Bank Lawyer's Blog

Spreading The Love

While I was out galavanting about the better part of three states over the past week, I received some eye-opening e-mail. A correspondent wrote to let me know that when it comes to dysfunctional regulators and self-fulfilling prophecies, community banks with their commercial restate woes aren't the only victims in the cross hairs. Banks that concentrate on agricultural lending are also in for their share of pain and suffering. I was so disturbed by the content, but pleased by the style, of the correspondence that I'll post it in full, minus personally identifying information of my correspondent (to spare him collateral damage that might flow from his candor).

The FDIC’s Kansas City Region hosted a teleconference on Wednesday, February 10, 2010. The topic for the teleconference was “Managing Concentration Risk.”

The speakers were: James LaPierre, Regional Director

Mark Moylan, Assistant Regional Director

Al McGregor, Supervisory Examiner

Rich Cofer, Regional Manager

The Regulatory Agencies have taken a lot of heat because they didn't get out in front of the Residential and Commercial Real Estate problems. They intend to be in front of the next one. And they think Ag may be it. So this teleconference was to discuss Agricultural-related concentrations and potential methods to reduce and manage these risks.

The Kansas City Region of the FDIC covers 7 states and holds nearly Two-Thirds of the nation's 1564 farm banks. (By the way, this is the group with the highest 2009 ROA and nearly the lowest noncurrent loans ratio as per the just released FDIC Quarterly Banking Profile for the 4th quarter, 2009).

They discussed the fact that Commercial Real Estate and C&D loans have grown sharply in the 10 years from 1997 to 2007. And that recent failed banks often have high exposure to these types of loans. No surprises here.

They then discussed that Ag credit concentrations during that same 10 year period has remained steady.  However, the risks associated with Ag lending have been increasing. Present farmland prices exceed the two price booms of the 20th Century. And operating income and expenses are showing signs of risk. So reduce or limit concentrations in loans secured by farmland AND Ag production loans. In addition, in the Ag banks, Non-Ag loans have the highest past due rates, so limit those also. They also said Loan To Value ratios for farmland loans should be 50% or better to NOT be classified when values are at or near their highs.

Regarding our Ag customers, we should, "form an exit strategy" from those farmers who only cash flow under the best case scenario when shocked for prices, input costs and interest rates. In other words, they want us to stop making loans to a large portion of our farmers under the age of 45.

They also discussed the Allowance for Loan and Lease Losses. The reserve should be "directionally consistent" with the past due loans. If the past dues are increasing, so should the ALLL. And the reserve should cover 100% of non-accrual and noncurrent loans. If we are not at 100% then we are not adjusting our economic factors and historical periods appropriately. We may have to limit our historical perspective to only the past 6 months.

They also provided some guidance. They told all of the Ag banks to read the three Financial Institution Letters discussing Commercial Real Estate Loans and wherever you read Commercial Real Estate substitute Ag.

I would like you to listen to this teleconference. However, you will have to take my word for it. They did not record the call. Even though this was coming from the Regional Director and Assistant Regional Director of the FDIC, they did not want it to be interpreted as official FDIC policy, because only the Board of Directors of the FDIC can set policy.

Thank you sir, may I have another?

It's great to see the FDIC flying under the public's radar to carpet bomb agricultural lending in the same manner its been blowing up commercial real estate lending. "Lend more! Get the economy moving!" Those are the federal regulators' public statements designed to satisfy politicians and an ignorant populace. At the same time, they are privately doing everything possible to make such lending impossible, while, at the same time, ensuring that banks capital and earnings are depleted. Don't be surprised when ag banks start to drop like community banks that bulked up on CRE.

I wonder how much longer small bankers are going to just sit there and take it?

Yakking For Fun and Profit

When I declined to give away my knowledge of FDIC loss-sharing agreements for free last month, that refusal so enraged a Gen Y reader who'd stumbled across this blog while Googling the phrase "doing the math on FDIC loss-sharing agreements" that he e-mailed me in a snit to inform me that I was "weak." Now, I realize that we've raised an entire generation of young people who got blue ribbons just for "trying," and who expect instant gratification, money for nothing, and their chicks for free. However, the only thing I give such pampered princes for free are instructions on how to fold their sense of entitlement five ways and stick it where the moon don't shine.

On the other hand, if he wants to join the adults in learning all that he can about the subject for a reasonable fee, he can listen to a three-part series on FDIC Shared-Loss transactions being put on by Bankerstuff.com. Fortunately for those who whine (and those who do not), the cost is only $497 for all three, or $199 apiece. If your allowance won't cover it, ask Mommy and Daddy for an advance.

