Did you read what Dick Durbin, assistant majority leader of the United States Senate, said on the Senate floor Monday? From The Hill:
Bank of America customers, vote with your feet. Get the heck out of that bank. Find yourself a bank or a credit union that won’t gouge you with $5 a month and will still give you a debit card you can use every single day.
What bank of America has done here is an outrage. [W]hen the announced they were charging a $5-a-month fee for use of the debit card, they went overboard. They are overcharging their customers.
So here’s the number-two Democrat in the Senate urging a run on the largest retail bank in the country! What a great idea!
Durbin’s undies are all twisted, of course, because BofA has imposed what people are calling the “Durbin fee”-a $5 per month charge to certain of the bank’s debit card holders-in response to the passage last year of the Durbin Amendment, which limits what banks can charge on debit interchange transactions. BofA and other banks will lose billions of dollars in revenue as a result of the cap, and have to try to make it up somehow. Thus the $5 monthly fee. To those of us who live in the real world, BofA’s move was entirely predictable and rational. The company has a duty to shareholders to maximize returns. Duh. Durbin shouldn’t be surprised by what the bank has done.
And here’s yet one of the Senate’s leading Democrats denouncing BofA’s decision as an “outrage” and accusing the bank of “overcharging their customers.” What world is he living in? Customers find value in debit card services. Banks should be fairly compensated for providing them. This isn’t difficult.
As it is, the various “reforms” that Congress has foisted on the banking industry lately have done nothing but cost consumers money. The Durbin fee isn’t the only new charge banks have come up with. Free checking is also a thing of the past at the largest banks, thanks to the Fed’s rules governing NSF fees. And rates banks charge on credit card loans have soared, because of the CARD Act. Much more help like this from the Democrats in Congress, and soon retail banking customers won’t have any money left over for actual deposits.
I’m assuming that Dick Durbin, a standard-issue Illinois hack, knows that he’s mouthing nonsense and is simply playing to the faithful. He thinks that’s his job. If the rest of us have to endure baloney like his, that’s the price we pay for having cable TV.
Worse, though, is what President Obama had to say about BofA’s new fee. “You don’t have some inherent right just to get a certain amount of profit if your customers are being mistreated,” he told George Stephanopoulos this week. ” . . . This is exactly why we need this [CFPB]. We need somebody whose sole job it is to prevent stuff like this.”
Oh brother. Larry Summers really needs to try to have another sit-down with this guy. President Obama is so ignorant about economics, remember, that he believes that productivity growth is a bad thing, not a good thing. Now he’s telling the banking industry it doesn’t “have some inherent right just to get a certain amount of profit if your customers are being mistreated.” Really? I doubt he understands how clueless that statement is. To begin with, banking customers are pretty good at figuring out when they’re not being treated well. If people think they’re not getting the service they deserve, they can walk across the street. Easiest thing in the world. The CFPB can’t serve as a stand-in for native common sense. It will just make doing business more expensive.
Second, and more worrisome, the banking industry (any industry, for that matter) does have a right to a certain amount of profit, despite what President Obama says. No, I’m not talking about anything in the Bill of Rights. It’s called the cost of capital. If the government prevents banks from earning some minimum return, the industry won’t attract any new capital. Instead, capital will flee the business. This is the banking industry we’re talking about. Even President Obama, if he thinks about it long enough, should be able to realize that a banking industry that’s chronically unprofitable via government fiat would not be helpful to the economy as a whole. He must be able to figure that out, right?
In the meantime, everyone would be better off if the politicians took a break from their jawboning. A strong, profitable banking industry capable of meaningful credit creation benefits everybody. I’m at a loss to understand why anyone, on either side of the political aisle, would be against that.
What do you think? Let me know!