Is it time to break the banks?

"Have you seen the little piggies,
Crawling in the dirt?
And for all the little piggies,
Life is getting worse.
Always having dirt to play around in."

George Harrison wrote these lines for the Beatles White Album. Who did he mean by the "Piggies?" Charles Manson thought he was referring to white America, but it's hard to take any thought of Charles Manson seriously. Others assumed he meant the police, who were less-than-affectionately referred to as pigs during the '60s when the White Album was produced.

I, on the other hand, think he may have meant the banks, Or does that attribute more prophecy (or memory) to Harrison than he merited?

Harrison's "Little Piggies"—crawling in the dirt, life is getting worse—sure seem to reflect the 25-50% of mortgage holders in the United States who have either defaulted on their mortgages or are in danger of doing so. Many of these little piggies knew what they were getting into, and decided to take the chance anyway. Others were lured by unscrupulous bankers and mortgage brokers into purchasing or borrowing against homes which were way beyond their means. Either way, ever increasing numbers of them find themselves crawling around, trying to play in their over-leveraged dirt for just one more month.

"Have you seen the bigger piggies
In their starched white shirts?
You will find the bigger piggies
Stirring up the dirt,
Always have clean shirts to play around in."

It hardly requires an MBA in Finance to understand this analogy. These are the guys (and occasional gals) who took our money (your taxes and mine) to pay themselves big bonuses instead of renegotiating little piggy loans. Perhaps their shirts aren't as starched as they were in the '60s, but they continue to play around with our money until the next time they hold us up for more.

"In their sties with all their backing (read that the Fed),
They don't care what goes on around.
In their eyes there's something lacking,
What they need's a damn good whacking."

Rumor has it that George Harrison's mother wrote the line about the "damn good whacking." I'm not surprised; it would take a mother to come up with an appropriate solution to banker myopia and recalcitrance.

Now it would appear that at least some of the little piggies are beginning to understand this. The "whacking" seems to be taking on two forms.

Today's (1/10/2010) New York Times Magazine carried an article entitled, "Walk Away From Your Mortgage!" It reports a trend among some mortgage holders called "strategic defaults." In other words, if a little piggy's mortgage is so much bigger than the value of his or her home, why not just walk out and rent? After all, these piggies haven't a chance of recovering the money they put in to purchase the dirt in the first place. Never mind that such "stregic defaults" depress the value of the neighborhoods which the little piggies abandon. Or that they could force the big piggies to come back to the public trough that much sooner. Anything to have good dirt to wallow in.

Shame on the New York Times. Not for reporting on this trend, but for encouraging it with their overtly suggestive headline. Surely there's a better way to let the banks know of our displeasure besides destroying our neighborhoods.

It turns out there is. I invite you to visit moveyourmoney.info, a database of community-based banks which have received a grade of “B” or above from Institutional Risk Analytics. Institutional Risk Analytics measures factors like profitability, lending default experience, capital adequacy, loan and unused commitment exposure and operational efficiency. Give moveyourmoney.info your zip code, and it will provide you with a list of qualified community banks and credit unions within or close to where you live. Go ahead...give it a try.

I've been banking in a community bank for years: Los Alamos National Bank in Los Alamos, New Mexico. LANB was the first bank in the country to win the coveted Malcom Baldrige Quality Award from the National Institute of Standards and Technology, an office of the Department of Commerce. All of the bank's deposits are invested within the State of New Mexico. What's more, the bank takes back the servicing of the loans it sells, so borrowers continue to deal with their local bank long after closing.

"Everywhere there's lots of piggies,
Living piggy lives.
You can see them out for dinner,
With their piggy wives.
Clutching forks and knives to eat their bacon."

We can put a stop to this form of American cannibalism, without destroying our neighborhoods or giving up the American Dream. Let's start putting our money where our mouths are.