The Banksters' Revenge

David Lazarus tossed a whole bunch of furniture at the banking industry in his latest column. Apparently the recent consumer protection legislation drafted to outlaw some of the more egregious practices of the banksters annoyed them. Their response was hardly surprising.

Happy new year. Now pay up.

That's the message from our friends in the banking industry, who are introducing all sorts of fees and changes as a slew of regulations take effect designed to make financial heavyweights friendlier to customers.

From costlier checking accounts to higher credit card fees, banks are scrambling to find ways to compensate for as much as $50 billion in annual revenue that could be lost because of the tougher rules and requirements. ...

... banks are cheesed because lawmakers are showing some uncharacteristic backbone when it comes to consumer protection, and they're turning the screws because, well, they can.

Never mind that just about all the big guys in the banking world are still on their feet primarily because taxpayers stepped in with billions of dollars in bailout cash. That's ancient history.

Now it's all about making up for the money that used to spill into bankers' pockets from arbitrary rate increases and practices such as automatically signing people up for overdraft protection -- and then nailing them with fees whenever a transaction went over the limit.

That's a pretty accurate assessment from where I sit. My own small community bank got involved in some of the shenanigans with respect to imposing over-draft protection. Because it is small, however, a quick phone call advising that I wasn't interested in the service, so they could remove it was all it took. I imagine a lot of other customers who don't read the fine print as obsessively as I do didn't make that call until they started getting hit with $35 over-draft charges imposed on top of the $25 rubber check fee.

But, as Mr. Lazarus points out, there's more in store as a result of the new legislation:

Some new regulations, such as requiring 45 days' notice for any significant credit card changes, were introduced last year. Others, including limits on rate increases and new disclosure requirements, take effect next month.

In response, many banks have been lowering the credit limits of millions of customers and raising rates. They've also been switching fixed-rate cards to variable rates that won't be subject to the new rules and imposing "dormancy fees" for plastic that doesn't get a regular workout.

The banking industry assures us that it's not a matter of revenge, it's just the need to cover their costs. Baloney! It's just a desire to make as much money off the rubes as they did the last few years before the bubble burst, more money, if possible, so that the shareholders stay happy and keep approving those generous salaries and bonuses. Mr. Lazarus spotted that as well:

I love that banks are saying this is merely the free market in action. Where were all those market forces when these guys were making staggeringly reckless investments in mortgage-backed securities, or when their losses started running into the billions of dollars?

This isn't about market forces. This is about good-old-fashioned greed, and the need to keep shareholders placated as the banking industry tries to adjust to a new era of transparency and scrutiny.

I hope Sen. Chris Dodd gets emailed this article (wink-wink). Now that he doesn't have to worry about re-election, he just might get serious in pushing through a legislative package that addresses the greed and fraudulent practices of an industry the taxpayers just spend hundreds of billions of dollars to bail-out.