Stick it to banks by depositing more cash

Crumbling bank facade

Was Bank Transfer Day a cleverly concealed way to dupe social media into doing what banks have thus far been unable to do themselves: bleed off surplus cash?

Before we proceed, and in the interest of full disclosure, I did not drink the magic tea being passed around the Occupy Wall Street encampment. But if American consumers really wanted to hit the bigs where it hurts on Nov. 5, they should not have withdrawn their money, they should have deposited more!

As I recently blogged, banks have a problem almost too bizarre to grasp: They have too much cash. (I know; I wish I had that problem, too.)

But they're serious: that historic sucking sound of consumers withdrawing megabucks from the stock market, combined with the abysmal returns available to banks on investments today, has many large banks flush with Benjamins like never before, with no way to make a buck off them.

It's gotten so bad that they're actually dreaming up ways to drive us away, as American Banker found out recently from Michael Bauer, the chief credit officer at Indiana's Community Bank Shares:

"We keep driving down the rates on our deposits, but every time we do that, it seems like more deposits come in," Bauer says. "It has gotten to the point that customers don't even shop around for rates anymore."

What's wrong with too much cash?

Funny story: When the economy crashed, Congress let banks park their money at the Federal Reserve for a paltry quarter-percent return. Banks embraced this miracle; in fact, about 72% of all deposit inflows from January to June were moved to the Fed, according to the FDIC.

Unfortunately, unless Congress extends it, that little financial boondoggle, part of the Emergency Economic Stabilization Act of 2008, is set to expire on New Year's Eve. And you might have noticed that Congress isn't in any mood to pass anything these days, except maybe the buck.

According to Dan Geller, an executive vice president at Market Rates Insight in San Anselmo, Calif., federal deposit insurance costs banks $1 for every $1,000 in deposits they hold.

Banks are also incurring at least $200 in annual overhead costs for each checking account, regardless of whether a balance is $100 or $10,000, he says.

And until someone -- anyone -- wants a loan again, that cash is just costing banks money.

Did some ingenious banker with an overactive BlackBerry cook up Bank Transfer Day?

If they didn't, they're kicking themselves for not thinking of it.

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