Bank fees: One intervention leads to another

You saw this coming 50 miles away. The question is, why couldn’t Washington Democrats?

In 2009 and 2010, when Democrats controlled both houses of Congress and the White House, Washington all but declared war on the banking industry, passing sweeping new regulations and myriad rules that had nothing to do with loose lending or the mortgage meltdown and everything to do with punishing a convenient scapegoat for the country’s economic woes.

The Credit Card Accountability, Responsibility and Disclosure Act, passed in 2009, severely restricted interest rate increases and fees on delinquent and unprofitable customers. Then, last year, Congress enacted a complete overhaul of financial regulation through the Wall Street Reform and Consumer Protection Act, also known as the Dodd-Frank law. An amendment to that law, attached by Sen. Dick Durbin, D-Ill., slashed the swipe fees banks charge merchants when customers use debit cards.

The two populist laws took a huge slice out of bank profits.

Banks are an unpopular, unsympathetic lot, considering their role in the housing collapse, their need for billions of dollars in taxpayer bailouts and their occasional mishandling of foreclosures. But they’re in business for the same reason as any other industry: to make money. And if acts of Congress deny them the ability to make money in previously profitable operations, they’ll change gears to remain attractive to investors.

Bank of America, forced to reduce what it charged businesses for electronic payments, announced it soon will start charging its checking customers $5 per month if they used debit cards for purchases. Chase and Wells Fargo already are testing $3 monthly debit card fees in a few markets.

Federal law has transferred the cost of swiping debit cards from businesses to consumers. As usual, congressional meddlers can’t understand how unintended consequences result from federal intervention in the private sector. These new bank fees hit the middle and lower classes the hardest.

One heavy-handed intervention inevitably leads to another. This week, Democratic lawmakers asked the Justice Department to investigate the banks and determine whether they colluded in violation of antitrust laws before announcing the new debit fees.

“You don’t have a competitive marketplace,” Rep. Peter Welch, D-Vt., joined by four other far-left congressmen, said at a news conference.

Instead of collusion, could it be, perhaps, that the fee increases were timed because the Dodd-Frank limits on swipe fees took effect … Oct. 1? Anything but that!