Which banks are most EA-friendly?

post by Billy Scheibner · 2019-12-26T07:32:36.400Z · score: 2 (2 votes) · EA · GW · 3 comments

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    16 Davidmanheim
    3 Billy Scheibner
    3 Ramiro
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I'm having a hard time finding any EA-focused information about banks. This seems to me like it should be very important for EA, perhaps even more so than charities. I'm not very tech-savvy, so I may just not be looking in the right place. Thanks.

Answers

answer by Davidmanheim · 2019-12-26T17:47:36.900Z · score: 16 (8 votes) · EA(p) · GW(p)

I suspect the choice of bank is rather unimpactful, even for those wtih a few million dollars in deposits. For most of us, it's really not worth time trying to optimize - you're better off finding a site that reviews banks and compares fees, etc. But if you are concerned about the systemic risks and externalities imposed by banks, I would recommend finding a credit union rather than a bank - or at least find a small commercial bank rather than a large national bank or an investment house for banking. (But again, I suspect convenience and fees are a more important factor.)

Edit: To clarify a bit, the marginal impact of giving money to charities is significant, while the marginal impact of giving your savings to a bank is fairly minor - it just gives them a slightly larger balance sheet to make loans, though most are not exactly short on cash nowadays. But if you want to think about systemic change for banks as potentially an important issue, picking where to put your money isn't as important as contacting your senators to tell them you want them to regulate banks for tightly.

answer by Billy Scheibner · 2019-12-27T10:08:54.931Z · score: 3 (2 votes) · EA(p) · GW(p)

What I'm primarily looking for is information regarding which banks most direct their INVESTMENTS in an EA direction. For example, whether a bank is a member of GABV (Global Alliance for Banking on Values) would be the kind of thing that I would want to influence a bank's EA rating.

In my opinion, credit, when it is socially-minded, is charity-lite. However, since there is so much more credit available in the world (in the form, primarily, of the investments that banks make with people's savings) than charitable funds, it seems possible to me that EA evaluations of banks could be even more impactful than EA evaluations of charities. (...Especially, if people's deposits are insured (eg. FDIC), and interest rates are extremely low (as they currently are and have been for quite some time)).

Ramiro--you brought up microfinance. I haven't listened to the podcast that you linked to yet, but I plan to do so soon. Thanks for that!

However, even if microfinance is found to be ineffective, I think that EA evaluations of banks are still very important for two reasons:

  1. Not all the loans that a socially-minded bank makes need to be "direct"; that is, they don't all have to go directly to needy individuals. They can, for example, go to businesses which provide jobs or affordable goods and services which are greatly in need to people in impoverished countries, even if those businesses are large, 1st-world-based, for-profit corporations. Outsourcing, in my opinion, when it is socially-minded, is a good thing, and should be a focus of EA.

  2. "Effective" is a relative term that I don't think should be used in the same way for charities and for banks. As I said earlier, I think that credit (i.e. loans) is charity-lite. This means that the amount of good that credit does is inherently going to be less than the amount of good that charity does. However, it also means that the amount of money that you (i.e. the person whose savings is invested by a bank) lose is also less. Perhaps nothing! This is a much, much, much easier way for the average person to undertake the seemingly Sisyphean task of doing their part to help the world's billions of extremely unfortunate. Therefore, as long as massive, needless, innocent, horrific suffering exists, I think there will always be a huge market for EA banking (and a much larger one at that than that for EA charity).

The question, then, for effective altruism, I think, should not be: "Is microfinance (or credit in general) effective?" but should be: "Which possible recipient of microfinance (or credit in general) is most effective?" (...Just as the question with respect to charity should not be: "Is charity effective?" but: "Which charities are most effective?")

answer by Ramiro · 2019-12-26T20:21:17.061Z · score: 3 (2 votes) · EA(p) · GW(p)

I join the chorus of those who are confused by the ambiguity of this question. On the other hand, considering the role of banks and financial systems in our economy and social lives, I'm surprised, too, that we rarely mention them in EA.

If you're thinking about the impact of microcredit, unfortunately, there's no evidence that it's very effective - though microinsurance might be a low hanging fruit. You might also be interested in how banks prey on people who lack the skills and knowledge necessary to make financial decisions; however, there are some initiatives about this - I remember Marginal Revolution and Future Perfect citing how economic undergrads were learning about financial education, and some government agencies are often concerned about it, too. Moreover, it's an interesting way to present some concepts about rationality, like risk-aversion, cognitive bias, time preference, etc. Besides, governments and regulators are often concerned about predatory practices, concentration, stability and efficiency, and the whole market will supposedly change with technological innovations. I'd like to see some evidence on the effectiveness of their policies (too many people talking about "financial disruption"), but the area is far from being neglected.

If you're thinking about systemic change (and the systemic risks our financial system entails), I strongly recommend The End of Banking. I wouldn't say this subject is like an x-risk, but economic crises are frequent hazards that greatly affect economic growth (and probably politics, too). Open Philanthropy dedicates some attention to macroeconomic policy research, and there's a bunch of smart people everywhere concerned about it. Again, not neglected.

Or maybe you're thinking about how one can use banks to gain leverage and amplify the impact of some policy; for example, since they're often seen as the bad guys, many banks (and related associations) are announcing committments concerning climate change mitigation and corporate social responsibility, and people are discussing how climate hazards should affect their balance sheet. This approach is probably limited, though; but maybe there's a low-hanging fruit in nudging those ethical washing activities into effective charities.

Finally, another attractive feature of financial systems: they provide interesting examples of success and failures in governance. Central Banks are monetary and regulatory authorities, whose power relies on expertise and financial tools, instead of popular support or political representation; and a bunch of international financial organizations, such as IMF and BIS, are often more successful in implementing policies than institutions receiving more attention from diplomats and heads of state, such as UN and OAS - think about how the EEUU depends on the ECB, for example. I wonder if this could offer a case study for AI governance (or other x-risks).

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comment by Aaron Gertler (aarongertler) · 2019-12-26T17:09:41.827Z · score: 3 (2 votes) · EA(p) · GW(p)

You can find information on credit cards here [EA · GW] (caveat: I haven't read the post closely).

I don't know what a bank would do to help other than having low fees and/or high interest rates so that you wind up with more money. And because that's what most people want out of a bank, standard guides like NerdWallet seem as though they'd be fine. I'm not aware of any banks that have charitable matching offers or anything along those lines (though I'd be glad to learn about them!).

comment by MichaelStJules · 2019-12-26T17:42:23.089Z · score: 2 (2 votes) · EA(p) · GW(p)

Some advice here [EA · GW], especially section Savings Account and CD Recommendations for Individuals [EA · GW].

I haven't personally followed any of this advice; I've always been with the same bank (from before my interest in EA and investing), not based on any systematic comparison.

comment by EdoArad (edoarad) · 2019-12-26T07:36:38.736Z · score: 0 (5 votes) · EA(p) · GW(p)

Can you expand a bit on what kind of information would be relevant? And how that would be perhaps more important than charities? I'm not very Fin-savvy 😇