Many of the nation's municipal treasurers are mad at their banks. They feel that in pricing policy, service rigidity - and just general attitude toward public officials - many banks are taking the treasurers for granted.
This is especially true after an acquisition, where the policies of the once-locally run bank are no longer set locally.
It is also a whopping opportunity for banks that have remained independent to gain new profitable and prestigious business.
The unhappiness starts right from the way in which municipal deposits are evaluated for earnings credit.
At a forum I attended as part of the recent annual meeting of the Municipal Treasurers Association of the U.S. and Canada, a major gripe was that the banks in large part still deduct 10% or more from the available balance when they calculate interest, to cover the banks' reserve requirements. Thus, municipalities that put deposit funds in banks often earn interest on only 90% of the balance.
"This is the bank's problem, not ours," the treasurers moan. And they feel they should not be charged for it.
When asked why they don't just pull their balances down to a minimum, invest the bulk of their funds in T-bills, and pay for services with fees - the U.S. Treasury never takes a 10% haircut from the value of the money invested with it - many say they do, thus hurting bank balances.
But others are hobbled by the fact that money for fees come from expense budgets, which is money that must be won away from other groups in the municipality that want to spend the funds. A shaving of the municipality's bank balances aren't expense-budget items, so the treasurer can control it without fighting other municipal departments for scarce dollars.
So they are helpless to fight the 10% haircut policy, but they sure don't like it.
But the anger at this bank policy was nothing compared to the unhappiness many treasurers showed for one special change many banks now implement after having been acquired by more distant institutions.
This is a shifting lock-box policy. Treasurer after treasurer told horror stories of how the bank that acquired their local institution came in and said, "We are concentrating lock-box operations. So from now on when your taxpayers send in their quarterly payments for us to handle and place in your account, they no longer will remit to a local address. They will have to send their payments to a lock-box in our headquarters city."
Think of how a municipal treasurer feels if his taxpayers and constituents now find that they must pay their taxes to a box number in Salt Lake City, Minneapolis, Chicago, or Atlanta instead of to a local box. It looks as if the municipal treasurer has given up control over the local finances to some big, distant giant.
Some municipal treasuries have replied: "Tell your local courier to stop at our local post office and pick up our tax collections there instead of having our citizens mail them to your operations center."
But many banks have refused to do this for some reason. As a result, a few treasuries have reported that they are now piggybacking on the lock-box of the local power company to receive payments or switching to other banks still willing to pick up checks in town, then handle the collection and disbursement procedures.
Treasurers are also getting mad at what they see as the complacency displayed by bankers, who look on the local treasurer as an unsophisticated individual who doesn't care about the value of time or money and whose account could thus be used to generate more bank revenue than would be the case with other customers.
As a result, the treasurers' association is beginning to step up its membership surveys to see whether vast differences occur in bank charges for the same service. And many communities are now putting in requests to all banks in their territory to see if they can get a better deal.
This is a real opportunity for the remaining independent community banks. They are finding that, through third-party servicers and even working with their own correspondent banks, they can be just as well equipped to handle the municipal treasurers' needs as large banks.
More important, the community banks who talk to the nation's treasurers, as I did at that meeting recently, quickly find that what most treasurers want more than anything else is a relationship rather than a market basket of services.
They want to have one person in the bank who has full responsibility for the community's account, who listens, and who reacts quickly when unhappiness develops and change is needed. And this is a flexibility and talent that is the hallmark and greatest competitive strength of the independent community bank.
