Inside Financial Services

Dick Durbin’s Shameful War on the Banks

His populist tirades aren't doing anyone any good, least of all consumers

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Oh brother. From The Hill: DURBIN ON NEW BANK FEES: ‘HERE WE GO AGAIN’

Sen. Dick Durbin (D-Ill.) is ramping up pressure on Bank of Americayet again over new fees.

The assistant Senate Majority Leader on Thursday railed against the nation’s second-largest bank, which is mulling new fees, and called on all the nation’s banks to adopt model disclosure that clearly lays out all fees tied to specific accounts.

“Here we go again,” said Durbin in astatement. “This brazen return to new monthly fees is a challenge that cannot go unanswered.” [Emph.added]

This is preposterous.Dick Durbin thinks banks are being “brazen” for actually wanting to charge customers for services they provide. Does he not understand how free enterprise works? (Wait. Don’t answer that.) As far as that goes, does he not understand arithmetic? (Don’t answer that either.) How the heck does Durbin expect consumer banking to even survive if banks can’t offset their costs? Demand deposit accounts offer a number of valuable features that benefit not just consumers but the economy overall. Not the least of these benefits are safety, liquidity, and convenience. But all that costs money, in the form of everything from IT spending to FDIC insurance charges. By some estimates, banks pay anywhere from $200 to $350 per year to offer and maintain a consumer checking account.

And here’s Dick Durbin, apparently pining for some kind of twisted utopia where Elizabeth Warren would be queen, saying banks’ plans to recoup those costs are a “challenge thatcannot go unanswered.” The challenge, Dick, is for banks to find a way to earn an acceptable return in a regulatory environment crafted by anti-free-market zealots like you. As it is, Durbin has already engineered a multi-billion-dollargiveaway from the banks to the retailing industry, via a mandated imposition of federal price fixing called the Durbin amendment. (Which won’t benefit consumers at all, by the way, and will only help line retailers’ pockets, instead.) Now he’s even against the idea of banks’ charging transparent fees for services. This can’t be just ignorance on Durbin’s part. It must be a deeply held hostility to the free market itself, instead.

In his implacable opposition to bank fees of any kind, Dick Durbin is exhibiting the worst kind of populist demagoguery. He’s a bully who’s simply against the idea of banks earning a decent return. But subpar returns for banks translate into subpar creation of credit, which in turn means anemic economic growth. You would think even Dick Durbin would be against that, but he’s not. He prefers ranting instead.

What do you think? Let me know!

30 Responses to “Dick Durbin’s Shameful War on the Banks”

  1. fugetaboutit

    when government dictates certain prices they force cost shifting and that creates crazy accounting anomalys like $1500 stents that ought to cost a few bucks in hospitals…then the pols can go on tv again and complain about the big biz ripping off the little guy. Worked like a charm for health care why not banking? We can make the financial system equally efficient and customer focused.

  2. Jimmie Johnson

    Bravo!
    Jimmie – longtime reader, first time writer.

  3. PMM

    Dick Durbin has an I.Q. that could freeze water!!! PMM

  4. James M.

    Where is the ABA’s and the ICBA’s voice on this matter? Why are they not as loud as Durbin is on the other side of his rants? What do I think? I think that both of these organizations should hire YOU to write their press releases and their speeches! Keep up the spot-on rebuttal, Tom.

  5. Doug

    The “(Wait. Don’t answer that.)” and “(Don’t answer that either.)” had me laughing out loud, as I drink my afternoon martini and smoke my cuban cigar in my corner office that Durbin thinks all bankers have.

  6. oy

    Agreed, but did all of the radioactivity released during the atomic bomb tests a couple of decades ago cause all this hyperbolic and vitriolic ranting that is now part of the common discourse these days? Can you turn it down just a notch?

  7. sgr

    Spot on as usual. But let us not forget that the Chicagoan who now resides at the end of the street Durbin works on is every bit as hostile to banks.

  8. Jack

    As a senator Durbin is used to getting everything free…even his haircuts.

    Fortunately, he’s gone after this year.

