Americans' trust in banks hit record low as financial scandals continue
In 2007, two in five Americans said they trusted banks. Now, just five years later, that number has dipped to one in five. New York Times columnist Eduardo Porter asks what changed. Do we care about bad behavior in corporate America?
Americans' confidence in banks is at an all-time low, as scandals continue to errode Wall Street's public image four years after the 2008 financial crisis.
A recent Gallup poll found that 21 percent of Americans have a great deal or quite a lot of confidence in banks, down slightly from 23 percent in the past two years and one percentage point below the 22 percent found in 2009.
New York Times economics columist Columnist Eduardo Porter says the prevalent cynicism is a recent development in America.
"If you go back a couple of decades, you had more than half of Americans say they trusted their banks substantially," he said. "That has just come plummeting down since the financial crisis in 2008."
A study by University of Pennsylvania economists Justin Wolfers and Betsey Stevenson suggests rising unemployment numbers are to blame for the drop in trust.
“Much of the recent decline in confidence — particularly in the financial sector — may simply be a standard response to a cyclical downturn,” they wrote in the study.
But Porter doesn't believe the loss of confidence will dissipate when the economy starts to come back. In his opinion, the recent scandals, including the Libor manipulation, have damaged banks' image far too much for them to simply bounce back.
The recent rash of financial wrongdoings has solidified the image of the profit-hungry banking executive who cares only for his or her stockholders.
"I do believe that as banks have become bigger and financial institutions have become bigger and more abstract and detached from their individual consumers, this argument of establishing a relationship of trust, a more touchy-feely sort of relationship with your bank, becomes impossible," Porter said.
But bank accounts still have a government stamp of approval in the form of FDIC insurance, which Porter believes is what keeps people going to banks despite the current atmosphere of mistrust.
This loss of confidence is not without grounds. The World Bank reported that corruption controls in the United States have fallen since the 1990s. The U.S. has declined from the world's 16th least-corrupt nation to the 24th, according to Transparency International.
"I think that (the scandals) might make trust go away for a very long time," Porter said. "I really can't tell you exactly how that's going to play out, but it doesn't look good because trust is so important for everything."
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