Making money off of money can be done at many banks, but they don't have to disclose better deals

Banks don't owe consumers their best
deals. (Adobe Stock photo)

Americans who choose banks with higher savings interest rates can make more money with little work; however, some U.S. banks hope consumers are too confused or hassled to bother making a switch.

"For the last few years, anyone keeping $10,000 in a high-yield savings account has earned close to 4% annual interest, or about $400 a year," reports Ben Blatt of The New York Times. "The nation’s three largest banks — Bank of America, Chase and Wells Fargo — offer 0.01% on their standard savings accounts. That works out to $1 in interest a year for a $10,000 deposit."

Sometimes banks offer additional perks to make up for their abysmal rates, but most believe "their customers won’t hunt for better deals out of inertia," Blatt explains. "Banks know their customers are generally not attentive to account details. A study commissioned by Capital One found that many people check their savings account less than once a month, and about half don’t know what interest they are earning."

While it may sound unethical, banks "have no fiduciary duty in many cases and can profit from customers’ confusion," Blatt reports. "The Consumer Financial Protection Bureau said one bank, Capital One, went too far by intentionally creating confusion so that customers wouldn’t know to switch to a higher-paying account at the same bank."

While sowing confusion may be wrong, part of a bank's purpose is to make money. Scott Pearson, a lawyer who represents banks in regulatory matters, told Blatt, “I don’t know why anyone would think that it’s the bank’s job to tell you that you can get a better deal somewhere else or that they’ll give you a better deal. That is just kind of a shocking and unprecedented theory in my view.”

'Great Wealth Transfer' is coming, and some funders are working to plant philanthropy money in rural communities

Graph by Sarah Melotte, The Daily Yonder,
from Federal Reserve data

Over the next two decades, tremendous amounts of American wealth will transfer from generation to generation. "In the next 20 years, about $84 trillion will change hands. . . . Economists call it the Great Wealth Transfer," reports Sarah Melotte of The Daily Yonder. "Small-town philanthropies hope to capture some of that wealth for the benefit of historically underfunded rural communities. . . . Some experts worry the transfer might reinforce economic inequality [but] rural philanthropists are thinking about how people might invest this money to create healthier communities."

Ben Winchester, a rural sociologist with the University of Minnesota Extension, told Melotte, “You can get your cup under this wealth that potentially is going to be transferred, and pour it back into your town and bring that wealth here." 

As part of his research, Winchester recently released a report on the Great Wealth Transfer in rural Minnesota. "The report found that in the coming decade, $5.6 billion will change hands across 10 central Minnesota counties," Melotte explains. "If local foundations could capture even one percent of that transfer, it could funnel $56 million into local infrastructure."

Philanthropic work can build additional supports across a wide range of needs within rural communities that have "often been left out of larger sources of both private and public funding," Melotte writes. “Many rural economies also suffer from long-term lack of investment. As a result, residents of nonmetropolitan counties are more likely to live in communities with persistent poverty."

Executive Director Erin Borla of the Roundhouse Foundation, a rural philanthropy in Oregon, asked Melotte, "If you’re from a farming community, or a logging family or whatever the rural livelihood was, does the next generation [who controls that wealth] live in that same community?” Melotte adds, "Borla said that the local wealth that is generated in a rural community can end up redirected to other economies throughout the country as people move away. Small-town foundations are aware of this trend, according to Borla, which is why they’re focused on directing those funds back into local projects."

Rural Minnesota is receiving wealth-transfer guidance from one of its foundations, CommunityGiving. Steve Joul, president of CommunityGiving, advises rural communities to envision what a healthier future for their town might look like. Joul told Melotte, "You need to have all the players at the table. It’s an open invitation to the community to come to the table to craft an idea and vision for where you want to go.”

According to Joul, everyone means everyone. Melotte adds, "Joul emphasized the importance of avoiding the common trap of only including residents with power and resources. Engaging more stakeholders helps mitigate worsening wealth inequality."

The growth of smaller banks and credit unions is outpacing the rest of the industry

Small banks often offer more personal service.
(Photo by Stoica Ionela, Unsplash)

As bigger banks consolidate into mega-banks, an opposing trend is emerging -- smaller banks are attracting new customers and deposits. "While the biggest banks are getting bigger, the smallest are growing too. Community banks, which typically have less than $10 billion in assets and a concentrated footprint, grew deposits by about 1% in the third quarter from a year earlier," reports Imani Moise of The Wall Street Journal. "Credit unions grew deposits by a similar amount. Their loan books grew by 10% and 9%, respectively. Both far outpaced the broader banking industry, according to federal data."

Bank customers opting for smaller banks or credit unions find that "making a switch not only gets them more face time with bankers, but they are also earning more and paying less," Moise explains. "People wanting a smaller bank have an ever-smaller number to choose from. Bank mergers are expected to accelerate this year as lenders seek safety in size after a series of regional bank failures in 2023."

The current market has been tough on mid-sized banks, but smaller banks offer local convenience and more personal customer service for consumers and small-business owners. "Even the biggest banks acknowledge that people like to do some banking in person," Moise reports. "PNC plans to add new branches this year after closing more than 200 last year."

Particularly if problems arise, smaller banks have staff available to solve problems in-person. "Laurie Matta, the chief financial officer for the city of Clarksville, Tenn., decided to move the city’s bank accounts from the U.S.’s fifth largest lender, U.S. Bank, after a mix-up during the pandemic," Moise adds. "It took six months and many unsuccessful attempts to get the bank to correct the error, even though it shared an office building with city hall. . . . She moved the accounts in 2022 to Legends Bank, which is down the street."

