Did Occupy Wall Street Really Change Anything?

Occupy Wall Street
Occupy Wall Street

Since Occupy Wall Street first set up camp in Zuccotti Park one year ago, it has helped to raise class consciousness among "the 99%" and given that silent majority a sense of empowerment.
But a recent report out of SNL Financial (not to be confused with Saturday Night Live) suggests the Occupy movement hasn't changed consumer behavior much at all.

Since OWS got off the ground, the Dow Jones Industrial Average (^DJI) has gained 14%, America's banks are bigger than ever, and just last month the owners of Hawker Beechcraft announced a plan to sell their company to China, dump their pension obligations on the federal government ... and give themselves $5.3 million in bonuses.

But what about average Americans?

A Small Victory

OWS's one real victory to date took place on Nov. 5, 2011 -- "Bank Transfer Day."

Touted as a call for consumers to move their checking and savings accounts to small banks and not-for-profit credit unions, ditching commercial megabanks like Wells Fargo (WFC) and JPMorgan Chase (JPM) en masse, Bank Transfer Day, or BTD, seemed by some measures a resounding success:

  • It was credited with helping to force Bank of America (BAC) to ditch its plan to impose a $5 monthly fee on debit card users.

  • A Facebook page dedicated to the movement generated 58,153 "likes."

  • According to the Credit Union National Association, or CUNA, some 40,000 consumers opened new accounts at credit unions on November 5, 2011 -- a rate at least 18 times above normal.

  • Over the course of five weeks leading up to BTD, CUNA says American depositors moved $4.5 billion from big banks to credit unions.

But did BTD inspire people to shift their money over to credit unions? Or was BTD itself part of a larger shift from big banks to smaller banks? SNL Financial suggests the latter.

The real economy is at home
The real economy is at home

Which Came First: The Chicken or the Nest Egg?

According to SNL's report, released last week, credit unions were benefiting from a widespread shift away from big banks "long before populist rhetoric over bank fees crescendoed into BTD." Indeed, as early as 2009, SNL data show deposit growth at credit unions beginning to outpace that at banks.

According to CUNA, the 2008 financial crisis caused many depositors to lose confidence in banks in general. Meanwhile, CUNA notes that after the crisis, many banks began cutting the interest rates they paid depositors -- after all, why pay good rates to depositors when the Fed was practically giving away loans for free.

CUNA says that as big banks' interest rates plummeted, "deposit rates at credit unions remained consumer-friendly."

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Curiously, even as depositors fled "Big Banking," they still sought safety in numbers. SNL data note that Boeing Employees Credit Union, based in Tukwila, Wash., is the fourth-largest credit union in the U.S., while State Employees' Credit Union is the second-largest. Deposits at BECU in Raleigh, N.C., grew 9.7% between 2007 and 2009 (when the crisis began). Meanwhile, SECU saw deposit growth of 32.8%. No. 1 credit union Navy Federal took in an extra 18.6% between 2007 and 2009. More recently, 2011 numbers show all three of these "mega-credit unions" outpacing the rate of deposit growth of credit unions at large.

CUNA suggests one reason larger credit unions are growing faster than smaller credit unions could be the fact that the bigger institutions offer more physical locations and greater convenience for customers.

But what about Occupy's call to abandon "banks?"

Bigger Is Still Better

To the extent that customers are leaving big banks behind and moving to credit unions, it appears the primary motivator is simple fear over the financial soundness of the banks and a perception that money is safer in a credit union (which, all else being equal, is probably not an unreasonable theory, inasmuch as a credit union is unlikely to have significant exposure to European government debt derivatives or use customer money to do a lot of proprietary trading for its own account).

But no matter how "global" their thinking is, it appears consumers aren't really enthusiastic about "acting locally" and moving their business to smaller institutions. To the contrary, the factors named above -- better rates on deposits, and better convenience through larger size -- appear just as popular as ever, regardless of whether they're found at banks or at credit unions.


Motley Fool contributor Rich Smith holds no position in any company mentioned. The Motley Fool owns shares of Bank of America and JPMorgan Chase. Motley Fool newsletter services have recommended buying shares of Wells Fargo. Motley Fool newsletter services formerly recommended JPMorgan Chase.

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