Eugene Page Links>> Events : Community : Division : FAQs

Will common good banks be insured by the FDIC?

Yes.

However, do not place too much trust in the FDIC. If many banks fail at once, the FDIC will not be able to help. Unlike other banks, common good banks are designed to provide local economic stability even in the event of a national or global economic collapse.

I like the idea of helping my community through banking, but will I also directly benefit from having an account with a common good bank, Eugene division?

There are many benefits to individual common good bank depositors and borrowers, compared to conventional banks and credit unions. Quantifying or even listing those benefits can be challenging, because the common good bank™ model is so community-focused. Nonetheless, here is a specific example in which an individual might save 40% on his or her deposits, while sharing in $1,100,000 of community benefits.

How will Common Good Banks operate its  highly automated online divisions?

For the first year,  the Banks functionality will be outsourced by the Connecticut Online Computer Center.  Ultimately Common Good Banks want our own software, but this might take a few years for such revenue as to afford this.

How many employees will the first Common Good Bank have?

Five. Our CEO, Chief Executive Officer, and 3 customer service staff.  As well, there will be  a 12 member board.  The remainder of the common good bank staff, such as the three division advisers in each community, will be independent contractors. Much of the work will be outsourced to existing organizations as well.

I understand each division is responsible for its capital adequacy, cash reserve, and solvency, as well as compensation for the Division Advisors and our non-profit partner.  But how are the operating costs of the whole bank being paid?

Each division will give equal percentage of it’s profits to the bank operations (home office), so wealthier communities will be contributing more than less wealthier communities.

Will I get charged late fees, over draft and other miscellaneous fees on my bank account?

Yes, but everyone will have a reserve credit cushion.  Normally, if you cover your overdraft quickly, there will not be a fee.  Our intent is to not have as many miscellaneous fees as other financial institutions. The purpose of the Common Good Banks™ is to serve the community and its individuals, so we will not be nickel and diming our account holders.  On the other hand, if people abuse this, there will be fees attached.  Our general philosophy is that fees will cover labor required for the service provided.

When will a common good bank division be opening in Eugene?

The Eugene division will be ready to open once the first common good bank opens. We still need tax-deductible donations of a few thousand dollars for the start-up costs of Eugene’s division, but with our community working together, we can make it happen.

We are expecting the first common good bank, in Western Mass. to open in 10-15 months.  To do this, we need to raise $1.5 million in investments before applying for the state charter.  If you would like to invest in Common Good Banks™ once they exist, or would like to see if you meet the requirements to be an angel investor, check here for a quick 10-second sign-up.  If you have questions about investing, or would like details contact Amie Chaudoir.

Will a common good bank division in Eugene compete with or hurt the local Credit Union with which I have a good relationship?

A common good bank division in Eugene will be a bank working for our community, so yes, it might compete with local credit unions, but it does not need to.  A common good bank division is another type of investment: it is your investment into our community at large.  Account holders with a common good bank may continue their primary banking with the financial institution of their choice, for, just a little bit of money deposited with a common good bank will create large profits for Eugene.

In fact there are new collaborations being made between common good finance and credit unions to act as our non-profit partner helping people to open accounts and apply for loans at a common good banks.  As a non-profit partner, these collaborating credit unions will be adequately compensated.

Can I make a deposit now?

No, you can’t make a deposit until the first common good bank opens. However, you can help NOW make it possible with a no-obligation 10-second signup.

What will the interest rates be on deposits and loans?

No common good bank exists yet, so by law we cannot discuss interest rates, except to say that we plan to offer rates that are competitive with what other banks offer.

Can I invest now?

Maybe! If you qualify financially, then you can be one of our angel investors.  Take our short Investor Survey and we’ll let you know. Common Good Finance needs to raise $1.5 million before applying for common goods bank’s state charter.   You can help make that happen, with no-obligation, in a 10-second signup.

If you have questions about investing, or would like details contact Amie Chaudoir.

