Then there’s the “are we really supposed to start using cash again?” angle. Or the Durbin angle — Senator Dick Durbin being the Illinois senator whose amendment to the new financial reform law, imposing a steep reduction in bank interchange fees, “forced” banks to search for ways to make up for the lost revenue. There’s even a presidential angle, with President Obama saying on Monday that banks didn’t have “some inherent right” to a certain level of profits — and then more or less withdrawing the remark the next day.

Me, I’m going with the gouging angle. The revenue that Bank of America, and many other banks, is seeking to replace with its new fees is lucre that a more honorable profession would never have touched in the first place. Indeed, 30 years ago, banks themselves would have turned their backs on it. Of course, back then, banks viewed customers as people to be helped, not marks to be taken advantage of.

It was, to be sure, a different world then, with regulated interest rates, the Glass-Steagall Act preventing banks from getting into lucrative trading and a sleepy business model that valued a steady dividend over a highflying stock price. As interest rates were deregulated, Glass-Steagall abolished and investors demanding that bank stocks perform like Internet stocks, that ethos changed. Banks began looking in some dark corners for new revenue; this is when hidden fees began to creep into credit-card agreements, for instance.

In retail banking, two new fees became crucial. One was overdraft fees, which gouged the least-sophisticated, least-wealthy customers by charging them $35 or so whenever their accounts were overdrawn.

The second source was interchange fees, which gouged merchants who accepted debit cards. Though merchants at first resisted debit cards, they eventually caved because banks made them so ubiquitous. Banks pushed debit cards in part because they are much less expensive to process than checks (which banks lose money on). But banks also got hooked on the absurdly high interchange fees they charged merchants — an average of 44 cents per transaction, even though it costs literally pennies to process a debit-card transaction.

In the summer of 2010, the Federal Reserve told the banking industry it could no longer charge overdraft fees unless customers “opted in.” To its ever-lasting credit, Bank of America, unlike its competitors, did not run a big scare campaign to persuade customers to agree to the opt-in. It chose to forgo the revenue, which amounted to some $3.3 billion, according to Credit Suisse.

The Durbin amendment tackled interchange fees. It called on the Federal Reserve to cap the fees at a level that “reasonably” accounted for the cost of processing transactions. Although the Fed’s final number was still ridiculously high — well over 20 cents — it will, nonetheless, cost Bank of America another $2 billion.

The news that Bank of America will impose the new debit card fee has infuriated many of its 50 million customers. But the bank insists that it’s not trying to alienate its customer base. Rather, a spokesman told me, the fee is part of “a much larger reconfiguration of our consumer business.” Next year, it plans to roll out a series of new offerings, most of which will be fee-based. Customers will be able to evade the fees only by maintaining large balances at all times.

One suspects that these new fees will only generate more anger, for they will make plain what has long been hidden: that, fundamentally, retail banking makes its money by gouging the have-nots. Post-financial crisis, the essence of big banking has not changed. It’s just become more obvious.

President Obama got it right the first time: Banks don’t have an inherent right to oversized profits. No industry does. Banks play a special role in society, and they get special protections from the government. In return, government has the right to impose special responsibilities.

Every person needs a bank, no matter how rich or poor. The government will never force Bank of America — or any other bank — to reduce or eliminate its fees; it doesn’t have the nerve. But, at the least, it could insist that banks display their fees in a uniform way so that customers can compare how they’re being gouged and make banking decisions on that basis. That kind of reform could stir competition and bring down fees.

This, of course, is precisely what the new Consumer Financial Protection Bureau is supposed to do — and would do if the Senate Republicans would ever allow a director to be approved.

But, sigh, that’s a column for another day.

Article source: http://feeds.nytimes.com/click.phdo?i=e3716fbd68ae666f7ca46c10e3990979