I'll be giving a webinar next Wednesday, March 31, together with the always-excellent Francine McKenna of re: The Auditors fame, on Technology Service Agreements for banks. We'll try to cover as much ground as we can and leave listeners with some useful "take-aways" on marrying a bank's business needs with its regulators' expectations.

Finally, one of my partners in Bank Business Advisors, LLC, John M. Walker, Jr., and I are speaking to the Financial Institutions and Real Estate sections of the Austin (Texas) Bar Association on April 8th on the subject of the commercial real estate woes of community banks. That's one topic that revs our engines and we're looking forward to interacting with the members.

I'm traveling over the next week, and blogging likely won't resume until mid-week next week. Y'all have a great weekend.

Throwing Gas On The Fire

When you're a bank, it's hard to lend money when you have to hoard capital because the regulators keep forcing you to write down the value of your assets. While we've been focusing on commercial real estate loans and REO, the regulators have been throwing other assets into the write-down pile.

According to Columbus (Ohio) BusinessFirst, community bank Delaware County Bank & Trust recently disclosed that what it, and its outside auditors, thought were adequate valuations of trust preferred securities weren't conservative enough to satisfy "you-can-never-go-too-low" FDIC examiners.

Bank parent DCB Financial Corp.has disclosed that regulators told the bank the assumptions it was using to value an investment portfolio weren’t conservative enough and that it needed to reflect a greater likelihood of future problems. The new assumptions led to a bigger write-down on the value of the securities than bank executives reported in quarterly financial roundups.

“It is awkward for us to have our auditors sign off on our methodology and assumptions and then have the regulators come in later on and say, ‘No, we don’t agree with that,’ ” said CEO Jeff Benton.

The change accounted for substantially all of a $1.2 million increase in the bank’s 2009 loss to $4.2 million, from $3 million originally. The bank ended up taking $2.6 million in charges related to the securities last year, leaving the $8 million investment with a value of $2.1 million, said CFO John Ustaszewski.

[...]

The disagreement centers on the bank’s portfolio of trust preferred securities, which were issued by small banks to raise capital. Classified as collateralized debt obligations, they were popular before the mortgage crisis, when bank failures were rare and finances for most lenders were strong.

But such investments increasingly have soured as the conditions of small banks responsible for paying dividends and principal on the securities have weakened.

Delaware County Bank wrote down the value of the investments without prompting. But regulators during an examination last spring disagreed with projections the bank used to determine how deeply those investments were in trouble, Benton said.

Guess who won that "disagreement"? That was an easy question to answer, right?

According to one expert quoted in the article, trust preferred securities are "risky."

It’s no surprise regulators are taking a close look at holdings of trust preferred securities because their provisions often allow banks backing them to defer making payments for years if they get into financial trouble, said John Shaffer, a principal at Dublin-based bank consultant Keller & Company Inc.

And the odds that banks will go under have increased, raising the potential for further problems with the securities, Shaffer said.

“That’s why (the investments) are risky,” he said.

With all due respect, pools of trust preferred securities were not considered exceptionally risky a few years ago. In fact, when the FDIC authorized state banks to invest in such securities in 1999, it did so under its authority "to designate other kinds of hybrid securities as permissible investments, subject to the same 15 percent cumulative limit, if the securities have the character of debt securities and do not represent a significant risk to the deposit insurance funds." Neither the issuers nor the purchasers expected the bottom to fall out of the US economy and to plummet into the worst recession since the 1930s, anymore than the regulators did. Now that the economy has done just that, the FDIC has had second thoughts.

A spokesman for the Federal Deposit Insurance Corp. said the agency does not comment on specific banks, but provided a guidance letter the FDIC sent to banks last April imploring them to carefully evaluate trust preferred and other securities.

“Management due diligence regarding purchases of these products was often lacking,” the letter said, warning bankers that FDIC examiners could force impairments even if the securities had investment-grade credit ratings.

Yes, well after the economy crashed, the FDIC sent a letter warning banks to be careful about investing in trust preferred securities. Like similar "guidance" (such as the commercial real estate guidance we discussed yesterday), it served no practical purpose other than covering the regulators' backsides, because by the time it was issued, the critical problem was not the acquisition of new assets but the problem of dealing with the legacy assets purchased long before such guidance was issued. As has become typical, the response of the FDIC to the problem of legacy assets is to deplete capital by being more conservative than either bank management or outside auditors, which exacerbates the problems of the banks that hold the assets.

