Thank Dodd-Frank For Your Debit Card Fees
Politics: Damned as an "outrage" in the press, Bank of America's just-announced $5 monthly fee for ATM use was a logical and predictable result of a Dodd- Frank financial bill that fixed prices. Guess who gets to pay for it?
Throwing their weight around at the height of the banking crisis, House Financial Services Chairman Barney Frank of Massachusetts and Sen. Chris Dodd of Connecticut vowed to stick it to banks. They blamed them for the mess to cover up the fact that they forced banks to lend to favored constituencies who could not repay.
The two Democrats pushed through the much-vaunted Wall Street Reform and Consumer Protection Act, which President Obama signed and touted as one of the signature accomplishments of his presidency.
That act, which included a micromanaging amendment on fees, carried a $2.9 billion implementation cost for that alone over five years, according to the Government Accountability Office.
It was nothing but the same old pandering to special interests. Named after Illinois Democratic Sen. Dick Durbin, the amendment limited fees that banks can collect from sellers when their customers make debit card purchases - cutting 44 cent fees to 21 cents.
That little bomb is now why battered Bank of America has no choice but to impose a $5 monthly fee - $60 a year - to consumers to make up for lost revenue.
The "economics of offering a debit card have changed with recent regulations," a bank spokeswoman told ABC News Friday.
BofA says it stands to lose $2 billion from the arbitrary Durbin price-fixing amendment and now has no choice but to make up for the lost revenue some other way.
Now that consumers will be stuck with that fee, they can thank Dodd, Frank and Obama for that special little spike in inflation tailored just for them.
Other banks, by the way, might follow. And like banks, consumers may respond in a way that is logical to their interests, too.
As banks are forced to impose fees, it would not be surprising if some consumers responded by moving to a cash economy - the kind they have in places such as Argentina and Zimbabwe, where government meddling has trashed the banking system.
That's what happens in all economies where a government attempts to legislate the transactions of willing buyers and willing sellers and impose its own vision of what prices for particular transactions should be.
And in the end, it's always the people at the bottom of the economic food chain who get it - consumers.
Which is interesting because Democrats claimed to be standing up for the little guy with this "reform." "American taxpayers, many of whom were significantly harmed by the financial crisis, would have shouldered none of the burden for implementing the legislation," Frank promised.
In those palmy days of 2010, the Democratic line was straight out of the Gilded Age: Banks are thieves. Wall Street vs. Main Street. Union thugs invading branch banks and busing in baying mobs to the home lawns of bankers.
Now the reality is here: Democrats' rabid intervention in market mechanisms is pushing costs onto consumers. Like taxes, fixing prices always passes costs down to the little guy. Until Democrats understand this, banks should be identifying the $5 charge as the Dodd-Frank-Durbin-Obama fee.