The White House and Illinois Sen. Dick Durbin have come out swinging—hard—against Bank of America over the new $5 per month fee it is charging its customers who use a BofA debit card.
The president told ABC News he hoped that "you're going to see a bunch of the banks say this is not good business practice." Reminding the banking behemoth of the money it had gotten from the federal government in its bailout of Wall Street, Durbin called the fee "an outrage" and urged BofA depositors to bank with their feet and take their business elsewhere.
"Get the heck out of that bank. Find yourself a bank or credit union that won't gouge you for $5 a month and still will give you a debit card that you can use every single day," Durbin, the Senate's No. 2 Democrat said.
[Vote: Are Debit Card Fees Out of Control?]
It's hard to remember the last time a major U.S. politician advocated a run on a bank but, as we've already seen, BofA is "too big to fail" so there's no worry there. What's one more bailout among friends? The issue of the new fees, however, is somewhat more profound. No one particularly likes them, but not liking them and understanding why they have been imposed are two fundamentally different things. As for the complaints from Obama and Durbin, the gentlemen, to quote Shakespeare, "doth protest too much."
American Bankers Association President Frank Keating, in an exclusive to Politico Tuesday, explained it this way:
It's disappointing and puzzling that the president would attack a private corporation for responding to government price fixing that has fundamentally altered the economics of offering a debit card. As a direct result of the Durbin Amendment, consumers have started paying for financial services they previously enjoyed free of charge. Unfortunately, this proves that whenever government tries to control pricing of a product or service, consumers lose.
[Rick Newman: 5 Ways to Beat New Bank Fees]
It's all too predictable, especially the complaints coming from the same politicians who supported the law that led to the imposition of the fee. What's happened with BofA is a perfect example of the law of an unintended consequence that everyone should have seen coming every since Durbin proposed and Obama signed, as part of the massive Dodd-Frank legislation, a provision that imposed these new regulations on debit card interchange fees.
Durbin and Obama got what they wanted. They should be happy. Instead they're leading the complaints because BofA, acting as one should have expected they would, simply passed the costs it incurred because of the Durbin Amendment on to its customers. It's kind of like the old joke about the young man who murders his parents and then asks for mercy from the judge because he's now an orphan.
- Video: How to Beat New Bank Fees
- Check out a roundup of editorial cartoons on the economy.
- Read about the five key economic battles that await Congress.
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Grace of AL 8:25PM October 12, 2011
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Bill Hedges of MO 5:53PM October 05, 2011