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Checking Chumps
Hollering about "fairness," Democrats vowed to punish U.S. banks by passing new laws to micromanage their businesses. As a result, free checking may soon be dead. So who's really paying for all that "fairness"?Bank of America and other big banks plan to charge monthly "maintenance fees" on checking accounts, according to the Wall Street Journal, due to a spate of recent new congressional regulations on banks. It's not surprising, given the extent of do-gooderism in Congress, which has insisted it knows better than banks themselves how to run their businesses and treat their customers. Acting from what they imagine are the interests of the little guy, their recent legislative moves -- as well as others on the way -- have effectively halted how banks charge overdraft fees on consumers who bounce checks and how interest rates are calculated on high-risk credit cards. What they didn't pay any attention to was the fact that those fees enabled banks to offset the $300 or so it costs to maintain each checking account at a bank. So now everyone pays to replace what had otherwise been penalty-based income on the individual acts of an irresponsible few. Previously, consumers could control their fees based on how well they managed their checkbooks. The better they managed, the less they paid. Now, they'll just pay, whether they're responsible or not. Call it the socialization of fees. The infuriating thing is that in recent years, Democrats really thought they could just wave a legislative wand to end all fees from banks and create a Better World. They assumed bank fees are purely a function of banker malice and greed, and that only their legislative heroism could stop it. In reality, banks are businesses and like other businesses, must balance their books and make a profit. The one instrument they control is the price of the service they provide. As prices go up to cover Congress' newly imposed regulatory costs, expect the poorest people to drop out of the banking system. They'll be driven from banks back to inner-city check cashing outfits and hide their cash under their mattresses -- and attract crime. It's exactly the fact that poor people were underbanked and dependent on a cash economy that prompted other irresponsible legislative measures, like the Community Reinvestment Act of the 1990s. The CRA forced banks to make home loans to poor people who might have been better served by access to free checking. In the end, we'll all pay for Congress' foolish desire to micromanage our banking system. Maybe voters in November will pick a Congress that can undo this mess. We certainly hope so. Posted by: Fred 2010-06-19 |
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