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'Bank Transfer Day' Won't Hurt Big Banks -- Why You Should Switch Banks Anyway

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

Updated with clarification of OWS connection to 'Bank Transfer Day.'

NEW YORK ( TheStreet) -- The "Occupy Wall Street" (OWS) movement has expressed support for "Bank Transfer Day" on Nov. 5, the day by which Americans are supposed to have transferred their deposits to community banks. OWS has supported many causes, but one of the issues protesters have complained about is the new $5 per month debit card fee announced by Bank of America (BAC - Get Report) and similar fees by others.

Occupy Wall Street: News Feed >>
The latest news, photos and videos from the 'Occupy Wall Street' protests.

I am not a big fan of the Too Big to Fail (TBTF) banks. But, it might be good to understand what has happened here. In the Dodd-Frank legislation, Congress authorized the Fed to set limits on debit card "swipe" fees which were averaging more than 40 cents. The Fed set the maximum at 21 cents beginning on Oct. 1 (that was higher than the original desired level of 12 cents).

Bank of America

During the legislative discussions, Congress was warned that they cannot legislate economic results, and that the TBTFs would find offsetting revenue sources. The debit card fees, then, are nothing other than an unintended consequence of misguided legislation. The beneficiaries of the "swipe" fee limits are America's retail businesses. Those with the highest transaction volumes, like the WalMarts of the world, are the biggest beneficiaries. Because consumers do not understand this process, don't expect big business to give the difference back. So, net, net, the TBTFs are revenue neutral, businesses are ahead, and, as usual, consumers wind up paying more. Given this, perhaps the OWS crowd should be occupying Washington, D.C., not Wall Street. Switching Won't Hurt TBTF

Back to "Bank Transfer Day." Before you decide to switch from the nasty TBTF bank, don't think for a single moment that you will be hurting that bank by moving your account to a Community Bank (CB) or Credit Union (CU). Deposits represent about 50% of TBTF funding, and consumer deposits represent a very small fraction of those deposits.

Today, all TBTFs currently have huge excess cash in the form of reserves at the Fed, federal funds, and cash. So they won't have to replace consumer deposits that leave. Furthermore, if they did want to replace those deposits, they can borrow at near zero percent interest rates directly from the Fed, or in the fed funds or money markets. Third-quarter results for Bank of America show that it is shedding "non-core" assets, indicating that some TBTF banks may welcome the opportunity to "shrink" as that improves their capital ratio.

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