Tossing and Tortured 'Till Dawn

I come back to you now, at the turn of the tide.

Monday, October 17, 2011

I saw quite a few Guy Fawkes masks this morning, and, I will admit -- especially as a fan of "V for Vendetta," and, one who enjoys the IDEA of rebellion, marching against the Man, whoever that may be. (I'm the fucking man, and you're the fucking man as well?)

And, yet, I suppose I am "moderate" in my views on banking. It makes the world go round, right?

I have found myself in a number of conversations about banking of late. Yours truly has one foot solidly planted in the middle class, but another which, if feet had memories, would remember what it is like to borrow money to pay rent.

The below was my response to a discussion about the matter, and I thought I'd save it here.

This is where it comes down to a matter of politics and philosophy, I suppose.

"Greed" is a funny thing. I think what people are concerned about is that banking is very good business, and makes a lot of people a great deal of money -- but by and large the people who make money through banking already have a great deal of it.

Of the great deal of money to be made in the banking sector, a fairly modest amount of it is in the simple retail banking section as is traditionally explained -- that is, taking in money on deposit and lending it out at interest.

To increase profitability of retail banking, corporate banks like BofA raise a bunch of money through fees. New legislation has curtailed the old fees, which tended to be "under the hood," if you will -- such as the old way of doing overdraft fees, or, over-the-limit fees on a credit card. The new ones are more overt, like the debit card fee, or, account maintenance fees / annual membership fees for credit cards.

Yes, coporations are people, as we've recently heard, but some people object to the transfer regime from lower-income folks to those with higher incomes, and, especially, with higher wealth.

The first two quintiles of income, as bank consumers, especially in the previous era, paid money for the services they received. The higher income / wealth folks largely received money for keeping their money with the bank -- and of course the highest compensated employees of those banks also earned lots.

I'd suspect most of those mid-to-lower income folks, if asked up front if they'd like to pay for their bank account with, for instance, $150 annually in fees, they might have demurred. Since they did not expect to pay them on the "free account," this was easier, and the fees snuck up on them when they fell foul of the fine print.

Now that the fees, of, say, $8 per month for the account and $5 per month for the debit card, are out in the open, many are electing to flee to the relative respite of credit unions -- which still work to earn money for stakeholders, but, do not have to be concerned with nondepositor shareholders, large executive salaries, or, indeed, taxes on their profits. This last is an oft-forgotten cost advantage of credit unions with respect to retail banks.

I do not fault for-profit banks for charging for their services, but I believe the way that they were previously collected was and still disingenuous.

Note: I agree with recent changes, like the Fed's banning of overdraft fees without preauthorization, even though these changes cost me money. I read the fine print. I didn't pay a dime in these overdraft charges, credit card overlimit fees, what have you. Instead, I reaped the rewards of cashback bonus debit and credit programs, even though those programs were funded with the fees paid by less-fortunate, less-attentive customers.

I think everyone ought to watch where they walk. But, simply placing a sign reading "caution! Mines!" and providing a small-print map of their location does not mean I agree with collecting the valuables of those who misread or ignored the map and were blown up.

SO: Do you like playing minesweeper?

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