By Duff Conacher
When you put or invest your money in a bank or other financial institution, how does the bank use it and what control do you have over it? And when you use your money, are you charged a fair price?
Those two questions are at the heart of the financial institution accountability movement that started in the mid 1970s in the U.S. and recently has spread around the world, as people and citizen groups concerned about many societal issues have realized that what banks and other financial institutions do with their money has very big effects on people, communities, and societies.
In a way, the movement actually began in Quebec in the late 1800s, when francophones realized that the banks in their communities were controlled by anglophones from Toronto who were not reinvesting their money back into their community.
A man named Alphonse Desjardins of Lévis, Quebec, came up with the idea of starting a community bank (or caisse populaire in French, known in Canada as a credit union). Desjardins is now the largest financial institution in Quebec, and credit unions have spread across North America and, with Desjardins’ support, around the world.
A second wave of financial concern began in the 1970s when citizen groups from many countries worked together to focus on the so-called “international financial institutions” that are essentially international banks funded and run by many governments (including the Canadian government)—the World Bank and the International Monetary Fund, and related agencies.
The groups were concerned that these international banks had many negative effects on developing countries because they required the governments of those countries to run their country and economy in specific ways that often did not help the people of the country, and instead helped large corporations from wealthy developed countries exploit the resources and people in poorer countries.
Similarly, environmental groups began in the 1970s to focus on various big businesses, trying to stop them from polluting and trying to change laws to prohibit pollution.
Strangely, these networks of groups did not also focus on so-called “private financial institutions” like Canada’s big five banks, and the other big banks around the world, even though these banks control much more money than the international financial institutions, and even though these banks provide the money that polluting corporations need to operate.
Finally, around 2000, these networks plugged into other networks that had been appealing to them for decades for help with efforts to increase the accountability of private financial institutions. And so, development and environmental groups finally began to “follow the money” and the movement has grown ever since.
What U.S. citizen groups began to do in the mid 1970s (and Canadian groups in the mid 1990s) was examine the lending, investment, and service records of banks and other financial institutions. Their research revealed patterns of systemic discrimination, and led to the passage of laws that require disclosure of the number of applicants for various types of loans and the number approved/rejected, tracked by the race, gender, income, and location of the borrower.
If a U.S. bank has a discriminatory lending or service record, government regulatory agencies can require the bank to create special lending and service programs targeted at the group of people the bank has treated unfairly. At the same time, no bank is required to lend to anyone who does not have a good credit record.
Networks around the world are now pushing for a similar set of key reforms for all banks (and insurance companies) in the world, as well as detailed disclosure of loans/investments and insurance provided to companies whose activities have negative effects on the environment, and requirements that banks not lend to/invest in/insure such companies.
Unfortunately, one key problem these bank accountability networks have not addressed is that they are completely outmatched by the resources of financial institutions and polluting companies, whose TV ads, political donations, and lobbyists are all paid for by part of the service charges and interest rates and prices consumers pay for financial services and company products.
Thirty years ago, Ralph Nader first proposed a simple way to greatly increase the power of financial consumers and investors, but unfortunately all groups have failed to push for this change except the Canadian Community Reinvestment Coalition (which almost won it in 2000).
Nader’s proposal is to require financial institutions to include a one-page pamphlet once or twice a year in the envelopes they send to consumers and investors (bank statements, credit card bills, annual reports, et cetera). The pamphlet describes and invites customers and investors to join a new group that acts as a watchdog over the financial services industry.
For example, if the federal government required the big banks and insurance companies to enclose the group’s pamphlet, 25 million Canadians would receive it. Even if only four percent joined, the group would have one million members, and if the membership fee was $40 per year, the group would have an annual budget of $40 million.
If this was repeated in countries around the world, the financial institution accountability network would have the members and resources to win the changes needed for effective financial institution accountability.
Until these changes are implemented, when you put your money in a big bank or other large financial institution, you should know that it will very likely be used in ways that you do not support, ways that will hurt you, your community, your country and its economy, and likely many others in other countries.
Duff Conacher is the chair of the Canadian Community Reinvestment Coalition, which has been leading the struggle for financial institution accountability in Canada since 1996.