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AP Photo While the government bails out big banks, the big banks squeeze the little guy. The Daily Beast’s Nomi Prins calculates how individual banking fees fund their risky activity.
Too big to fail means big enough to screw taxpayers twice.
That’s my conclusion after a few weeks of combing through FDIC databases, trying to calculate the price to consumers following the decade of bank consolidation—following the 1999 repeal of the Glass-Steagall Act—that reached a government-sponsored peak during last fall’s economic crisis. As banks keep merging, so does their share of our deposits. In 1998, the five largest U.S. commercial banks held 19 percent of total domestic deposits. In 2004, they held 27 percent. And since the Federal Reserve brokered marriages of the largest banks last fall, it is now 40 percent.
Not only do big banks charge higher service fees for the luxury of taking your checking deposits and using them as capital for other ventures, but the interest they provide is comparatively abysmal.
In layman’s terms, this means that the biggest banks enjoy increasingly captive power over their customers—the opposite of competition in the so-called free markets. That dominance provides the inner-circle banks every incentive to do everything they can to profit from their newly acquired customers (and old standby ones). After all, our deposits, plus fees and charges, represent the highest quality of real money for them to work with. That’s aside from the backing we’ve involuntarily provided through various federal sustenance programs.
Captive customers are very lucrative. Nearly three-quarters of banks’ total service charges of $34.3 billion in 2008 came from overdraft or NSF (not sufficient funds) fees.
That’s our money. It’s not like banks don’t require payment for their services in order to sustain them, but the problem with the biggest banks is that they extort disproportionate sums from customers relative to the smaller banks, in almost every way.
In general, not only do big banks charge higher service fees for the luxury of taking your checking deposits and using them as capital for other ventures, but the interest they provide on these, and savings accounts, are comparatively abysmal relative to smaller banks. Citigroup, Bank of America, Wells Fargo, and J.P. Morgan Chase don’t even make the top 25 in highest savings interest rates provided.
Yet the rates bigger banks charge to lend money are higher than smaller ones. Big banks like Wells Fargo charge an average annual rate of 14.2 percent for its credit cards, Citibank (the consumer-banking arm of Citigroup) charges an average of 15.99 percent, whereas smaller banks like First Command Bank or CNB Bank charge just 4.5 and 5.25 percent, respectively.
• Jeff Madrick: Why Washington Won’t Prevent Another MeltdownThough banks aren’t compelled to disclose how much of their profit comes from fees, the Service Employees International Union has done some good research in this area. Based on their research, J.P. Morgan Chase’s bank fees comprised 71 percent of its profit for the first half of 2009, or $3.45 billion. Citigroup earned $326 million in service and credit-card fees, or 95 percent of its profit for the same period. Bank of America made $5.26 billion in bank account fees, 70 percent of its profit. Much of the rest of their profit came from trading revenue, predicated on risk-taking on the back of capital raised either through federal support, or using our deposits as collateral on which to lend or borrow.
Overdraft charges are administered not only to people who don’t have enough money in their accounts to pay their bills, but also to customers who may keep enough money in their savings account, but get slapped for not transferring it at the appropriate moment to their meager-interest-rate checking account.
Media and congressional noise about these egregious practices prompted Senate Banking Committee Chairman Chris Dodd (D-CT) to unveil the Fairness and Accountability in Receiving Overdraft Coverage Act, which would force banks to rethink them. Among other suggestions, Dodd’s act requires banks to gain customers’ "opt-in" approval for their overdraft programs. Less than a week after Dodd announced drafting the legislation, J.P. Morgan Chase, Bank of America, and Wells Fargo responded by voluntarily announcing changes to their overdraft programs—in the hope of thwarting Dodd from going through with it, but that didn’t work.
View as Single Page 12 Back to Top November 2, 2009 | 12:43am Facebook | Twitter | Digg | | Emails | print Too Big To Fail, Banks, Business, Wall Street, Riegle-neal Act, Fairness And Accountability In Receiving Act, Service Employees International Union, Bank Fleece, Bank Ripoff, Big Banks, Jpm Chase, Glass Steagall, Tarp, Chris Dodd, Meltdown, Economic Meltdown (–) Show Replies Collapse Replies Sort Up Sort Down sort by date: octavio
Nov/2/2009/1:48 A.M. Not to long ago,George W.Bush made a deal with the banks. He told the banks: In exchange for your campaign contribu- tions ( bribes ) I allow you to screw the USA banking custo- mers as much as you want. He did it.George W.Bush gave the banks every thing they wanted.George W.Bush became the banks' s whore for many years. These crooks are still around.We need to prosecute Bush/Cheney as soon as possible. Banks are like lawyers.First they will steal your money.Second they will suck your blood. The government needs to stop giving money and going to the rescue of these crooks.Let them fail.We need to clean house,we need to start with the three credit bureaus. These credit bureaus are also the banks whores,they had ben screwing the taxpayers for years.
