Cash is still king. But they know how to fix this… another law, that banks can’t charge the fee and then… force customers to use debit cards… and give debit cards to those that don’t have one… and ya know, fix everything…
This may end up helping consumers. More people will start getting cash for the week (like we all used to). There is more ‘pain’ in handing over cash than there is to handing over your card. Once people see the money leaving their wallets, they’ll think harder about spending as much. And if you don’t have enough cash to buy that $5 coffee, you probably don’t want to make it a $10 coffee. Long term this could mean more privacy (cash in anonymous), more savings and a hit to places like Starbucks. This may fail to do what Congress intended (surprised?) but could be a ‘good pain’ for Americans.
I use cash for day-to-day purchases, checks for paying bills, and a debit card for buying stuff online (which I don’t do all that often).
My accounts are with a smaller regional bank which didn’t take TARP funds. The TBTF banks like BoA should have been allowed to go bankrupt in 2008. There would have been a sharp depression, but we would be on the way to a genuine recovery by now. The bailouts just put off the day of reckoning and ensured that it will be worse when it happens.
I don’t even have a debit card, though I know a lot of people do. I use my credit card much like a debit card for larger purchases (and pay cash for smaller ones), but I have the discipline to pay it off every month, which a lot of people don’t. I don’t like the idea of someone being able to get directly into my bank account – I want something (like the credit card company) between the thieves and my bank account.
That said, the gummint should butt the hell out.
I suspect t this has much more to do with BoA poor financial position than anything else. They are desperate to earn income to make up for their strategic mistakes and to cover the many lawsuits against them. It will be interesting to see if other banks follow. More likely they will use it to gleam dissatisfied BoA customers. I see this more as the start of the BoA death spiral rather than any protest by banks against the regulators.
So trying to make up $2b of a $7b inflicted by regulators had nothing to do with it, huh?
No, because only BoA is doing it. The rest of the banks seem to be OK with having their 90%+ profit margin on debit card transactions cut in half.
Is it impossible these days for banks to turn a profit from…normal banking? That is, investing the money of the accounts of their depositors? Trying to squeeze more money out of customers through debit transactions (are these really any more costly to process than check, teller, or ATM transactions?) or other burdensome fees (rigging the system to maximize $35 overdraft fees per transaction) seems to me to be an act of desperation that will do nothing but drive customers away. Of course, maybe BoA is indeed pretty desperate after having purchased a millstone in the form of Countrywide.
That’s the way any business would respond when some revenue limiting regulation or tax is suddenly imposed. It’s their responsibility to maximize profits to increase shareholder potential. If they just sat on their hands and went, “oh well” they’d have the shareholders screaming for a few board members heads. This is a perfect example of how burdensome regulations or taxes on the “Rich” becomes a burden on everyone.
Yep. And Matula, of course, blames the messenger — which BofA happens to be on this.
Nope. You and Rand are just looking for a message that doesn’t exist.
Banks try new fees all the time. Some stick, others result in a backlash. This is most likely the later. And adding $5 a month charge to an account that already costs $12 a month is hardly going to kill off the debit card even if this fee does stick.
Guys, I think there is plenty of blame to go around. Yes, the government shouldn’t be telling private banks what they can and cannot charge for various services. I would never argue otherwise. But in this instance I don’t know that the practical effect of this intrusion is all that pernicious – what was once an indirect fee built into the price of goods and services is now a direct fee. On balance it is better to have a service such as this as a direct fee.
Corporations should indeed maximize profit for shareholders, but the problem is that that won’t happen if they continue to soak their customers, who can then leave for banks that don’t share BoA’s horrible, awful business practices.
Good point.
Considering the size of the transactions in total not per purchase, it is a little surprising that the banks could not negotiate a better deal with the processors.
Is this $5 fee that BoA will be charging for debit cards per month, or per transaction? If it’s per month, I’m quite willing to pay it ($10/month) to avoid having to deal with checkbooks for two accounts.
I believe it is per month not transaction.
Ken,
Yes, per month.