How do I withdraw money and make deposits without a bank building?

Account holders will have a debit card to make withdraws at our local retail business partners (convenient and current community epicenters).  Deposits will be mailed into headquarters in Western Mass. (liken the good ol’ days).  Monies will be held at headquarters, but each common good bank division will be  financially autonomous: Eugene’s profits will be held in escrow for Eugene.

The Eugene division account holders can chose to vote on having a bank building and ATM machine if we want, but neither are necessary. Some of our business partners will act as virtual ATMs (cash back with no purchase necessary), and our non-profit partner will help people open accounts and apply for loans (for people who want personal interactions instead of performing these operations online).

Without a bank building and ATM machine(s), over-head costs are kept to a minimum so that profits for our community can be maximized!

As a business owner, I spend thousands of dollars annually on fees for processing credit cards.  Will a local common good credit card minimize this cost for me?

Yes!  The common good bank debit card and local credit card will be FREE for all businesses and account holders: no processing fees if the business has an account with Common Good Banks™.  With Common Good Banks™  as the credit card provider, we are choosing not to charge businesses a processing fee.  This is possible because when swiping the card, money is electronically moving from one CGB account to another… fees are not necessary.

If the common good bank credit card has a visa or mastercard logo on the card, then the card can be used for purchases at non-member businesses and there will be a processing fee for the business.

Common  good bank debit cards are also free for account holders and local businesses.

Why a bank? Why not a common good credit union?

Common good banks are designed to be not-for-profit, community-spirited businesses. So why not organize them as credit unions, an already-existing legal structure for tax-exempt nonprofit financial institutions? The short answer is that banks can do more than credit unions. Besides, credit unions are regulated in a way that prevents them from giving away very much of their profits and prevents them from growing quickly. Here’s how it works:

All banks and credit unions are required to maintain adequate capital. For stock-based banks, of course, capital means stock. For credit unions and mutual banks, adequate capital means retaining enough profits so that the ratio of net worth to deposits is at least 8%.

For example, let’s say a credit union has assets of $108 million – $8 million above and beyond the $100 million that it has borrowed from the depositors (as deposits). It has, in the view of the regulators, barely adequate capital. Now let’s say the credit union wants to expand by 10%, accepting another $10 million in deposits. It cannot do this until it has earned $800,000 more (or received a grant for that much), after all the costs of doing business. The credit union cannot give those profits to worthy causes; it must hold onto them indefinitely.

Now look at a similar situation in the common good bank™ model. Say the bank has sold $8 million in stock and has $100 million in deposits. In the view of the regulators, the bank has adequate capital. Now if the bank wants to expand by 10%, all it has to do is sell another $800,000 in stock. Typically, the new depositors themselves will buy that much stock. Meanwhile, any profits made by the bank (about the same amount of profits as a credit union would make) can be given to food pantries, public education, or whatever the members decide. So the bank can grow much more quickly and give much more to the community than a credit union can.

In spirit and in effect, a common good bank is a credit union organized as a stock bank, in order to advance the greater good more effectively.

Why will common good banks use the fractional-reserve system?

Many people who have become disillusioned with our current economic system mistakenly believe that the fractional-reserve system is the problem.

In the fractional-reserve system, banks are allowed to lend out a certain large fraction of the amount that has been deposited. In the United States, this fraction is 9/10. Each loan creates new money, which can then be deposited in the same bank or in a different bank. Most of that money (the same fraction) can then be lent out again, creating more money, and so forth.

Overall, the result of this practice is a several-fold increase in the country’s money supply (for example, by a factor of ten in the United States). But each bank can only lend out a fraction of what it has received as deposits, so it is not always obvious from the banker’s point of view that any money is being created.

