Move California’s Money!

Okay, time to connect some dots.  I was inspired by an article on the Huffington Post about a proposal from State Rep. Brian Egolf of New Mexico.  He has introduced a bill to move the State of New Mexico’s money from Bank of America to community banks and credit unions throughout the state.

Naturally I thought, why not do this in California?  So I called the State Treasurer’s office in Sacramento and talked for over an hour with Mark Hariri, Director of Cash Management, to get a handle on the situation.  As it turns out, about 80% of the State of California’s money is also handled by Bank of America.

Which is odd, because the two largest pension funds in the state, CalPERS and CalSTRS, representing public employees and teachers, respectively, filed to be the lead plaintiffs in  shareholder lawsuits against B of A in March of 2009.

They’d better get in line.  According to this article in Slate’s The Big Money site, there are currently over 5,000 federal cases that name B of A as a party.

The Securities and Exchange Commission seems to think that California’s pension funds have a case.  Just a few weeks ago the SEC filed its own case against B of A, “charging it with failing to disclose extraordinary losses at Merrill Lynch & Co before shareholders voted on a merger of the companies”, - Reuters.

Also last November, the capital’s own Sacramento Municipal Utility District sued B of A, along with Chase and UBS and forty four other firms, in a price fixing and kickback scheme.

I could go on.

The point is, why is the State of California banking with these guys while their two largest pension funds, a public utility, and numerous citizens of the state are suing them?  Why not take that business away from B of A and put it where it belongs, in banks and credit unions that are based in California?

According to Mr. Hariri, the doors are open to any bank that wants to join the State’s Centralized Treasury System, the members of which (except Chase, which joined last fall) are listed on the Treasurer’s website.  Many banks look into it, Hariri says, but then change their minds when they see they can’t compete with the bigger banks’ low rates and fees.  You read that right.  These low rates and fees are worthwhile when you consider California’s huge float and it’s multi-trillion dollar economy.

Of course the smaller banks can’t match these fees because of the massive economies of scale that Bank of America can bring to bear.  So just as Wal-Mart drives local businesses out of business wherever they open up shop, B of A is keeping these smaller banks from getting their share of the pie by throwing their weight around.

To all this I say, wouldn’t it be worth it to pay a few extra cents per check if that money is going to a local bank or credit union, rather than to B of A?

I’m hoping to find a legislator in Sacramento who agrees with me.