Trust in banks fell during third financial quarter, but anger against financial institutions increases. Will the sentiment endure?
Trust in banks and other financial institutions fell in the third financial quarter as anger –such as that expressed by the Occupy Wall Street movement - grew to levels not seen since the beginning of the financial crisis, according to the latest Financial Trust Index produced by the University of Chicago Booth School of Business and the Kellogg School of Management at Northwestern University.
Only 23 percent of survey participants said they trust the country’s financial system, down from 25 percent in the second financial quarter. Nearly 60 percent reports being angry or very angry about the current economic situation. According to Luigi Zingales, a co-author of the index, anger is at its highest level since the earliest months of the financial crisis.
With news headlines focused on Occupy Wall Street, falling household incomes, and President Obama’s low approval ratings, the latest index paints “a gloomy picture of attitudes toward American’s financial systems and economic climate,” states a press release announcing the index.
“The findings in this issue reflect what’s been reported in the news and demonstrate the fragility of trust many Americans still have in the institutions where they invest their money,” said Zingales, who is the Robert R. McCormack Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business.
Trust in banks has fallen to 33 percent in September, down from 39 percent in June, though there is a significant disparity between trust in national and local banks. National banks are trusted by 26 percent of respondents, and banks in which the government has a stake received the lowest level of trust, 22 percent. Trust in banks that are local and in credit unions is more than double, at 55 percent and 56 percent, respectively
More than half the respondents said they believe a significant stock market drop is likely, and 33 percent think home prices will drop in the next 12 months. Pessimism over the housing market is the most intense sign March 2009. Two-thirds of Americans think the government effort to create jobs is more important than reducing the federal deficit.
Americans surveyed in October by Millionaire Corner appear to be equally divided in their opinion of the Occupy Wall Street protesters, yet they express a high level of support for some of the ideas advocated by the movement. Nearly half (48 percent) support raising taxes on individuals with more than $250,000 in annual income, and almost 70 percent approve raising taxes on individuals with more than $1 million in income. More than 60 percent said the nation could improve its economic situation by increasing investment and research in alternative energy, and more than 62 percent say an infrastructure program would help the economy by creating jobs and improving the nation’s roads and bridges. More than 26 percent of participants, representing a range of wealth levels, say the protesters represent a contingent that will be a force in the next election.
Researchers described the declining trust in banks as “worrisome.” Paola Sapienza, Merrill Lynch Capital Markets Research Professor of Finance at the Kellogg, said “These findings indicate just how pressing of a political issue the economy is likely to be as the presidential campaign gets underway.”