The name “fractional-reserve” is meant to suggest that something is being held “in reserve”. However, since almost all money is just database entries, nothing real is held in reserve and nothing real is lent out. For example, even if you deposit a million $1 bills, the bank can lend out $900,000 and still have every one of those dollar bills in the vault. All money, including paper money, is just an accounting system, keeping track of who is entitled to how much goods and services. The so-called reserve is simply an accounting rule that limits how much money a bank can create as loans.

The fractional-reserve system benefits some banks more than others. Common good banks will encourage borrowers to spend their money locally and especially to use their borrowed money to pay other common good bank customers, so that the common good bank (instead of some other bank) can lend that money out again, for the greater good of all.

Where did this idea come from?

The idea for common good banks began in 2002 in Ashfield, Massachusetts, a small rural community in the foothills of the Berkshires. It began with a spiritual imaging exercise and informal theoretical discussions on how our society  especially our economic system and governance  might be restructured to work better, to create a more peaceful, just, and environmentally sustainable world. Inspired by dozens of other economic systems, through many surveys, discussions, experiments and detours, the common good bank model evolved. Hundreds of professionals and volunteers have contributed to the design.

Most of the labor for researching, developing and promoting this project has been volunteered. We have raised over $85,000 in pledges and contributions, consisting mostly of in-kind contributions. We are still seeking an additional $20,000 in contributions, to cover the expenses of securing a charter for the first common good bank. (You can help by making a donation.)

For a more personal account of the early stages of the project, see this article by our Project Director, that appeared in the Quaker publication Friends Journal, July 2006.

Why hasn’t anyone done this before?

Every individual piece of the common good bank™ plan has already been done successfully elsewhere (See “Spectrum of Economic Systems” and “Where Is CGB Democracy Used“). No one else put all these pieces together in this way because no one thought of it. Until now. And it took hundreds of people working together to come up with this synergistic combination.

Moreover, it It is not easy to start a bank. It takes a lot of money. Since no one will be making a large personal profit from this bank, a couple dozen community-minded people will have to put in $50-$100 thousand each AND thousands of people of lesser means will have to invest what they can comfortably afford. (According to securities regulations, only individuals with over a million dollars net worth can invest in a bank project before it gets a charter.)

Won’t the common good bank just get bought out by a bigger bank?

No. Common good bank™ organizing documents will contain several provisions to prevent a takeover. For example, return on investment will always be limited to the true rate of inflation, which will make any takeover bid financially unrewarding. No one would want to take over a common good bank! Also, the common good aspects of common good banks are contractually subject to oversight by the Society to Benefit Everyone, Inc., which owns the “Common Good Bank” name and logo, so if the bank stops conforming to the common good bank™ model in any way, it will cease to be called a Common Good Bank.

The clincher is that voting is one-person one-vote, rather than one-share one vote, and a 5% minority can veto any proposal that is morally reprehensible (see the section on common good bank™ democracy). So a larger bank trying to acquire a common good bank would have to convince 95% of the depositors to give up their control. Since each community division of the common good bank will vote independently after public discussion and debate, the chance of 95% being successfully hoodwinked is vanishingly small.

If return on investment is limited to the rate of inflation, why won’t investors just buy government bonds instead?

First of all, the true rate of inflation of the dollar is consistently higher than the United States government reports (see, for example, George J. Paulos: “An Alternative Inflation Index“, September 08, 2004). Until a credible and reliable measure of inflation is developed, common good banks will calculate inflation (and therefore the expected resale value of common good bank™ stock) as prime minus 1.5%. Over the past thirty years, the true rate of annual inflation and prime minus 1.5% have both averaged out to about six percent.

Many investors will invest in common good banks because they care about social and environmental “returns” as well as financial ones. Low-income depositors will invest small amounts because, by design, stock in a common good bank will act more like a high-interest one-month certificate of deposit (CD) than like typical stock. Also, by design, stock will be so easy to buy and sell, through simple transfers to and from a checking account, that depositors will be happy to choose a higher interest rate than they receive for their ordinary deposits.

“Be the change that you want to see in the world”

Mohandas K. Gandhi