The market speaks to Bank of America

And BoA listened.

Bank of America earned over $6 Billion in the 3rd Quarter but a hidden revenue stream has been stiffled by the Dodd-Frank Act so they had to go out in the open and announce that they were going to whack debit cards users with a $5 monthly fee to make up for it. Customers resisted and the bank has backed down. I said in an earlier post that the $5 fee was a good thing because the big banks would have to put their fee schedules up front instead of hiding them.

That doesn't mean that they won't try to squeeze their cusomers in other ways.

Banks likely to try range of new fees

Consumers should prepare for even higher checking and overdraft charges, analysts said. If they use another bank’s automatic teller machine, they may well get hit with higher ATM fees. And if they want to receive paper statements in the mail, they may end up paying for that, too.

The Occupy Wall Street movement started getting media attention right after Bank of America announced the $5 fee. Most people don't know the in's and out's of financial policy but they know when they know when they are getting screwed. The TARP program was probably necessary but we don't have to like it. In my mind to big to fail should mean to big to exsist. The anti-trust laws seem to be a thing of the past.

Bank Of America Derivatives Timebomb Shows System Is Corrupt To The Core

If regulators were doing their jobs properly, banks would not be allowed to engage in massive speculation through derivatives trading. The near meltdown of the financial system in 2008 has resulted in thousands of pages of new regulations but has done nothing to reign in “too big to fail banks” or reduce systemic risk in the financial system.

Local banks and credit unions welcome the opprotunity to attract new customers.

Smaller financial institutions were promoting "Bank Transfer Day" on Nov. 5

Bank of America $5 debit card fee is a good thing

Hear me out.


First, the Occupy Wall Street protest that has been going on might get the attention from the TV networks and other mainstream media outlets that it deserves. From the coverage I've seen so far they are depicted as anarchists that deserved to be viciously attacked by the NYC police.


The reaction from BoA customers online crashed the company's website.

Smaller banks smell an opprotunity


Bank of America “struck the third rail on this one,’’ said Joe Bartolotta, a spokesman for Eastern Bank, based in Boston. “We think it will be an opportunity to attract new customers. People are fed up with fees.’’


My advice to BoA and other big bank customers is to join a credit union. I didn't even know what a credit was until I joined the Air Force and have been a member of one ever since. The rules for joining have been liberalized over the years thanks in part to former Congressman Paul Kanjorski's efforts. We have been members of the Cross Valley Federal Credit Union for years with no fees on our accounts. Even when I screw up the math in my checking account and overdraw it they just transfer money from savings and charge a $2 fee not $35 that the big banks hit you with.


One of my favorite economics bloggers, Kevin Drum, explains why this is good thing:


Bank Fees Finally Out in the Open


Unfortunately, it's hard to explain why this is, nonetheless, a good thing. But here's the nickel version: the old fees were largely hidden. The new ones aren't. Overdraft fees were deliberately designed to be unpredictable, unforeseen, and primarily aimed at low-income users. Swipe fees were invisible because the credit card industry is effectively a duopoly and prohibits merchants from adding swipe fees to credit card bills. After all, if they did that, consumers might actually see what they were really paying for the privilege of using credit and debit cards.



So yes: the new fees are annoying. But that's a feature, not a bug, because now they're right up front in black and white, which means that consumers will see them and can be properly outraged (or not) by them. This in turn means that the free market has a chance to actually work: consumers will abandon Bank of America if their fees are too high and force them to charge less. Likewise, other banks will compete openly on the size of their fees. In the end, this competition will force fees down to the lowest possible profitable level, which is exactly what competition is supposed to.