“You don’t have some inherent right just to, you know, get a certain amount of profit, if your customers are being mistreated,” he said. Later, he added, “this is exactly the sort of stuff that folks are frustrated by.”
Those words, spoken in response to a question posed by an ABC news correspondent about Bank of America’s decision to begin charging a $5.00 monthly debit card fee by our 44th President, sent shock waves throughout the banking community this week. And, well, it should have.
He went on to say, “This is exactly why we need this Consumer Finance Protection Bureau that we set up that is ready to go,” Obama said. “This is exactly why we need somebody whose sole job it is to prevent this kind of stuff from happening. You can stop it because if you say to the banks, ‘You don’t have some inherent right just to – you know get a certain amount of profit. If your customers are being mistreated, that you have to treat them fairly and transparently.”
Now let me say at the outset that I don’t have any warm fuzzy feelings about too big to fail Bank of America. Every time they are held out for their lame-brained treatment of the consuming public (remember this summer’s robo-signing incident?) it hurts all banks, including community banks. But, if you believe in our free enterprise system, then you must admit that B of A has the right to model and price their product offerings any way they want.
Senior Democratic Senator Dick Durbin from the land of Lincoln, whose infamous interchange amendment prompted the fee to begin with, couldn’t wait to pile on. He used the announcement to offer this suggestion to B of A customers in a personal privilege speech to his colleagues on the Senate floor. “Vote with your feet. Get the heck out of that bank.” Is this the brave new world of civility and discourse we live in? Did a United States Senator call, from the floor of the Senate, no less, for a run on an American financial institution?
President Obama showed a modicum of political savvy as he later followed his advisors and backed away from his earlier comments. When asked in a subsequent news conference whether government has the right to dictate how much profit American companies make he responded, “I absolutely do not think that. Now (B of A) has the right, but it’s not good practice. It’s not necessarily fair to consumers.”
A couple of observations. First, Obama has shown his true colors and zest for creating the Consumer Financial Protection Bureau (CFPB) in the first place. Short of this country having a nationalized banking system, he wants bank product and price regulated, and he is willing to use the bully pulpit to suggest so. That is precisely what the industry feared when the new agency was constructed in Dodd-Frank. Only after speaking to Secretary Geithner and Acting CFPB Director Raj Date was our President reminded that the CFPB’s mission is in fact, not to regulate product and price, but to ensure financial products and fees are clearly disclosed to consumers in plain English.
Second, just what did our fearless leader and trial lawyer Senator expect would happen when they craftily inserted debit fee interchange price controls in Dodd-Frank? The banking industry warned that such limitation would dramatically affect debit card usage and likely result in higher fees for consumers.
I certainly do not suggest that all banks will follow Bank of America’s lead and impose a monthly fee on their debit customers. I only opine that there is inherent danger when government gets in the way of free enterprise and attempts to create winners and losers.
Our leaders should spend less time trying to interject public policy into free markets and concentrate instead on truly enabling financial institutions to fail, regardless of size, something they attempted to do in the financial reform legislation.
Bank of America doesn’t need their help in driving consumers to other financial institutions. They seem to be doing a pretty good job of doing that all by themselves.
