The Republicans have recently made themselves even more laughable by calling the greatest capitalist who ever lived, Warren Buffett a socialist. Despite these claims that discredit the word, the president of the U.S., and his Senator crossed a dangerous line in the last week.
The government has for years regulated certain industries but take a look at some of these comments: This Monday Senator Dick Durbin gave a 14-minute speech on why customers should stop doing business with Charlotte-based BofA. Durbin called BofA's recent decision to charge debit card users a $5 monthly fee an "outrage" and "gouging their customers." He said customers should find a bank that didn't charge to have a debit card. "Bank of America customers," he pleaded. "Get the heck out of that bank."
The worst part is Obama echoed his view. Why are politicians voicing their displeasure against one bank, what a joke. The bank should be allowed to charge what ever fee it wants.
All banks are beginning to raise fees since the Durbin Amendment was passed. This reform takes money out of the banks pocket and gives it to retailers. Banks don't like this since they enjoy profit. And before people comment that they all ready make enough money. Lets remember Apple is going to make $30 billion this year. The government could force them to lower their prices by $100 per product. But how come banks do people get so upset with? Perhaps their service is more important than a Mac computer but its still a business which will try to balance profit and customer. The customers who think they should get a free ride are as stupid as Durbin and Obama who are telling customers to leave a public company. The customer is free to put their money at some crappy credit union and BAC knows that they can replenish its profit by hurting the consumer. People should be most mad at the government not the bank.
When the government interrupts the market it creates a dead weight loss. Now retailers will get more money banks will charge more money and less spending will take place in the economy.
This is why Republicans argue for less regulations. Sometimes these Republicans are wrong but here they are right. The Obama administration is a joke.
Look at the public reaction to Steve Jobs' death. He innovated, created products and changed the world. Can you say the same of any of our banking executives? Can you imagine a similar reaction to the deaths of Jamie Dimon, Lloyd Blankfein or Dick Fuld?
ReplyDeleteWe lost a great American yesterday. We lost a Ford, an Edison, a Rockefeller. Bankers are unpopular and a dime a dozen, the public is increasingly growing antagonistic toward our financial system. Expect this chasm to grow, and expect politicians to channel that frustration by increasingly hampering the banks. Tis the new normal and I can't say I'm shocked.
I never mentioned Steve Jobs who is a visionary.
ReplyDeleteMy point was the government cannot say a company should make less profit not matter what industry it is. That is not their place.
Lastly no one in corporate America would get that reaction but Jobs. So its an unfair example. To say A is right because the public like all of A. When in reality it is just Jobs. My point is you can't tell Dell to charge less. People care as much about Michael Dell as Jamie Dimon
What I do not get is if the prior debit card intercgahnge rate was so unfar, why is it that only banks with a market cap of 10 billion and greater have to cap the rate? Why does it not apply to all banks period!
ReplyDeleteWhat do you mean it was unfair?
ReplyDeletePeople seem to live in their own little world when it comes to banks. And that any little fee is bad. You should seriously see it here in Canada. And you want to talk about high fees. Nothing in Canada is free. The government decided to make banking more expensive in the U.S. what can the banks do but hurt the consumer.
Its the government to blame. They are the ones putting on the tax.
1% per transaction seems fair to me given how much debit card increases sales for merchents. And they are allowed to add their own surcharge. I am sure if you sell guitars you forgo 1% so the transaction gets done. Thats what we call business. The banks adds value in liquidity. Lets have a whole economy with no banks!
It doesn't apply to banks under $10 billion since these banks are getting special treatment even though way more of these banks failed then larger ones. And if anything large banks are the ones which save these crappy little banks.
I'll admit Steve Jobs is a bad example. I felt a need to mention him because of his recent passing (I mourn in public). But I do think Michael Dell will elicit more reaction than any banker.
ReplyDeleteI agree the government should not be interfering with the banks, they are private companies after all. However, a line was crossed these past three years. Deregulation (if you can call it that) led almost to a collapse of our economy and the government bailout out these banks. Once the government decided to buy up shares and guarantee bank assets, it was too late. Frankly, we haven't had a complete separation of the government and banking system since the Fed came into being.
I can see why certain people in the administration want to hamper the big banks. It's a matter of national security, the big banks can hold the economy hostage. I'm not saying that we should rely absolutely on "crappy little banks," but we can't have a few large ones monopolizing the entire US financial system either.
I think there is a difference Plop is more regulation and punitive measures on the bank.
ReplyDeleteSecond BP was regulation when their well blew up. But the department did a poor job in enforcing their inspections which was a big cause of the disaster.
This was similar to banks. The regulation was in place but they did a horrible job in monitoring what was occurring and they missed it.
I am for more regulation of course, I would not say banks should go back to 2007. I am saying you can't have Senators saying leave BAC, you can't have the president saying it. And you can't have regulation that hurts everyone.
parts of Basel III and the durbin amendment are damaging to the economy. Forcing a bank to hold to much capital and tacking on punitive measures only hurts the consumer.
Thanks for the clarification. I don't agree with Basel III, more capital does not necessarily mean safer banks.
ReplyDeleteThe recent events of the last few years have shattered the public's belief in free markets. Like you said, more regulation is not the answer. Better enforcement of regulations, repealing cumbersome (or unenforceable) ones and introducing rules targeted toward increasing transparency would be more constructive.
Ya that is my point exactly. A lot of this over regulation a) does not tackle one thing that resulted in the financial crisis and only adds tons of expenses b) punitive.
ReplyDeleteWhat you want is a system that keeps companies safe so they can't create bubbles. Holding more capital is a start but holding to much is damaging. But punitive measures like the Durbin Amendment are damaging and only hurt the economy.
Its finding the right mix. Right now the Pendulum has swung the other way. They need to find a middle ground. I like Tier 1 ratios of 7% they were min 2.5% in 2008. And I would like a more clear definition of Risk Weighted Assets. In the U.S. they have the most strict definition in the world, in Canada Europe not so much which can create a big problem if Basel III is implemented because its an international regulation implemented by domestic bodies. IE U.S. Banks get hurt badly. I don't like this SIFI Buffer and the Durbin Amendment. This is just damaging and helps no one but politicians wanting to play the blame game when they are as much to blame, as the public as Wall Street for the crisis.