It would be interesting to see how many of the bank and thrift holding companies that issued trust preferred securities have been subjected to vigorous write downs and loss reserve requirements by regulators, which actions have led, in turn, to deterioration in the financial condition and performance of the issuers, which deterioration was used as a basis for writing down the value of the securities on the books of the banks that hold them. Obviously, the root cause of the economic problems of community banks is the economy, not the regulators' reaction to it; however, has anyone in the regulatory realm heard of the term "self-fulfilling prophecy"?

Just checking.

More Barn Door Slamming

In the latest example of closing the barn door when there are no horses left inside, Comptroller of the Currency John Dugan announced that federal bank regulators are going to crack down on commercial real estate lending by commercial banks.

Regulators are weighing several options, he said, including tougher concentration caps, increased capital requirements, minimum underwriting standards and limits on banks that use wholesale funding to finance these loans.

"We need to revisit the issue of the appropriate regulatory response to CRE lending concentrations, especially for construction and development lending, and especially for concentrations supported by noncore funding," Dugan told the Independent Community Bankers of America conference in Orlando. "While the concentration guidance we issued in 2006 was necessary — even though it was opposed by many parts of the industry — in retrospect, it has obviously not worked as well as we would have liked."

It didn't work as well as you liked because by the time the regulators issued it, it was too late. Many community banks that had few profitable alternative investment sources were up to their eyeballs in CRE loans by 2006, and the "guidance" was just that: "guidance." It didn't ban CRE lending in excess of suggested limits, but warned banks that they'd have to justify how they managed the risk of excess concentrations. Give a man enough rope, etc., etc. Plus, the widespread commercial real estate woes are not the result of speculative lending practices and dysfunctional loan structuring, they're the result of the general economic meltdown that followed the subprime mortgage debacle. Collateral values have been hammered (not in small part by aggressive examiners), and CRE  loan borrowers and their properties are suffering.

It's not that excessive CRE concentrations shouldn't be discouraged or that a further consideration of this area isn't warranted, but it's not as though community banks are rushing full-bore to beef up their CRE loan portfolios today. There isn't an urgent need to throw "stop-strips" in front of runaway bankers hot to snag more of that sweet CRE. Instead, bankers are trying to deal with the CRE that they've currently got in their portfolio and can't unload without running the bank off the rails. THAT is where attention needs to paid. THAT's the problem with the most critical need of a solution.

Thus far, the program from D.C. seems to be to (A) do nothing to save those community banks that are being overwhelmed by CRE losses; (B) take actions that ensure that such banks enter a death spiral from which they will not emerge alive; (C) take the CRE from failed banks into the FDIC, where it will be packaged and sold for prices and on terms that make scads of money for the private purchasers; (D) retain upside potential in sold CRE in the FDIC (rather than the failed banks that originally held the stuff); (E) publicly encourage bank examiners to be "fair and balanced" while privately letting them be as strict as they can be; and (F) publicly encourage community banks to lend to credit worthy small business borrowers while privately doing everything possible to ensure that they won't be able to do so.

Have I left anything out?

Too Big Not To Dismember

"Break 'em up!" That's what independent community banks are crying about the "too-big-to-fail" giant banks, and Jerry Walker, CEO of the Independent Bankers Association of New Mexic,o tells New Mexico Business Weekly reporter Dennis Domrzalski why.

"This financial crisis started with the big guys, but the little guys have wound up paying a disproportional price.”

As the story discusses, consolidation of the banking business in New Mexico, which has seen the number of banks in the state halved in the last 25 years, mirrors what's happened on a national scale, especially since the enactment of the Gramm-Leach-Bliley Act in 1999. That law battered down the wall between commercial and investment banking and added racket fuel to the growth of the nation's biggest banks.

“Since the change in the law, the largest 20 firms have increased their control of the nation’s banking assets from about 35 percent to an astonishing 70 percent,” [Federal Reserve Bank of Kansas City President Thomas] Hoenig said. “Even more striking, perhaps, is the fact that some of these firms are now 30 to 40 percent larger than they were when this [U.S. financial crisis] began, and as you know, many of these firms were protected during the crisis.”

Banking consultant Joe Bidal expressed a view held by many community bankers, inside and outside of New Mexico, when he talked about how the federal regulators catered to and saved the biggest banks while lopping off the heads of local lenders like Charter Bank (previously discussed on this blog here and here).

