Tuesday, October 11, 2011

Regulations Hurt Consumers Once Again...and CNN Blames Banks

Read the following article, at least the beginning of it if you don't have time to read all of it, before proceeding.

http://money.cnn.com/2011/10/11/pf/bank_fees_switch/index.htm?hpt=hp_c1

What CNN frames as literally "big, bad banks" being greedy is actually the direct result of government regulations. In a blind attempt to cut into profits that liberals felt were too high, the Credit CARD Act passed by Congress a few years ago restricted how much banks are allowed to charge retailers for every debit card purchase. The average rate before the new regulations was 44 cents per purchase, but now these have been capped at 21 cents per purchase. Banks were then faced with a choice: say "aw, that's a bummer", and take the hit in their bottom lines, or make up for that lost revenue by shifting the fees elsewhere: namely, us. You can guess what they chose.

The predictable happened: banks said "fuck you!" to the government, and passed those costs onto the consumers! Consumers now have to pay more than they did before for the same banking services as DIRECT CONSEQUENCE of government regulations.

There are two ways of looking at this: the naive, ignorant way which evinces no understanding of incentives, and the realistic, pragmatic way which understands the primary purpose of any business is to make as much money as possible. CNN chose the former. The "breaking news" story on the front page is a blatant anti-bank article I posted above, describing how people are "mad as hell and not gonna take it anymore" about increased bank fees. They show people switching to smaller banks without those fees, insinuating that those smaller banks aren't greedy like the "big bad banks" (verbatim quote) are. They don't mention the reason those fees are rising until 2/3 of the way down the article, and even then they portray it as if the banks are being selfish and not paying their patriotic fair share. Then they slip in, in one tiny little sentence, that the small banks are exempt from the new regulation, without even writing that maybe that's why they're not raising their fees also.

That's so irritating it makes me want to scream. As someone who's debit card fees apparently just increased by $60 a year, yes, I am mad as hell. But the difference between the people CNN selectively chose to interview and me is that I know who to blame. I cannot blame a company for wanting to make as much money as it possibly can. That is their stated intention, their mission, their purpose for existing. Companies are predictable: they will always, without fail, try to maximize profits. That's not wrong, it's what makes the economy run. It's the only reason any business does anything. That should be no surprise to anyone, much less politicians. For that reason, I CAN blame the government for sticking it's dirty hands in and forcing businesses to pass their expenses down onto me, when they KNEW that was going to happen. If they didn't know, they're irresponsible because of their ignorance, and arrogant for creating rules for industries they don't understand. If they did know, they're irresponsible for placing even further costs on consumers in down economic times.

When the government causes your bank to raise its fees, CNN says to change to a bank that isn't so greedy. I say, change to a government that isn't so stupid.

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