It was WJC who signed the 1999 law that started this era of banksterism in the US. He bent over for Wall St. in order to get their support; he needed it to beat the rap for sodomizing an intern, and lying about it. He's responsible for the debacle, as is Alan Greenspan whom WJC re-appointed; W comes in a (very distant) third. Why it's taken the media so long to connect the dots, I don't understand. George Patton
WJC signed the bill authored by Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa). Telling only half the story is dishonest.
The Gramm-Leach-Bliley bill was so fully supported by the right that it had a veto-proof majority vote; Clinton didn't have an option. So, Patton, you're only partially correct or your selectively lying to make the story seem like it's all Clinton's fault.
Really, because if memory serves me correctly the 106th Congress was a 55-45 split in the Senate (R to D) and 227-221 (R to D) in the House. So explain how Clinton didn't have a veto option (assuming all "D's" would have been against this bill)?
Sodomy? Only a Wal-Mart shopping chrisitian would refer to WJC's encounter with Lewinsky as sodomy.
Octavio, I agree completely. I honestly think that banks have forgotten how to make a profit as banks are supposed to, through lending, banking services, etc. When such a huge proportion of their profits come from fees, something is wrong at the heart of banking practices. They have become too used to gambling as though they were at a casino with our money, that they know nothing else. I'd love for the government to break these giant banks up to restore true competition to the marketplace. As long as the big banks are so big, they can just drive the little guys out of business, slowly and surely.
Here are two versions of the same comment. High tonic prose and poem, the same words in the same order. What we should do, as a people, about recalcitrant money lenders; one of the planks in my independent candidacy for president. Uncle Sam Shazam The credit card anchors are pulling us down; wrecking America's dream. Their charge-it schemes come with hooks too deep to fathom. They dip both ends of the stick, skimming the sales with nets the fish cannot slip; then at the swipe of your card they reel out their dough, riding your line on the rate you agreed to, the total you owe. Horrific stories abound. You pay your bills online on time. Build excellent credit. Then one night your laptop freezes. By a tock of the clock, you're late. Your interest rate jumps double digits, off the chart. Then you get the call. Sopranos on your cell. Yet credit card folk appear angelic, necks to pay-check advancers who prey on the broke. The payday people put fifteen bucks on a hundred, their max two-weeks flat, and grinningly tell you, "That's 391.07 percent per annum." The credit card giants and check advance dealers have something in common: The same filthy hands. Price fixers violate law. But their scams for scramming money are apparently legal, their shades, miniscule. We need a public credit card option: The Uncle Sam Shazam! The statute will read, regardless of your credit, an income guarantees your Shazam line comes with Shazam agreement: Uncle Sam Protection, the interest fair, plainly written clear, a teensy rate with excellent credit, higher for chronic late payers, your monies compounded quarterly. The shops accepting Shazam can expect livable fees for all their transactions. You make the call, the citizen who flashes glam of Shazam, guaranteed extension. Uncle Sam Shazam is a boon for Congress, too. Suggesting, "Public Option," burns their pocket through; halls of the Congress crowed by lobbyists, ducats by the bucket full. On Capitol Hill, lobbyists and prostitutes go far, share the same car. All aboard pay the fare, get their due. Senator Max Baucus snatched three million pesos from the health care execs. Their single payer plan insures every body single, pesos them, unless you get sick. Then you don't have a prayer. Lobbyists for entrenched purveyors will exercise their protection racket, rising to the call, stuffing campaign pockets up and down the hall, thousands for their elections, quid from the pros for Members of Congress all, to snub the Shazam, refuse to hold hearings, issue tabled, snubbing Nobel Prize winners on whether or not to consider saving us one trillion bucks a quarter. Oh! That Shazam Card interest payment? That's in the statute. Interest goes to pay vigorish due on our national debt! I explained this idea to my banker: The public option for private creditor debt. The manager exclaimed, " We'll be back in the black." Unless we draw down our world wide debt we will soon be secondary rated, our vigorous dollar slashed! That's the debtor etch on the window; why worldly executives self-inflict with repugnant piles of money, G'zillion dollar bonuses that dwarf their pay. They sense devaluation is coming our way, trillions of deboned empty dollars ushering steep dénouement, their inflation plan, stash while you can. How long after 2012 before one stick of Wrigleys will chew up a dollar? When I was a kid five sticks cost a nickel. One dollar covered an emergency trip to Doctor Greunfeld's, a block away. A chunk of coal was stuck in my eye. Those days are gone. My eye is OK. When our economy slumps in a funk, instead of braying for the Federal Reserve to adjust money cost, we can bump the Shazams of all our working folk 500 bucks, interest and payments not for six months. When the bottom is up, our economy pumps; their Fed economy, anomaly. What about dead beat non-payers? Oh? What about that income tax refund? Besides the vig from our national debt, Shazams' net, locked and boxed to square medicare, saving trillions, we have home land