The term “bankster” has an interesting history. A combination of “banker” and “gangster,” it was first popularized in the throes of the Great Depression, when a tenacious, cigar-chomping prosecutor led tumultuous Senate hearings on the causes of the 1929 crash. The hearings became something of a media circus, as some of the richest bankers in America were raked over the coals for their role in the stock market collapse. At one point, during a break in J.P Morgan Jr.’s testimony, a press agent for Ringling Bros. actually barged in and set a 21-inch tall woman on the wealthy financier’s lap, claiming the “smallest lady in the world” wanted to meet the world’s richest man.
The media attention and public outrage that resulted from the hearings helped the Roosevelt administration institute new oversight and regulations, and the country avoided another catastrophic financial crisis for the better part of a century – while the industry itself came to be seen as generally benign. But after the 2008 crash, “banksters” re-entered the common lexicon, as polls showed that almost 70% of Americans believed most people on Wall Street would break the law for money if they thought they could get away with it.
Though most financial services professionals do honest work, it’s hard to blame the public for thinking otherwise, or for looking askance at a sector with the power to devastate the global economy. But though relatively few took note prior to the 2008 crisis, the industry had been consolidating that power for decades: it expanded from 2.8% of U.S. GDP in 1950 to 8.3% at its peak in 2006, with much of that growth happening since 1980. From 1980 to 2007, the ratio of financial assets to tangible assets doubled in the U.S., with the total value of the country’s financial assets reaching approximately 10 times its GDP. Meanwhile, the earnings of financial services employees grew about 70% more than those of their counterparts in other industries.
This growth fed upon itself, as the industry attracted more young talent: before the crash, 44% of Harvard MBAs were going into finance – a trend reflected at other elite business schools. And many other countries, including some emerging markets, experienced similar changes. But though public policy and market forces have counteracted those trends in the years since the crisis, it’s clear that the financial sector continues to have vast, arguably oversized, power over our economic futures – and will for the foreseeable future.
In light of that fact, a new movement has emerged within the industry to harness this power in a positive way. If banksters represent the dark side of the financial force, this movement – sometimes called “banktivism” – embodies the opposite. It’s defined by financial services providers’ desire to make a difference in the communities they serve by promoting social, economic or environmental change – while also making a decent profit. And interestingly, many providers are discovering that those two goals are not mutually exclusive.
For instance, California’s Pan American Bank has geared its business toward addressing social and economic inequality in the lower-income, heavily Latino East Los Angeles area. It offers a microloan aimed at increasing political participation in its community by eliminating the financial barriers that prevent legal long-term immigrants from filing for citizenship. It also makes loans to Latino businesses and reinvests profits back into the community by funding social programs, including those focused on closing financial literacy gaps among local youth. To that end, it also offers a fee-free checking and savings account to area children, and even contributes $5 for a first deposit. These efforts not only benefit the bank’s customers and community, they give it a unique inroad to a traditionally unbanked population that could become lifelong customers.
Pan American Bank is one of about 1,000 U.S. banks certified by the Treasury as Community Development Financial Institutions, which include banks and credit unions that offer specialized services to economically distressed target markets. And there are efforts on multiple fronts to spread a similar social focus to the industry in countries around the world. Some of these involve sustained campaigns like Move Your Money, which encourages people to open accounts at socially responsible institutions. Others have been one-time events like 2011’s Bank Transfer Day, which convinced about 600,000 U.S. customers to switch from big institutions to credit unions and community banks. Meanwhile, international networks like the Global Alliance for Banking on Values are working to spread and standardize a social banking ethos among mid-size institutions around the world.
It remains to be seen whether these “banktivists” will contribute to lasting systemic change among the institutions that dominate the financial industry. If they don’t, at a minimum they will expand the options available to people who want to align their financial choices with their ethics. But if they do manage to prod the major players in a more positive direction, it could result not only in a better economic future for their customers and communities, but in a financial industry with fewer excesses, fewer crashes, and a far better reputation.