  9. Rivvir

    No problem. If my bank does the same i’ll simply change to a bank that doesn’t. It’s happened before, it’ll happen again. I guess the rest of you don’t mind paying up. That’s fine by me. If all the banks do it then i’ll hide my money under the mattress. With what banks are paying for deposits today i won’t lose anything. Guaranteed money in the bank? You people have very short memories. The only guarantee is the feds, so you keep trying to destroy them.

  10. Tom brown

    Turn it down a notch? No way! I think the foundation of our free enterprise system, that created the greatest nation on earth, is being attacked by people like dick Durbin. They believe in a different economic system, one that has a much stronger government hand, than I do. I don’t want to live in a socialist country or one with a centrally planned economy so I will fight like hell against that!

  11. Frank Maurno

    Durbin has always been a shill got the socialist, er, democraitc party, along with being a major league fool. No surprise here.

  12. Timmie

    Durbin is a dimwit. But so is the group of dimwits that defended FMD for years.

  13. Robert Ward

    Are these costs scalable? If half the checking accounts are closed, does the bank save $200 – $350 for each one closed. Or do the remaining accounts now cost $400 – $700 each since the costs cited are necessary for the bank to even be in business and have very little direct correlation with providing checking accounts?

  14. Tom brown

    Turn it down a notch? No way! I think the foundation of our free enterprise system, that created the greatest nation on earth, is being attacked by people like dick Durbin. They believe in a different economic system, one that has a much stronger government hand, than I do. I don’t want to live in a socialist country or one with a centrally planned economy so I will fight like hell against that!

  15. Former bank ceo

    At some level, bankers brought this upon themselves( ourselves). We had “free checking” which was not free to provide. We paid for it on the back of the little guy via NSF fees and credit card fees. Now as that gig is winding down we have to charge the fees that we should have always been charging. This administration is out of control with their socialist/communist agenda. They will eventually be thrown out by the american people. And when they are, we should all remember that sound businesses are built on great service and fair pricing. Not the gimmickry and hide the ball antics that dumb bankers played in the era of “free checking”

  16. Robert Ward

    Are these costs scalable? If half the checking accounts are closed, does the bank save $200 – $350 for each one closed. Or do the remaining accounts now cost $400 – $700 each since the costs cited are necessary for the bank to even be in business and have very little direct correlation with providing checking accounts?

  17. Ed

    I think Durbin is acting like a bully and is exhibiting bad judgment in the way he is using his office to badger a private company. That doesn’t alter the facts that bankers in the opinion of many took leave of their senses in the last few years and contributed heavily their current predicament. It’s fashionable to bash banks and we brought a lot of this on ourselves with uncapped OD fees, large to small order of check presentment and the like. Time to suck it up and repair the damage. Public confrontations with a senior senator is hardly the best way to do that.

  18. Angry Banker

    Bankers have been running scared and ducking for cover for five years now. And what has that running and ducking earned us in the eyes of the consuming public? In my opinion, nothing. The strategy of remaining quiet, taking our lumps, and waiting for the seas to calm seems to be an ineffective one for the banking industry. Perhaps it is time for the banking industry to stand up, provide facts, expose the Durbins of the world, and, frankly, tell the country why banks are necessary, important, and excellent contributors to society. I, for one, am tired of being afraid of these “bank bashing bullies”. A stronger offense from banks on the PR side may work better than a weak defense.

  19. MIDGET

    “Banks are a lot like the crossed eyed javelin thrower at an Olympic Track Meet, you have to keep one eye on them all the time!”

  20. Blindspot

    Let’s see, everyone herein has ranted and raved as if they have just watched Rush; even ignoring if he called their own wifes w _ _ _ _ _ _. The Banks almost took the entire economy down, most got huge bailouts, as well as access to the open Fed window for virtually free money; in the hundreds of billions in total. Recent profits have exceeded those in the past. While Durbin may be wrong on some things, let’s have some objectivity for once, despite the fact that Tom and Vernon invest in financial institutions and it is purely in their vested interest for “their” financials to reap the greatest returns possible. So pregmatism and objectivity in total has been lacking here (not restricted to this one topic). How sweet it is to have no memory; it is almost like being in the movie “Men In Black” and flashed. Just like 2007 and 2008 never happened with MBS’s, CDO’s, etc.