security snookered, re-spoken for by Great Sam Uncle Shazam. The conspiracy crowd shouts I'm nationalizing private debt, Uncle Shazam will get in our lives deeper yet, find out to whom we owe, and for what. That's right! Grin and get bare with it, the great skinny dip, our ship of state buoyed by Shazam; our all purpose patriotic ticket. The government taps your transaction information and sweeps every move. Times where you go. Sees what you do. Good. Shazam dissolves their queasy need to tap our phones en masse, listening to one maybe wannabe terrorist! Cells qualified for spot checks should belong to those who hide behind cash. With Shazam we regain our homeland security, the privacy of our home spoken thoughts, sanctified in our sanctuary. You approach an ATM. Insert Shazam, punch in your pin, whisper magic word, greenback appears. (Shazam magic word.) The credit card anchors Are pulling us down, Wrecking America's dream. Their charge-it schemes Come with hooks Too deep to fathom. They dip both ends Of the stick, skimming The sales with nets The fish cannot slip; then At the swipe of a card They reel out their dough, Riding your line On the rate you agreed to, The total you owe. Horrific stories abound. You pay your bills online On time. Build excellent Credit. Then one night, Your lap top freezes. By A tock of the clock, You're late. Your interest rate Jumps double digits, Off the chart. Then you get The call. Sopranos on your cell. Yet credit card folk Appear angelic, necks to Pay-check advancers Who prey on the broke. The payday people put Fifteen bucks on a hundred, Their max two-weeks flat, And grinningly tell you, "391.07 per cent per annum." The credit card giants And check advance dealers Have something in common: The same filthy hands. Price fixers violate law. But their scams for scramming money are apparently legal, their shades, miniscule. We need a public credit card option: The Uncle Sam Shazam! The statute will read, Regardless of your credit, An income guarantees Your Shazam line comes With Shazam agreement: Uncle Sam Protection The Interest fair, plainly Written clear, a teensy rate With excellent credit, Higher for chronic Late payers, your monies Compounded quarterly. The shops accepting Shazam can expect livable fees For all their transactions. You make the call, The citizen who flashes Glam of Shazam, Guaranteed extension. Uncle Sam's Shazam Is a boon for Congress, too. Suggesting, "Public Option," burns their pocket Through; halls of the Congress Crowed by lobbyists, Ducats By the bucket full. On Capitol Hill, lobbyists And prostitutes go far, share The same car. All aboard Pay the fare, get their due. Senator Max Baucus snatched Three million pesos From the health care folks. Their single payer plan Insures every body single, Pesos them, Unless you get sick. Then you don't have a prayer. Lobbyists for entrenched Purveyors will exercise Their protection racket, Rising to the call, Stuffing campaign pockets Up and down the hall, Thousands for their elections, Quid from the pros for Members of Congress all To snub the Shazam, Refuse to hold hearings, Issue tabled, snubbing Nobel Prize winners On whether or not To consider saving us One trillion bucks a quarter. Oh! That Shazam Card interest payment? That's in the statute. Interest goes to Pay vigorish due on Our national debt! I explained this idea To my banker: The public option for Private creditor debt. The manager exclaimed, "We'll be back in the black." Unless we draw down Our world wide debt We will soon be Secondary rated, our Vigorous dollar slashed! That's the debtor Etch on the window; Why worldly executives Self inflict with Repugnant piles of money, G'zillion dollar bonuses That dwarf their pay. They sense devaluation Is coming our way, Trillions of deboned empty Dollars ushering steep Dénouement, Their inflation plan, stash while you can. How long after 2012 before one stick of Wrigleys will chew up a dollar? When I was a kid Five sticks cost a nickel. One dollar covered An emergency trip to Doctor Gruenfeld's, A block away. A chunk of coal was Stuck in my eye. Those days are gone. My eye is OK. When our economy Slumps in a funk, Instead of braying For the Federal Reserve To adjust money cost, We can bump the Shazams Of all our working folk 500 bucks, interest and Payments not for six months. When the Bottom is up, Our economy pumps; Their Fed economy, anomaly. What about dead beat Non-payers? Oh? What about that income tax refund? Besides the vig from our national debt, Shazams' net, Locked and Boxed to Square medicare, saving Trillions, we have home Land security snookered, Re-spoken for by Great Sam Uncle Shazam. The conspiracy crowd shouts I'm nationalizing private debt, Uncle Shazam will get in Our lives deeper yet, find Out to whom we owe, And for what. That's right! Grin and get bare with it The great skinny dip, our Country buoyed by Shazam; All purpose patriotic ticket. The government taps Your transaction information And sweeps every move. Times where you go. Sees what you do. Good. Shazam dissolves their Queasy need to Tap our phones en masse, Listening to one maybe Wannabe terrorist! Cells qualified for spot Checks should belong to Those who hide behind cash. With Shazam we regain Our homeland security, The privacy of our Home spoken thoughts, Sanctified in our sanctuary. You approach an ATM. Insert Shazam, Punch in your pin, Whisper magic Word, greenback appears. (Shazam magic word.) Michael Stephen Levinson michaelslevinson.com
I think we can all agree that you need to take this stuff elsewhere. No one wants to read your attempts to implant entire blogs into the comments of other articles. You constantly put your novels into these postings, why? It is just a nusance.