“When you lose a Charter, which invested almost exclusively in New Mexico, it makes it more difficult for local businesses to finance their needs. You add that to the incredible pressure that federal regulators are putting on local banks to reduce their exposure to commercial real estate and you have a big problem.”

Yes, you have a big problem. And it's a problem that's growing with every seven-bank "Bank Fail Friday" like the one we had last week. A paranoid person might suspect that there's a method to this madness, that the federal regulators have decided to nationalize the entire commercial banking system of this country, in the same way that it's in the process of effectively nationalizing the residential mortgage lending business through its de facto nationalization of Fannie Mae and Freddie Mac and its dramatic expansion of FHA lending. The fewer the number of banks, the easier the system is to capture.

A cynic, on the other hand, would simply assume that the inmates are currently running the asylum, and that the damage they are inflicting is due to the fact that their reality and everyone else's reality are operating on mutually exclusive planes of existence, rather than from the execution of any grand conspiratorial plan. As for me, I'm a cynic.

Whichever view is correct, let's hope that the damage that is being done to the community banking industry is not so irreparable that it can't be fixed, staring with the off-year elections this November.

FDIC Assessments: Another Nail In The Coffin

A recent article in The New Mexico Business Weekly publicizes yet another way that federal bank regulators are beating up community banks: increased FDIC insurance assessments.

The article focuses on a couple of specific examples, local community banks that saw their annual FDIC assessments nearly quadruple from 2008 to 2009. On top of that, FDIC-insured banks were forced to prepay three years worth of assessments at the end of last year. Nationwide, FDIC-insured institutions paid the FDIC $47 billion at the end of 2009. At a time when too-small-to-save bank capital levels are already under distress, this type of "bleeding" has consequences that ripple beyond the banks themselves.

That money had to come out of banks’ profits, capital reserves or dividends, and it has left banks without the ability to make more loans, said bankers and industry experts.

“Indirectly, it does inhibit our ability to loan, because in this case, dollar for dollar, it reduced our capital by $9 million,” [First Community Bank CEO Pat] Dee said. “The money comes from our profits, and it has had a huge impact.”

“The more money they take out of our profitability, the less we have to lend in our communities,” [Century Bank President Don] Padgett added. “It also means that we have to charge more for our products and services, which we do.”

[...]

New Mexico banking consultant Joe Badal, owner of Joseph Badal & Associates Inc., said the higher premiums have a huge impact on a bank’s ability to lend because lending is often done on a 10:1 ratio, meanings banks loan $10 for every $1 they have on hand as capital.

“If a bank gets hit with an additional $1 million premium, that’s $10 million less it’ll be able to lend,” Badal explained.

Fairly simple arithmetic. Disappointing results for the "community-banks-need-to-lend-more" chorus of ignoramuses, though. The facts always have this nasty tendency to get in the way of ideology. Not that that impedes ideologues, some of whom appear to rant write for the so-called main stream press.

Another point this information should hammer home to many of the ill-informed is that it's not the US taxpayer who is currently on the firing line to pick up the tab for the FDIC's aggressive butchering of the community banking industry, it's the rest of the banking business itself. Of course, by the time the dust settles, or, more likely, following the departure of St. Sheila and the installation of the poor sucker who will follow her her successor as Chairman of the FDIC, the FDIC could very well be forced to tap the public treasury because the banking industry will have reached the limit of its capacity to pick up the tab fetish for failures. By that time, hundreds of more community banks will have disappeared and, instead of continuing to eat the hand that feeds it, the FDIC might even get creative and suddenly discover solutions like...oh...ten-year amortization of commercial real estate losses and other means of forbearance that are currently staring them in their eyes-wide-shut but that don't fit into their "too-many-community-banks" and "save-the-borrower-not-the-bank" memes.

Wal-Mart's Revenge

Under the title "Wal-Mart Marches On," last November we profiled Wal-Mart's post-banking plan to capture retail financial services from traditional banks (and other financial service providers) through its partnerships with General Electric's Money Centers and Fiserv's CheckFreePay unit. Yesterday, the marching cadence increased to double-time.

Wal-Mart Stores Inc. will be opening another 500 Wal-Mart MoneyCenters this year. Wal-Mart has more than 25 stores located in the North Texas area alone.

As part of its current plan, Wal-Mart said MoneyCenters will be located in about 40 percent of Wal-Mart’s 3,763 stores nationwide, including 158 in Texas, according to a spokeswoman. A total of 102 stores in the Lone Star State will have a MoneyCenter by the end of 2011.

