Holmes Report 28 Jul 2012 // 11:00PM GMT
Only 21 percent of Americans trust the financial system, the lowest point on record since March 2009. According to the June 2012 Chicago Booth/Kellogg School Financial Trust Index, this decrease was largely driven by a drop in trust of national banks.
“Trust in banks has collapsed,” says Paola Sapienza, co-author of the Financial Trust Index and the Merrill Lynch Capital Markets Research professor of finance at the Kellogg School of Management at Northwestern University. “Since last quarter’s issue of the Financial Trust Index, trust in banks has fallen five percentage points to a low of 27 percent.
“It’s worth noting that this data was collected in late June, so this drop could be reflective of consumer attitudes toward the news about JP Morgan’s multi-billion hedging losses announced in late spring.”
Trust in national banks fell to 23 percent in the June 2012 report, from 25 percent in March. Trust in local banks increased to 55 percent from 51 percent, and trust in credit unions also increased, rising to 63 percent from 58 percent.
“This suggests that the national banks may be ‘too big to trust,’ whereas there is still a relatively high level of trust in banks at the community level,” says Luigi Zingales, co-author of the Financial Trust Index and the Robert R. McCormack Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business.
Trust in both stocks and large companies edged up, while trust in mutual funds dropped to 25 percent from 28 percent in March 2012.
The majority of Americans have a neutral view of the stock market, with 80 percent of survey respondents planning to leave their investments in the stock market unchanged. And, the fear of a stock market collapse has subsided, with more than half of respondents saying that a drop of more than 30 percent within the next 12 months is unlikely.