Just enough to squeeze some more money from their customers to cover the costs of the many lawsuits against them but not enough to cause them to switch all their direct deposits and close their accounts.
The BoA CEO should drop the card fee, make a conference call with Frank, Dodd and Durbin and say “THANK YOU SIR, MAY I HAVE ANOTHER?” like a good little boy.
BoA problems are not from Frank, Dodd and Durbin, but from the many lawsuits being filed against them by other banks, investors and customers. Not to mention the state attorney generals getting ready to join Arizona and Nevada in going after them for mortgage fraud.
[[[SACRAMENTO, Calif. (AP) — California Attorney General Kamala Harris said Friday that she will not agree to a settlement over foreclosure abuses that federal officials and other state attorneys general are negotiating with major U.S. banks.]]]
[[[Attorneys general in Arizona and Nevada, two of the states hardest hit by defaulted mortgages, have filed lawsuits against Bank of America, the country’s largest bank, saying the lender misled and deceived homeowners who have tried to modify mortgages.]]]
I thought Frank and Dodd were responsible for legislation that contributed heavily to the mortgage fiascos in places like AZ and NV.
NV has its own unique problem – it’s too heavily dependent on tourism. Gotta have more industry than that – especially with gambling proliferating across the country. Even the UFOs are leaving Area 51 in favor of Gulf Breeze, Florida.
Of course, my original point is that Congress shouldn’t expect corporations to grin and say “yes massa, whatever you say” whenever Congress flagellates corporations. If BoA is getting flagellated from other directions, well, those are separate issues.
Alan,
No, it was Newt Gingrich’s Tax Relief Act of 1997 that created the housing bubble by turning professional house flipping into a tax free form of income. The rest was just normal human behavior driven by greed.
Also if the banks didn’t want Congress to flagellate them they shouldn’t have begged Congress for the TARP funds they received. They should have just took their impending bankruptcies as their just free market rewards for their poor management practices instead of threatening the country with economic doom in order to get bailed out.
I checked out a New York Times article on the act. The title reads “Tax Break May Have Helped Cause Housing Bubble,” but the graph clearly shows that the bubble started a few years before ’97. Therefore it may be a contributing factor, but it cannot be a cause.
Calling it Newt Gingrich’s law is disingenuous. The same article points out that Bill Clinton proposed the tax break at the 1996 Democratic Convention.
If I pour petrol on a bush and light a match, it is dishonest to say that the match started the resulting fire. The Tax Relief Act of 1997 might have been relatively safe in and of itself, but in this case the petrol consisted mainly of Greenspan’s insanely-low interest rates and the Community Reinvestment act. Business Insider has an excellent article detailing how CRA “required lax lending standards that spread to the rest of the mortgage market.” If I can get tax breaks or outright subsidies for selling an ungodly-expensive commodity, I can’t take advantage of the perk if nobody will lend me the money to buy said commodity. I’m not George Kaiser (Solyndra co-owner) or Ken Lay or anything like that.
Your remark presumes that house flipping was the bubble’s primary mortgage abuser. If that’s true, then why are people like Maxine Waters fighting tooth, nail and marrow to prevent bank foreclosures? If flippers were the main culprit, then prove it.
It is probably a little bit of everything.
In addition to any mortgage fraud that took place since the crash, regulations constricted their revenue streams, they made too many risky loans, and too made many poor acquisitions. Government meddling was significant in several of those areas.
Wodun,
Yes, normal greed, but the banks refused to take their medicine when their greed caught up to them, instead begging the government to save them.
If the banks except the government, and taxpayers to bail them out when things go bad, than they should expect to have limitations put on their behavior.
Here’s an idea. Pass a law that a bank will be able to become exempt from all banking regulation IF they sign an agreement they will NEVER ask the government to bail them out and they drop out of the government’s FDIC program, which is also a form of bailout. In short, let them live in the same world as the rest of us.
