The latest idea from MoveOn.org and their friends and OWS is to withdraw all their money from the “Wall Street Banks,” and to move it to smaller, community banks and credit unions on November 5th.  If such a move were to take place on the scale they’d like, it would be a deliberately created bank run on the largest financial institutions in the country.  They seem to have gotten the scheme from some Ron Paul supporters, who are at a minimum mildly ticked off that OWS and MoveOn are claiming credit for it.

They may claim that this is a small, symbolic action, but that doesn’t excuse it. Small, symbolic actions are unlikely to have any actual effect on large institutions, and fanatics don’t propose such actions hoping for them to be merely symbolic.

We can all be grateful that this won’t amount to a hill of beans in this crazy world, but this is still a terrible idea, one whose ineffectualness doesn’t absolve it of its fundamental irresponsibility.  You might expect this sort of thing from MoveOn, but the Ron Paul people fancy that they understand how banks work, and that turning all of Wall Street into the Fidelity Fiduciary Bank wouldn’t be the soundest financial strategy.  Bringing Wells Fargo crashing down isn’t any better an idea now than it was 3 years ago, and it’s liable to take a bunch of smaller, “safer” community banks with it.

The basic premise of the exercise is flawed. It’s certainly true that the balance sheets of some of the larger banks are in worse shape than many smaller, community banks.  And it’s equally true that Too Big to Fail probably means Too Big (to borrow a phrase from Instapundit), and that any bank Too Big To Fail should probably be broken up into smaller entities. And when smaller banks fail, they fail less catastrophically.

Ironically, the website for the Move Your Money Project features a scene from “It’s a Wonderful Life,” the bank run scene, on a building and loan that, if you remember, came within $2 and the goodwill of a couple of neighbors of failing.

Smaller banks do fail, almost 300 between 2009 and 2010, and 86 so far this year.  The MYMP site will cheerfully direct you to a smaller bank or credit union, one which stands a good chance of operating under some sort of enforcement action from the Office of Thrift Supervision, the Office of the Controller of the Currency, the Fed, or the FDIC.

Ultimately, this isn’t about “sending a message” to Wall Street, or making your  money safer.  It’s about visceral hatred of banks and bankers, and a failure to appreciate the role that finance plays in a healthy capitalist system.

Yaron Brook, who runs the Ayn Rand institute and is nobody’s idea of a Keynesian squish, has the appropriate response: