas many institutions that aggressively put their money in the housing maket (by giving away mortgages) are now being more cautious than ever.

I would simply look at it in terms of your personal needs including convenience (such as ATM availability) and service. I would not worry about the safety of your money. Moving to a smaller institution might give you a leg up on getting a loan, but probably not until you develop a track record with them.
posted by dhartung at 2:43 PM on September 27, 2008

lee, I have to disagree. We have no way of knowing why a stock price moves. We can't read the minds of the buyers and sellers. The stock price only measures the confidence the buyers and sellers have in that stock's ability to go up or down. It's more like horse racing. If you see a lot of people betting on one horse in some race, you can't know whether it's because he's a good horse, or because he's a bad horse running against worse horses.

Look at what happened to United Airlines a couple weeks ago. Some news agency screws up and the stock tanks. Had NOTHING to do with the company's fundamentals, and everything to do with people acting irrationally.

The only way to judge an institutions health is to read all the information about them, like the public statements of the management and directors, the financial reports and the analysis of business experts.
posted by gjc at 11:04 PM on September 27, 2008

Thanks for the input, guys (even the digression!). I ended up moving to the small local bank.
posted by danb at 7:47 AM on October 5, 2008

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