Love it or hate it, the Beast of Bentonville is becoming a force in retail financial services. Moreover, Wal-Mart's getting to expand at this rapid pace without dealing with growth-killing Sheila Bair and the rest of her crew at the FDIC. As everyone recalls, Ms. Bair slapped a moratorium on FDIC insurance for industrial bank charters when Wal-Mart filed an application and eventually stiff-armed Wal-Mart out of the realm of the FDIC-insured.

At the time, Wal-Mart expressed disappointment and community banks expressed joy. Now, Wal-Mart is going full blast forward, unimpeded by the gentle ministrations of FDIC examiners and social justice engineers like The Care Bair. Simultaneously, many community banks are being beaten about the head and torso by the FDIC and other federal banking regulators in ways that are making it difficult not only to make a buck, but, in many cases, even to survive.

Irony: it's often bittersweet.

More States Bashing Big Banks

Last month, we reported about New Mexico's House of Representatives passing (unanimously) a bill that would have directed the state to move money from New Mexico branches of out-of-state banks to in-state banks. Although that legislation did not make it through the state Senate before the current year's legislative session expired (paid subscription required), there's a chance that it may be resurrected in a special session later this year. If that doesn't happen, the bill's sponsor vows to pass it next year.

According to the Wall Street Journal, New Mexico's legislation is part of a trend.

State lawmakers in Maryland, Massachusetts, Minnesota and New Mexico have introduced legislation that would funnel more money into small financial institutions, which generally have avoided the brunt of criticism over the industry's reluctance to lend.

New York Mayor Michael Bloomberg wants to deposit as much as $25 million in city tax proceeds in credit unions. And Lake Oswego, Ore., a suburb of Portland with about 36,000 residents, is moving $1.2 million from a state investment pool into six community-based banks that support local businesses, community organizations and civic groups.

[...]

This month, the Los Angeles City Council ordered city officials to try to renegotiate an interest-rate swap that is costing the city about $19 million a year. Under the motion, firms that won't buckle would be banned from doing new business with Los Angeles.

It isn't unusual for elected officials to use deposits and their bully pulpit as leverage to spur community development or investments in poor neighborhoods. Richard Alarcón, a Los Angeles city council member, says the tough talk is gaining traction because of the economic crisis. The city council also voted to assign grades to banks with which the city does business, based on their small-business lending, foreclosure prevention and other measurements. City officials have until mid-April to draft an ordinance implementing the measure.

[...]

Last month, C. William Frick, a Democrat from Montgomery County, Md., introduced legislation in the state House of Delegates that would allow state-chartered banks to win the state's business if their bid came within 10% of those from larger banks. Mr. Frick says the move was triggered by concerns about credit-card practices and overdraft fees. "The federally chartered institutions come in here and tell us we can't regulate them because of federal pre-emption," he says. "We are powerless to stop them, yet we give them lucrative state contracts."

Wall Street Journal reporter Ruth Simon points out that from a practical standpoint, all this thunder may not bring much rain.

It isn't easy for state and local governments to abandon big banks no matter how unpopular they are. In Maryland, state payroll contracts usually "end up going to larger banks ... because they need to have branches across the state," says Bernadette Benik, Maryland's chief deputy treasurer.

A reader who is a knowledgeable bank law attorney questions whether these local laws can survive a challenge under The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994. He claims that such discrimination against out-of-state-based banks is prohibited under that Act. Although I haven't researched the issue (inasmuch as no one is paying me to do so and I NEVER work for free), as I recall the provisions of that act, they deal with state laws limiting the powers of in-state branches of foreign banks versus the powers of in-state banks, and the laws under discussion do not limit powers of banks, but rather limit the discretion of state officials with respect to the deposit of state funds and/or the awarding of state contracts. Again, I could be wrong, but I don't think such laws run afoul of this particular federal law.

It will be interesting to see if these types of laws gain traction this year and next, or fade out as mere populist spasms generated by local politicians looking to make headlines.

Bank of America's Post-Foreclosure Brain Freeze Immune To Global Warming

Sooner or later, Bank of America is going to have to get its "stuff" together. In the interim, we'll continue to marvel at its inability to keep its hands off other peoples' homes. After swiping a parrot named Luke, the banking behemoth seized a house they'd previously foreclosed upon and sold, for cash, to a doctor. Imagine the doctor's surprise when he visited the home and found that BofA's wrecking crew had changed the locks and cleaned him out. Thank goodness he didn't have a parrot in the place.