Instead of National or State banks, these exempt banks could call themselves “Free” Banks. Then let the markets work 🙂
Cash is still king. But they know how to fix this… another law, that banks can’t charge the fee and then… force customers to use debit cards… and give debit cards to those that don’t have one… and ya know, fix everything…
This may end up helping consumers. More people will start getting cash for the week (like we all used to). There is more ‘pain’ in handing over cash than there is to handing over your card. Once people see the money leaving their wallets, they’ll think harder about spending as much. And if you don’t have enough cash to buy that $5 coffee, you probably don’t want to make it a $10 coffee. Long term this could mean more privacy (cash in anonymous), more savings and a hit to places like Starbucks. This may fail to do what Congress intended (surprised?) but could be a ‘good pain’ for Americans.
I use cash for day-to-day purchases, checks for paying bills, and a debit card for buying stuff online (which I don’t do all that often).
My accounts are with a smaller regional bank which didn’t take TARP funds. The TBTF banks like BoA should have been allowed to go bankrupt in 2008. There would have been a sharp depression, but we would be on the way to a genuine recovery by now. The bailouts just put off the day of reckoning and ensured that it will be worse when it happens.
I don’t even have a debit card, though I know a lot of people do. I use my credit card much like a debit card for larger purchases (and pay cash for smaller ones), but I have the discipline to pay it off every month, which a lot of people don’t. I don’t like the idea of someone being able to get directly into my bank account – I want something (like the credit card company) between the thieves and my bank account.
That said, the gummint should butt the hell out.
I suspect t this has much more to do with BoA poor financial position than anything else. They are desperate to earn income to make up for their strategic mistakes and to cover the many lawsuits against them. It will be interesting to see if other banks follow. More likely they will use it to gleam dissatisfied BoA customers. I see this more as the start of the BoA death spiral rather than any protest by banks against the regulators.
So trying to make up $2b of a $7b inflicted by regulators had nothing to do with it, huh?
No, because only BoA is doing it. The rest of the banks seem to be OK with having their 90%+ profit margin on debit card transactions cut in half.
Is it impossible these days for banks to turn a profit from…normal banking? That is, investing the money of the accounts of their depositors? Trying to squeeze more money out of customers through debit transactions (are these really any more costly to process than check, teller, or ATM transactions?) or other burdensome fees (rigging the system to maximize $35 overdraft fees per transaction) seems to me to be an act of desperation that will do nothing but drive customers away. Of course, maybe BoA is indeed pretty desperate after having purchased a millstone in the form of Countrywide.
That’s the way any business would respond when some revenue limiting regulation or tax is suddenly imposed. It’s their responsibility to maximize profits to increase shareholder potential. If they just sat on their hands and went, “oh well” they’d have the shareholders screaming for a few board members heads. This is a perfect example of how burdensome regulations or taxes on the “Rich” becomes a burden on everyone.
Yep. And Matula, of course, blames the messenger — which BofA happens to be on this.
Nope. You and Rand are just looking for a message that doesn’t exist.
Banks try new fees all the time. Some stick, others result in a backlash. This is most likely the later. And adding $5 a month charge to an account that already costs $12 a month is hardly going to kill off the debit card even if this fee does stick.
Guys, I think there is plenty of blame to go around. Yes, the government shouldn’t be telling private banks what they can and cannot charge for various services. I would never argue otherwise. But in this instance I don’t know that the practical effect of this intrusion is all that pernicious – what was once an indirect fee built into the price of goods and services is now a direct fee. On balance it is better to have a service such as this as a direct fee.
Corporations should indeed maximize profit for shareholders, but the problem is that that won’t happen if they continue to soak their customers, who can then leave for banks that don’t share BoA’s horrible, awful business practices.
Good point.
Considering the size of the transactions in total not per purchase, it is a little surprising that the banks could not negotiate a better deal with the processors.
Is this $5 fee that BoA will be charging for debit cards per month, or per transaction? If it’s per month, I’m quite willing to pay it ($10/month) to avoid having to deal with checkbooks for two accounts.
I believe it is per month not transaction.
Ken,
Yes, per month.
Just enough to squeeze some more money from their customers to cover the costs of the many lawsuits against them but not enough to cause them to switch all their direct deposits and close their accounts.