  21. Hank Bukowski

    Did you think the banks that were rescued by their political cronies were going to be provided a future without permanent micromanagement from their political foes? Corporate-socialism saved them. It’s only fair that the same type of government would keep them as indentured servants from this point forward. Hearing complaints about governmental efforts to cap their fees is like listening to a child whine about not getting to play with fireworks a year after he almost burned the house down with a bottle-rocket.

  22. Georgio

    The banks are in the business of making loans, not steal my money. For money the bank management pay themselves for doing administration they do not deserve more then minimum wages. Their loans should amply provide for their expenses.

  23. IRS

    With Brobama in the White House, this shall warrant an audit. Have fun with the random selection.

  24. Judge Roy Bean

    Tom:

    Your comments are “spot on”. A demand deposit account and ATM system cost money to provide and operate. I certainly don’t mind paying a nominal monthly fee for that. If a bank wants a minimum balance in order to qualify me for a “waiver” of the monthly fee, I’ll maintain it. The folly to Durbin’s mindset and those of his ilk is that all this is doing is pushing working people out of the banking system as wealthier clients have the balances needed to have monthly maintenance fees waived. If bank’s can’t recover their costs for providing a service to a client, they’ll find a way to push them out of their system Last time I checked, the “right” to a bank account was not unalienable right. To those individuals who want to put their money under a mattress, good luck with that carefully crafted plan. You’re money will be safe there…

  25. Ric Bonner

    Agreed, plus Durbine has to sneak his legislation through Congess in the Durbin Amendment.

  26. John Vollrath

    Durbin, Obama,Pelosi,Frank, Reid………..God help us.

  27. Litch

    If banks find that the profitability of retail banking (given Democratic Party control) is insufficient to meet their return hurdles then they should simply adjust their business models so that they can meet their hurdles. (Seems kind of obvious that they have no other choice, right?)

    As you know, they could (a) lower rates paid on savings (when rates eventurally rise), (b) reduce branches only to areas where they can make a profit, (c) refuse to open accounts not meeting a profile which they would find satisfactorily profitable, and/or (d) raise rates on consumer loans.

    I’d guess that this will result in lots of squacking from the Democratic Party. However, how can any sane for-profit entity indefintiely perpetuate a sub-satisfactory business.

    In fact, I wonder, Tom, to what degree:

    (a) the marginal loss in deposts and retail related fees, and the incremental funding costs resulting from institutional term funding would actually flow thru; given,

    (b) the cost avoidence and revenue enhancement actions mentioned above?

    Would welcome your thoughts?

  28. JOHN

    Durbin will say anything to secure votes. He is a lawyer who understands nothing about economics (I am not sure he understands the law any better).
    The Durbin amendment makes absolutely no sense. The consumer was happy using the debit card, the retailer was happy because for a small fee he got immediate cash and no collection problems, the bank was happy to collect a small fee for the system and services it put into place. The only person that was not happy was Dick Durbin. He exploited his position to make it look to the unsuspecting public like he was doing something for them. He was, he was screwing the less knowledgeable citizens for gain of their vote. Even Barney Frank and Chris Dodd did not agree with this amendment (but eventually caved in to secure Durbins vote for their bill).
    This is blatant price fixing and interference with the free markets. Doesn’t anyone understand that MOST OF the financial problems in Europe and the US start with BAD GOVERNMENT. And bad government is stupid laws like this. Why isn’t Durbin doing his job of balancing the budget (OH that is right, the Senate has not submitted a budget for 3 years) and reducing debt, and keeping his nose out of the free market. He thinks he has a better idea – HE DOES NOT.

  29. Dr. Roberts

    @ Former Bank CEO….”This administration is out of control with their socialist/communist agenda.”. Gee, I missed the part where President Obama nationalized the banks. You must be referring to the TARP, a socialistic approach, devised by Bush’s former S

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