6 Oct

How I Learned to Stop Worrying and Love Bank of America [Reader Post]

                                       

With the uproar over Bank of America introducing $5 monthly fees for the privilege of using their debit cards, there is an angle to this that everyone is missing – the law of unintended consequences. Wizbang’s Jay Tea blogged about this very point over the weekend, and I want to take his point a bit further. The law of unintended consequences is going to be one of the chapters in my ongoing (which will end up being nine or ten parts) Economics for Politicians series, but this particular incident warranted its own post.

First let’s step back a minute to the 1990’s when ATM use took off (causing mass unemployment) and they started popping up everywhere. No longer restricted to getting money from your bank, you could get them from any bank’s ATM. In fact, cash machines started popping up in places we would never expect – in bank’s branches at supermarkets, in shopping malls, and convenience stores. But like everything in life, there was a cost. If you used an ATM not belonging to your bank you got charged a fee not only by the bank owning the machine, but by your bank as well. People grumbled about them and still do, but we pay those fees for the convenience. I always thought the fees were ridiculous and thought that something should be done about them by lawmakers.

In the late 1990’s Investor’s Business Daily was required reading a class I was taking, and I came across an article addressing this gripe regarding ATM’s. The article made an excellent point that one of the reasons that ATM’s popped up everywhere was because banks could charge these fees. Banks are in business to make money, and allowing them to profit from these machines is what led these machines to pop up like daisies in so many then uncommon locations. The article also made an excellent point regarding anyone who still felt cheated by these fees – you could still use your bank’s ATM at no charge 24/7. Or for that matter, look at what options were available before the rise of the ATM. I came of age where my working career began just as ATM’s were emerging. I still remember the lines at the bank on Thursdays and Fridays to deposit paychecks and to withdraw money before the bank closed for the weekend. Or if your bank had weekend hours, it was a short window on Saturday mornings that meant more long lines. The ATM changed all of that. Now you had 24/7 access to your money, and the clincher for me was the fact that nothing that was available to you before was taken away. You still could see your neighborhood teller during business hours (with much shorter lines), and now you also had access to a 24/7 machine at no charge to you and access to vastly more if you were willing to pay a fee. Ban the ATM fees? Guess what will start disappearing in no time flat.

So now the Durbin Amendment of the Dodd-Frank bill now has banks making consumers pay to use their debit card networks because they are no longer allowed to cover the cost with merchant fees? Guess who you should be blaming. Are you wondering why banks are hesitant to loan money when Congress has seen fit to add so much regulation to "protect" consumers and make it easier for them to walk away from repaying their loans? You could blame Bank of America of course. But if you’re blaming them you’re probably already showing your outrage up on Wall Street. And as usual, your rage is misplaced – if you’re unhappy with B of A’s actions you should drive a few hours down I-95 and start walking on Capitol Hill.

This entry was posted in Economy, Politics, Taxes. Bookmark the permalink. Thursday, October 6th, 2011 at 8:59 am
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7 Responses to How I Learned to Stop Worrying and Love Bank of America [Reader Post]

  1. mathman says: 1

    Oh, Brother Bob.
    Do not confuse us with facts.
    Facts are such pesky things.
    We heart Dodd-Frank. We heart the trashing of banks.
    We heart Durbin the turban.
    We heart Keynesian economics.
    Don’t bother to try to educate us. We don’t need to be educated. King Putt is smart enough for all of us. Just follow the Pied Piper down the road to destruction.
    The whole financial crisis was started by Chuck Shumer, who started a run on a bank.
    And now Durbin wants a run on B of A.
    Who elects these clowns, anyway?

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  2. Greg says: 2

    Why financial industry reform was necessary: The Importance of Saving Money

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  3. Buffalobob says: 3

    Durbin, Frank, Dodd are either colossal morons or maybe we just have to follow the money. Did Barney and Chris really think it was fiscally sound to force banks to lone money to people that could not afford to repay let alone upkeep their homes? Did they not realize that once the rules were changed on lending practices and the Gov. would accept the high risk, the schemers would eagerly take free money? Did Durbin think that the merchants would pass on the savings of debit card fees to their customers? Altruism is a rare think, in politicians it is non existent.

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  4. Aleric says: 4

    Thank you for continuing to bank with B of A since doing so allows me to keep my job for a while longer.

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  5. MrBigW says: 5

    John Stossel did a great report of ATM fees years ago, one case i remember was a lady who owned the only ATM on a tourist island off i want to say NC. She charged a 7.00 transaction fee which every one but the merchants bitched about…WHY… Because most of them were cash only shops and once a person ran out of money they had to take a ferry back to the mainland to get more.. By this lady opening an ATM people were able to spend more and it provide them more time on the island…

    But she was the one taking all the risk, She had to buy the machine – build the building – pay the insurance – hire an armored truck to take the ferry over every week to fill the machine- fill out all the gov’t paperwork…etc… no one was forced to use her machine…

    W

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  6. Claire Solt says: 6

    We are being fed a line of bull. The gov nationalized banks and housing. The banks are just vehicles for laundering money from the Fed to the treasury. They are doing what they are told. Kudlow calls them Zombie banks. This litttle spat about swipe fees covers up the thousands of complaints and myriad lawsuits about mishandling of credit cards. I closed my accounts after they pulled an amazing stunt in January. I authorized a $150 payment against a $300 balance by online banking. When I checked I saw that the payment had been refused. BOA gigged me with penalties in both checking and credit accounts. Then they blocked access to this account for six months. As I processed this scenario I was contacted about 2 class action lawsuits and saw thousands of complaints online. So I moved to a little local bank with a five star rating. I have so much more money that I had had for a couple of years. I think they were stealing me blind with debits on Keep the Change. Yesterday, I got a statement on a savings account I closed in person five months ago. It asks for management fees for the last three months. They are and have been acting desparate money grubbers under the close scrutiny of the government.

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  7. Dan says: 7

    cue Yosemite Sam:

    I haaaaaaaaates banks.

    I’ve avoided bank accounts since the ’70s. I have a credit union I joined in Maryland in the middle ’70s that has served me well all this time. I’ve, since joining the CU, lived in at least six states and one foreign country, plus spent time in several other foreign countries. My home mortgage is also through my credit union.
    The credit union took care of me and has always been there when I needed them, even by collect call from overseas.
    I will do my best to NEVER have a “normal” bank account ever again for the rest of my days. The one bank I do do business with is USAA for credit cards and car loans on occasion. (I also have done car loans through my credit union).

    ReplyReply

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