| Banks and the Current Outrage
I have for a long time been pissed at the unregulated fees charged by banks. Oligops all, I once did a little research on the charge for an overdraft. At the time it was $25.00. Now it is $35.00. The acutal cost of the transaction in question? This from a British commentator at the LA Times;
Bank fees and the free market
MARTIN: So, what you're saying is the actual cost to the banks of covering these overdrafts is fractions of pennies?
HALL: Oh, absolutely. New technology has made this fast. When Barney Frank said recently that he thought it was cumbersome for the banks to give the accountholder the ability to say yes or no, when they're actually shopping at the cash register. It's not that hard to do anymore. However, banks would argue, oh, we have to phone up. No, it all comes up in a little machine that you swipe your card through, you're about to go overdrawn, do you want this transaction, yes or no? It's that simple.
MARTIN: But couldn't the bank argue that they're actually making you a short-term loan. And that because it's a short-term loan, they're entirely, it's within their rights or it's a reasonable thing for them to charge you, in effect, interest.
HALL: I think it's reasonable for them to charge interest but not interest that can add up to 10 times the amount of your overdraft. Banks just see this now as a guaranteed cash flow stream. And they say, let's grab the money while we can.
In other words, the big semi-monopolies like Bank America, Wells Fargo, etc. use these fees as a cashcow to pump up their profits, and there is no limit on what they can charge. When one rises their fees, they can all do so and the consumer's choices end up being very limited.
But wait, you say, you can always withdraw you money, change your direct deposits. Stop and consider how easy and convieent this is . Do you have a comprehensive list of all the online sites you need to update? Do the credit unions or small local and regional banks offer the bill paying and other services you need? like? None of these singularly are deal killers but, if you are like me, the thought of having to do all this is not very appealing.
And why should I have to do this? When the market for anything is dominated by one or even a few companies, why isn't it government's job to protect me from these predatory practices?
Nobody will argue that one must prevent the consequences of NOT protecting against the moral hazard of consumer just abusing the poor banks if there were not some fee, or punishment attached to overdrafting. We'll get to the hypocracy of this concern in a moment. Econmics define moral hazarad as a situation in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk"">
The issue is the abuse of such fees. Moreover the issue is hypocracy. We could not reasonably apply the principle of "moral hazard" against the banks when they indulged their greed and bought and sold those toxic mortgages, could we? So, our reward to bailing out these giant leeches is to have them raise these arbitary fees to maintain their obscene profits! |
