Bank of America, Wells Fargo, and J.P. Morgan Chase have announced that they will soon begin imposing monthly fees for the use of their debit cards. Others banks will likely follow suit.
Obviously, people are angry. And Obama is angry. This is not a good business practice, he said, “[Banks] don’t have some inherent right just to, you know, get a certain amount of profit...” (I wonder how much of a profit he thinks his government has an "inherent right" to.)
Contra Obama, banks did not just suddenly realize that they could be more greedy. There is a reason banks are imposing these fees almost all at once--the president's own regulatory agenda. The Durbin Amendment to the Dodd-Frank financial reform law gave the Federal Reserve the power to set limits on the fees banks could charge retailers for swiping their debit cards, which will end up costing banks almost $14 billion a year.
Since all banks subject to the regulations know that their competitors are also looking for ways to recoup the new costs, they can introduce these new fees on debit cards confident that other banks will do the same.
There are two possible explanations for Obama's reaction. The first is that he is an economic ignoramus and was genuinely surprised when the cost of a financial regulation he signed into law was passed on to consumers. Political leaders always get angry when they realize that they cannot overrule economic law. The second possibility is that Obama knew that the banks would pass the costs of his regulations on to consumers and planned all along to jump on the opportunity to blame them for the fee increases.
Incompetent or Machiavellian...why is it always so hard to tell the difference between the two?
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