Help your community 'know their risk and protect their money' by raising public awareness with this media kit

To increase the public's awareness of deposit insurance and how it can protect people's money in the event of a bank's failure, the Federal Deposit Insurance Corporation developed a national consumer campaign, "Know Your Risk. Protect Your Money."

The campaign reaches people who may have lower confidence in the U.S. banking system or do not use a bank, as well as those who use mobile payment systems, alternative banking services and financial products that may appear to be FDIC-insured but are not.

The FDIC is asking financial institutions, community organizations, government agencies, and others who serve the public to help raise awareness of deposit insurance protections.

Tips on how to spread the word:

• Link to FDIC's Deposit Insurance page from your website (also available en español).
• Publish posts on your own social media channels using the materials on our social media toolkit page and including the hashtag, #IsYourMoneyInsured.
• Review the campaign launch press release to learn more.

To make the topic less daunting, FDIC offers several "Saving Pigs" in English and Spanish to get the conversation going.
                 
           

Goldman Sachs commits $100 million to help rural businesses raise capital and expand

Photo by Andrew Kelly, Reuters via ASBN

In a win for rural entrepreneurship, global investment leader Goldman Sachs has committed $100 million to help "rural small business owners raise capital and grow their enterprises" through its 10,000 Small Businesses initiative, reports Colin Velez of America's Small Business Network. "According to the Goldman Sachs website, the company plans to divide the new $100 million among three groups: community lenders funding rural small business owners will receive $75 million; community college courses hosted by the 10,000 Small Businesses organization will receive $15 million; local entrepreneurs will receive the remaining $10 million in the form of grants."

The rural initiative will launch in North Dakota and Arkansas.

The investment will seed entrepreneurship and business growth that addresses rural businesses' unique challenges and vital role in rural community economics and overall health. The release noted how a lack of capital prevents rural business owners from growing their businesses. It cites an "accompanying survey that found only 7% of rural entrepreneurs felt they received adequate support from non-government entities. Limited access to child care, healthcare and labor were also cited as obstacles to expansion," Velez writes. "Noting such individuals employ roughly 65% of their local workforces, the company argued that these conditions are also holding back economic growth."

Rural enterprises often struggle with investment dollars and are "naturally neglected by typical lenders and education institutions, as they represent a smaller portion of the national economy than competitors in more populous states," Velez reports. "If more entrepreneurs were to leverage private and government programs that prioritize small business growth in underserved areas, this could help reverse these tendencies and ultimately ensure wealth is distributed more evenly between different parts of the country." 

USDA's voluntary tack on climate change brought farmers along; next job is convincing Wall Street, environmentalists

Methane emissions from livestock are not targeted by the USDA's
initial program, which focuses on soil. (Photo by Mario Tama, Getty)

President Biden’s plan to help farmers reduce their greenhouse-gas emissions "has the powerful, conservative Beltway farm lobby smiling ear-to-ear," Garrett Downs of Politico reports. "That’s enough investment to turn the agricultural lobby around on Biden, for now. But the administration acknowledges it still has a long way to go in proving to climate advocates that its plan will reduce the effects of global warming in a meaningful way."

Biden's main tool is "a $3 billion initiative dubbed Partnerships for Climate-Smart Commodities," which is spending to test farming methods that reduce carbon-dioxide emissions, "akin to a large-scale science experiment," Downs writes. It aims to involve 60,000 farms and 25 million acres. "The Agriculture Department estimates the results will produce emissions benefits equal to taking around 12 million cars off the road."

Administration officials hope the "influx of cash will produce an impressive feat: turning some farmers, generally a conservative group, around on Biden," Downs reports. The so-called Inflation Reduction Act "will grow the incentive-driven climate-ag space by nearly $20 billion," and "They have even broader hopes for the new $3 billion initiative: that Wall Street will see the financial possibilities of turning farms green and make their own investments in similar projects."

Cover crops seeded into mature corn are a big part of the private
carbon-control market. (Photo from DTN/The Progerssive Farmer)

“This can’t just be government money; we have to attract private investment,” said Robert Bonnie, the USDA’s undersecretary of farm production and conservation. “Part of the real interest in the Partnerships program is a way to provide seed money to entice more folks in the private sector to come in … The government’s not going to do it alone.” He added, “If we’re going to maintain agriculture and forestry support for this, it’s got to stay voluntary. And if we can prove that this approach works, we have a high probability of doing that.”

Bonnie, a Kentucky native, is "a veteran of the Obama administration and saw that administration’s cap-and-trade approach go up in smoke," Downs notes. "He researched how to gain support in rural communities for environmental efforts."

Downs points out, "Wall Street has been nervous about investing in green supply chains — and in particular in purchasing carbon credits under government programs designed to quickly offset pollution from farms. Last year, a Bloomberg article exposed that scores of companies claiming to be eco-friendly actually purchased carbon credits that turned out to be bogus. . . . But after USDA provides significant monetary incentives to farms around the country to go green, Wall Street will have a better idea of what works and what doesn’t — and which carbon credits and sustainable farming tools are worth the money."

UPDATE, Aug. 11: Chris Clayton of DTN/The Progerssive Farmer reports, "With at least 22 different carbon programs being marketed now to farmers by private companies, a new research paper looks at how those programs should be transformed to deal with barriers to adoption and ideally broaden the adoptions of conservation practices in the process."