In an excellent article over at the Atlantic, Daniel Indivglio posits the irony that the big banks are more likely to face criticism the more open they are with their customers.

Money Quote:

But Bank of America didn’t take that route. It effectively said, “Okay, we are losing revenue from interchange. So to make that up, let’s be super-transparent and tell our customers that they’ll have to pay a small monthly fee for using their debit cards.” And then their customers flipped out. So much for clarity!

To be fair to the consumer, it is not as though BofA’s charge was the only charge they ever gave their customer. Larger and larger banks require more and more capital to continue their operations. Non interest income is one of the easiest of these ways. When customers at the big banks are upset, it provides for one of the best arguments in favor of community banking. Mainly this  is that mid to regional size banks live in the best zone, where they are able to provide a wide array of services and products to a not-unnoticeable amount of customers, without the burdens of being literally too big.

When bank’s charge non-interest related fees there ought to be  a coherent reasoning. When BofA ramped up its own non-interest income after the passage of the Durbin amendment, which limited the cost banks could charge retail vendors for the ‘interchange’ of money from the bank to the vendor, the biggest banks were sent scrambling to find alternative ways to stay solvent in the short term.

While Durbin’s amendment likely fixed a long-term disparaty in payment types, (though the American Banker’s Association would argue their constituents are  being robbed blind), it caused a painful and uneven disruption in banking modes that had remained unchanged for at least the last 20 years. It is good that vendors are able to now take in more debit and credit cards with less overhead, because I believe this does indeed have the added impact on the smaller vendors. However, ‘big box’ retailers are now also benefitting. Bank’s by and large do not enjoy being viewed as a secondary market, and essentially telling a large multinational bank that a big box retailer is more important rubs a  lot of people the wrong way.

Yet this is the situation we now find ourselves in. In addition to cumbersome and onerous regulation that basically paved the road to Hell, the larger banks are pushing charges on an already cash-strapped middle class.

In spite of this, I remain proud that a great many persons have realized that their local community or mid-size bank is a viable alternative to the Big Banks. If anything good comes of the back and forth in DC, it is that this provides a critical moment for the community banks to emphasize what makes them the staples of their communities.

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