The BoA CEO should drop the card fee, make a conference call with Frank, Dodd and Durbin and say “THANK YOU SIR, MAY I HAVE ANOTHER?” like a good little boy.
BoA problems are not from Frank, Dodd and Durbin, but from the many lawsuits being filed against them by other banks, investors and customers. Not to mention the state attorney generals getting ready to join Arizona and Nevada in going after them for mortgage fraud.
http://www.google.com/hostednews/ap/article/ALeqM5guaDmVmFCoh8BG-0k2h4nrAB0Rvw?docId=3ef21fd5967647d6b1fe42040f335ca4
[[[SACRAMENTO, Calif. (AP) — California Attorney General Kamala Harris said Friday that she will not agree to a settlement over foreclosure abuses that federal officials and other state attorneys general are negotiating with major U.S. banks.]]]
[[[Attorneys general in Arizona and Nevada, two of the states hardest hit by defaulted mortgages, have filed lawsuits against Bank of America, the country’s largest bank, saying the lender misled and deceived homeowners who have tried to modify mortgages.]]]
I thought Frank and Dodd were responsible for legislation that contributed heavily to the mortgage fiascos in places like AZ and NV.
NV has its own unique problem – it’s too heavily dependent on tourism. Gotta have more industry than that – especially with gambling proliferating across the country. Even the UFOs are leaving Area 51 in favor of Gulf Breeze, Florida.
Of course, my original point is that Congress shouldn’t expect corporations to grin and say “yes massa, whatever you say” whenever Congress flagellates corporations. If BoA is getting flagellated from other directions, well, those are separate issues.
Alan,
No, it was Newt Gingrich’s Tax Relief Act of 1997 that created the housing bubble by turning professional house flipping into a tax free form of income. The rest was just normal human behavior driven by greed.
Also if the banks didn’t want Congress to flagellate them they shouldn’t have begged Congress for the TARP funds they received. They should have just took their impending bankruptcies as their just free market rewards for their poor management practices instead of threatening the country with economic doom in order to get bailed out.
I checked out a New York Times article on the act. The title reads “Tax Break May Have Helped Cause Housing Bubble,” but the graph clearly shows that the bubble started a few years before ’97. Therefore it may be a contributing factor, but it cannot be a cause.
Calling it Newt Gingrich’s law is disingenuous. The same article points out that Bill Clinton proposed the tax break at the 1996 Democratic Convention.
If I pour petrol on a bush and light a match, it is dishonest to say that the match started the resulting fire. The Tax Relief Act of 1997 might have been relatively safe in and of itself, but in this case the petrol consisted mainly of Greenspan’s insanely-low interest rates and the Community Reinvestment act. Business Insider has an excellent article detailing how CRA “required lax lending standards that spread to the rest of the mortgage market.” If I can get tax breaks or outright subsidies for selling an ungodly-expensive commodity, I can’t take advantage of the perk if nobody will lend me the money to buy said commodity. I’m not George Kaiser (Solyndra co-owner) or Ken Lay or anything like that.
Your remark presumes that house flipping was the bubble’s primary mortgage abuser. If that’s true, then why are people like Maxine Waters fighting tooth, nail and marrow to prevent bank foreclosures? If flippers were the main culprit, then prove it.
It is probably a little bit of everything.
In addition to any mortgage fraud that took place since the crash, regulations constricted their revenue streams, they made too many risky loans, and too made many poor acquisitions. Government meddling was significant in several of those areas.
Wodun,
Yes, normal greed, but the banks refused to take their medicine when their greed caught up to them, instead begging the government to save them.
If the banks except the government, and taxpayers to bail them out when things go bad, than they should expect to have limitations put on their behavior.
Here’s an idea. Pass a law that a bank will be able to become exempt from all banking regulation IF they sign an agreement they will NEVER ask the government to bail them out and they drop out of the government’s FDIC program, which is also a form of bailout. In short, let them live in the same world as the rest of us.
Instead of National or State banks, these exempt banks could call themselves “Free” Banks. Then let the markets work 🙂