octavio - I agree they (banks) should be allowed to fail. However, time for a wake up call. Both Republicans . . . AND . . . Democrats . . . are bought off. Time to stop looking through Far Left or Far Right Glasses.
connie47: You're implying that a Republican would be lying, are you?
Ladies and Gentlemen: Intheno, etc.: WJC didn't have an option because of his own actions. That's the whole, sad story. George Patton
"What" actions? You're just pointing and saying: "Hey! Look over there!"
" the government bails out big banks " Beg to differ. Seems the Working People of America bail out the Big Banks. Seems the Government gets it's money from the Taxpayers, unless you consider them PRINTING Money, and doesn't printing devalue the Dollar ?
Thank you Ms. Prins for your illumination of the ditch we Americans are currently stuck in. This climate of corporate profits, pleasing shareholders, and pumping up #'s through any means possible (fee's vs. true banking) is literally destrouing our society as evidenced by what is going on all around us today. Foreclosure, unemployment, debt collection crooks, crazy APR's, even crazier fees, bailouts, bonuses and an American spread sheet that reads like a 4th world nation. Most everyday folks do not know the extent to which our supposed leaders in business are robbing us without a gun, and destroying our way of life in the name of their bottom line. Many commenters here are rabidly blaming WJC, W and the like. This is typicalof the way society is today. Lots of talk, opinion, editorial and all the while so many families and kids are suffering terribly. So much fraud within the Wall Street firms, banks, communications, oil, energy markets in the last few years. When does someone stand up and say that there are crooks amongst us disguised as bankers, money managers, mortgage brokers and the like. President Obama was brilliant when discussing businesses that are registered abroad. When he said "19,000 American businesses are supposedly located in that one building abroad. Either that is one giant building, or something is wrong here". Brilliant. ONly the little guy gets hurt when these people in positions of power abuse their reach and begin to covet others money. Let me remind all of us that there are probably only about 500,000 people in this country pulling down obscene amounts of money based on technicalities, lawyers and lobbyists, whil the other 290 odd million of us struggle. And these days the struggle includes foreclosure, financial ruin and worse. People are not standing up for their rights to live and work in this country. We must all revot and let these people who are destroying our way of life know that it is unacceptable. I guess we are all so busy juggling bills, surfing the net, twittering and playing around on facebook to think about the serious issues we face and the threat our way of life is confronting. Wake up America!!!
Bravo!
Nomi I like you. You hit the nail on the head. What's disturbing is that these banks are fleecing the people who need the money the most: the working poor who live paycheck to paycheck. I have a friend who in one year was charged $1900 in bank fees by BofA. Another friend didn't believe me when I told her how they hold deposits to maximize on bank fees: They will hold your paychack then cash checks that were written AFTER you deposited money so they can charge you a $30 overdraft fee (they use the BS excuse that the funds were not available). When she had a child and became one of the working poor, she soon learned the truth of their shoddy business practices. CONSUMERS! Stop wasting your hard earned money with these crooks! Take your money to a local credit union!!
Wasn't the original legislation put in place for a reason? As checks and balances? What makes us think we don't need those protections? By now, people should be aware that any attempt to "overturn" a previous law is a cause for concern. Nowhere is that more true than when the law being overturned is the Constitution. Maybe, just maybe, we'll pay better attention next time (though that's doubtful).
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