The banking shell game sponsored by your bailout dollars – how banks lure working and middle class Americans into losing hard earned money. $29.5 billion in overdraft fees charged last year.
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Banks really have a wonderful structure in place at least when it comes to US banking. The Federal Reserve and US Treasury have given an open ended response in terms of bailing out the banking system should any additional financial crisis should arise. Even at the moment no real changes have occurred and this is troubling given the headwinds that are approaching. In the US the largest banks, the too big to fail variety, charged Americans over $29.5 billion in overdraft fees last year. This ludicrous figure was released in a recent Pew Research study showing that banks have no desire in consumer protection and would rather operate like a loan shark. If you calculate the annual percentage based on these short-term “loans†you would understand that the overdraft piece of the pie is too lucrative to banks but provides no real service. Banks would argue that they are helping the public access money when they need it. If we did a survey, I think most would opt out of paying $35 for a burger or for a cup of coffee. Yet this is part of the larger banking shell game still going on.
Borrow low and lend extremely high
The entire focus of the bailout schemes has been on helping provide banks very low rates on their capital. If you look at the Fed Funds Rate (FFR) it has been at practically zero for a very long time:
“(NY Fed) By trading government securities, the New York Fed affects the federal funds rate, which is the interest rate at which depository institutions lend balances to each other overnight. The Federal Open Market Committee establishes the target rate for trading in the federal funds market.â€
This rate has been close to zero since 2009. The too big to fail banks have access to cheap capital. The fact that $29.5 billion in overdraft fees were charged last year shows that the public does not have this same access to capital even though this money is backed by the public! In other words we are subsidizing the success of these banks to loan shark the working and middle class into poverty.
Let us move away from the overdraft fees for a second and examine credit card rates. These same banks also provide credit cards to the public. With lower interest rates, are banks passing on the savings to customers? Let us find out:
The national average for a credit card is 15 percent. How high is that? Bernard Madoff, the ultimate Ponzi scheme king was promising rates of 15 percent to his clients. He is now in prison. These financial institutions are averaging out a rate that the Ponzi king would have been proud of.
How about interest rates on savings accounts?
Banks are offering customers almost zero percent for keeping their money at their savings institution. And if you happen to not pay attention and go over your balance (very possible given 1 out of 3 Americans have no savings), expect to be hit by a $35 overdraft fee. In other words, if you had $10,000 saved yet went over on your checking account it would take you over 30 years just to save that up on interest for the onetime fee that you will be charged.
It would be one thing if you were borrowing from a local bookie. Yet this is coming from the kings of our financial system who are wards of the state via massive bailouts and subsidies. The shell game continues and this is part of the system supporting 46,000,000+ Americans on food stamps and a growing low wage population. The relationship is symbiotic because as many live paycheck to paycheck, the risk of overdrafts will simply get higher. Your bailout dollars at work.
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droubal said:
I agree that bank behavior has been awful. Their reckless speculation has kept them solvent only with help of Federal government bailouts.
The fees they charge are not in line with the interest they pay savers. Still no one comes up with a much better solution. Local credit unions are cheaper for many services, yet most people still use these big banks.Have you considered creating some kind of co-op, like a credit union that will provide inexpensive credit to poor people?
Should there be a penalty for overdraft; if so, what is fair?
What would your model be for such an entity, or do the current credit unions already provide what the public needs? Maybe we just need to get people to do business with their local credit union.
What do you think?June 9th, 2012 at 9:13 am -
Moneyman said:
The figures shown in this post are staggering but not in the sense it is portrayed. Lets look at the facts. Banks did get a bailout, with most of them had already paid back what was given.
The issue is not what banks have earned but more so what the consumer has spent! It is buyer beware senario, as consumers have a choice to overdraft or not to overdraft. Those who choose to overdraft whether buying that cup of coffee or burger and paying $35.00 dollars for it is not the banks fault, it’s yours the consumer, you made that choice. Oh, and the excuse “well my bank should let me know if I don’t have enough money”, ah well they do, it’s called alerts! Your responsibility to set up your alerts. You can always keep a register handy and keep track of your spending, unless your to dumb to do basic math! If WE the consumer do not take responsibility for our own actions and take the necessary steps to use the banks as a tool rather than a cushion for your neglective and financially distructive nature, then you would have no problem. The media really has to stop the pointing of fingers to who is responsible. That is not positive when it comes to changing a way of life. We have to look at ourselves as consumers and change the way we do things. And for those that take advantage and are on some type of social care such as food stamps is a choice as well!
Qoute: ” The shell game continues and this is part of the system supporting 46,000,000+ Americans on food stamps and a growing low wage population.”
Those people know who they are. Some do not have a choice, but they sure can do something about it over time. The ones that take advantage are those that I am talking about, the ones that took an education and did nothing with it, the ones that have an excuse for everything why it’s not thier fault and blame everyone else. As far as I know we are all on the same planet much less than the same country. It’s call opportunity for prosperity, and it does not come to anyone, it has to be earned and devolped honestly with integrity and matter of heart. Not by deception and depending on the system and leeching off of everyone elses hard efforts. This type of leech in all honesty is called a BUM! So if truth and honesty hurts and makes you upset, GOOD, then be a positive and make a difference than a drain on society and family and friends.
Qoute ” 1 out of 3 americans have no savings accounts”. Why?, because they fail or do not have the dicipline to maintain or get one. Banks have so many programs to have a savings account and have mechanisms to help you save. Just look at any bank website and you can see for yourself. This is why many live paycheck to paycheck, because of not having a 3 to six month of savings of all your bills. Think about it, if you change your lifestyle and truely manage your money and make better financial decisions we would not be in this financial crisis personally or nationaly.
June 9th, 2012 at 10:29 am -
Terrance said:
This is a product of government policy. The lower interst rates we have are a product of the welfare state—-we have nearly 16 trillion in national debt. Low interst rates allow us to service that debt. It tirckles down to savers who lose due to inflation but gain by not borrowing at loan shark levels. Those without savings have to borrow, but do not get insulted by low savings returns. Meanwhile we all suffer at the hand of our policy makers—most not elected as Congress long ago learned how to pass the “buck”.
June 10th, 2012 at 7:14 am -
Hillary said:
I have always had an issue with how banks work their debit and charge cards instead of having them clear in the order they were purchased they take the largest sums and clear them first so that you may end up with more overdraft charges.
June 11th, 2012 at 9:49 am