The failures of First Republic Bank, Signature Bank and Silicon Valley Bank in 2023 seems like a thing of the past and a problem solved by the FDIC and the big banks like Chase.

The reality is that the problem of 4 banks controlling half of all the US banking assets just got worse.

Following the failures of the mid-sized banks in 2023 there was an immediate transfer of wealth from regional banks to the 4 biggest banks in the United States. Many midsize and small companies along with consumers left their local banks for the perceived security of larger national banks.

On top of that, Chase Bank acquired the assets of First Republic making the largest bank in the US even bigger.

If you are a depositor in one of the 4 big ones (1. Chase, 2. Bank of America, 3. Citigroup 4. Wells Fargo) then you are getting very little, if any interest on your money and these banks are profiting massively off of your hard work.

While they profit, economic inequality just gets worse.

Having too big to fail banks as the backbone of our economy is horrible for everyone.

If a bank is too big to fail then what is their incentive for treating their customers fairly? What about treating their own employees fairly? It’s almost as if these banks don’t have any meaningful consequences for their actions. If there were, they might actually fail and then what? Economic collapse?

It appears that this is exactly what is happening. The 4 largest banks in the US are also the most penalized corporations in the US. Bank of America is the most penalized corporation, Chase Bank is the second, Citigroup the fifth and Wells Fargo the sixth. Let’s also not forget about Swiss Bank UBS as the 4th most penalized corporation in the United States.

To put this in perspective the largest 4 banks in the United States have been penalized more than the pharmaceutical and oil & gas industries combined.

Despite this fact, we as a population, continue to place our deposits with them and our federal government does whatever it takes to keep these banks from failing.

So what exactly happens when you place your money into a commercial bank like Bank of America?

Commercial banks loan money based on the amount of deposits that they hold. However, banks don’t actually use the depositors money to issue loans. Imagine if you looked at your account one day and it was zero because the bank used it to make a loan.

Instead banks are legally allowed to create money to issue loans. This is called fractional reserve banking.

So while your money is sitting in a too big to fail bank, the banks are busy loaning, investing and making a killing off of your hard work and what do you get in return? A half a percent (.5%) interest, if you’re lucky. This system only perpetuates economic inequality.

According to the most recent scientific research, economic inequality is the leading cause of destructive human behavior.

Destructive human behavior is the root cause of almost all our social problems. Certainly the worst of them.

So what do we do as American citizens? We ask our politicians to do something.

So what do they do? They make more regulations preventing a collapse of our too big to fail banks. A vicious cycle.

What if we stopped asking our politicians to do something and instead we address the problem ourselves?

I am calling for such an action.

It turns out that there are simple steps we can all take to address the problem of the too big to fail banks and the increasing economic wealth divide.

Credit Unions

The first thing we can do is to withdraw money from too big to fail banks and place it with a credit union instead. This is not a new concept and has been promoted for years.

Credit unions are nonprofit and any revenue that is generated on top of operating expenses is pumped right back into the credit union. This allows credit unions to charge lower fees, have better interest rates on savings accounts and when taking out loans. In addition credit unions offer services like notarization and financial education for free while providing products like lines of credit that have revolving debt like a credit card but at half the cost.

The other big advantage of credit unions is that the board of directors in credit unions are far more diverse coming from different backgrounds and different areas of expertise.

This lack of diversity appears to be one of the reasons for Silicon Valley Bank’s collapse last year.

Crowd Investing

Crowd investing or crowd-sourced financing offers another simple way to address economic inequality and the too big to fail banks.

Instead of placing your money into a bank only for the bank to loan and invest your money, why not loan and invest your money yourself.

In the past this was not an option but due to the ability of the internet to connect populations and recent changes in laws, most notably the JOBS ACT of 2012, for the first time the general public can replace the services of traditional banks.

Thanks to online platforms such as Groundfloor a regular person can set up an auto-investor account and deposit as little as $10 a month and have that money go towards 10 different loans giving an average person the much needed diversification to mitigate risks the same way commercial banks do.

Think about it. Banks issue thousands and thousands of loans but the size of these loans are far greater. So if a bank makes a $100,000 loan and the loan defaults then the bank is out $100k. But if you’re using a Groundfloor auto-investor account and you only lent $1 along with 100,000 other people only lending $1 each then everyone who made the loan is only out $1 (you may not even lose the $1 because these are real estate loans with a first lien position).

Another huge reason to participate in crowd source financing is you get to choose who gets funding. In the past this was reserved exclusively for banks, private equity and wealthy investors. A relatively small group dictating how our economy, and future, gets shaped.

When your money is in a bank, the bank will lend to large corporations (more concentrated wealth) and exploitative projects taking advantage of the little guy, increasing gaps in wealth and deteriorating the quality of life for all.

With crowd investing, the general public can instead invest in small businesses that typically look out for the wellbeing of their communities, customers and employees. This creates a double positive effect.

Average citizens can not only choose to invest in small businesses, creating meaningful impact on a local level but now average citizens can profit from investing and lending to small businesses instead of traditional banks.

A market-based redistribution of wealth.

​We have power. Let’s start using it.