One day last week, he says, “we arrived at the house on our daily visit to discover… the locks on the house changed.  A sign in the window basically [stated] that the property had been secured by Bank of America to protect its interest and prevent entry by unauthorized individuals.  A call to the emergency number resulted in no callback after two attempts.”

Dr. Kassing then spent a couple of hours at the office a BofA branch manager: “She spent most of the time on the phone being transferred around Bank of America phone lines and waiting on hold.  It was finally acknowledged that an error occurred and the house was incorrectly seized.  It was agreed that a locksmith would be sent out to open up my property again.”

Once he got inside, the doctor found that the possessions he had put in the house were gone: “About $2,000 worth of property was taken, including a new microwave still in the box, multiple tools, and various other items.”

It's as if the Keystone Cops had been revivified and put in charge of every aspect of Bank of America's post-foreclosure process. Passed around and put on hold appears to be a way of life these days with the too-big-to-be-held-accountable, whether it's your friendly giant bank or your favorite local cable television monopoly. These guys could make a populist out the Sun King.

Adding sprinkles to the top of the cupcake was the fact that Bank of America didn't start to rectify this massive faux pas until Wall Street Journal reporter James Hagerty placed a call. After that, they offered to cough up cash to reimburse the good doctor for the pilfered property, trespass, and infliction of brain damage.

An email from a BofA executive to Dr. Kassing says: “We sympathize with the frustration and inconvenience you and your family have experienced and sincerely apologize for the fact that there was also a disconnect in reaching us to discuss the matter.”

The article doesn't document what Doctor Kassing's response to this sincere apology might have been. Shall we assume it included the phrase "...and the horse you rode in on"?

You know, if this was the first time this had occurred, you'd cut the bank some slack. Instead, this is becoming a way of life. On the bright side, it's great advertising for switching your banking relationship to a community bank.

Move Your Money? Maybe Mañana.

Arianna Huffington's "Move Your Money" campaign has, thus far, filled retail bank customers full to the brim with inertia. At least, that's the case in The Lone Star State.

With big banks battling tarnished reputations and heightened scrutiny from Washington, D.C., you would think that local institutions would be able to capitalize on consumer dissatisfaction and inspire customers to defect on principle.

Local and regional banks are doing what they can, but a defection to Main Street typically only comes when the big banks make a personal mistake.

“There’s a large portion of our deposit base that’s very docile, and it takes a lot to disturb them enough to move their accounts,” said Robert Strong, Dallas market CEO of Mutual of Omaha Bank.

It might be just me, but when I think of moving money to a small, community bank, the community bank name that first pops into my head is not "Mutual of Omaha." That sounds like a big bank connected to a big insurance company connected to a wild kingdom. I would think a name like "Boll Weevil Cotton Picker's State Bank & Trust" might be a better draw for the "smaller-is-better" crowd. On the other hand, I'm no marketing expert.

Total deposits in the nation’s banks increased 2.1% last year to $9.2 trillion. But the smallest banks saw total deposits decline 4.9% on a yearly basis. The 2,845 banks with $100 million or less in assets ended 2009 with $132.4 billion in deposits.

Texas-based banks bulked up on deposits by 7.9% in 2009 to $281.4 billion, but again the smallest institutions didn’t share in that growth. Those 249 small Texas banks saw deposits decline 8.1% to $11.9 billion. It's not clear why the very small banks saw deposits dwindle, but it could relate to some small and growing banks, which add deposits and loans and then cross the $100 million total asset threshold.

“They have to mess up,” said Mark Singleton, president and CEO of Citizens National Bank and Trust in Waxahachie, on what it takes for a consumer to change banks. “Most people will have to get really upset to go through with the trauma of moving the account.”

Unless Ms. Huffington's crew gets cracking, it looks like this Move Your Money rocket may fizzle out and fall back to earth.

Of course, as we've noted before, many small banks don't need deposits moved from big banks, they need capital. They also need to keep what capital they already have or may raise in the future from being swept out the door by "paper" write-downs mandated by overzealous examiners. What many of them could also use is relief of the sort we've recently been pushing, the ten-year amortization of commercial real estate loan losses.

So, let's put this Move Your Money movement to bed and focus on something else that will actually help the too-small-to-save community banks save themselves.

Again: it's not the deposits, it's the capital. And please note, I did not say "stupid."