Consumers largely celebrated Bank of America's decision Tuesday to drop its planned $5 debit fee. Bank analysts, not so much.
In a note distributed Wednesday, analyst Richard Bove of Rochdale Securities called the fact that several major banks have cancelled plans to institute fees a win for "the Socialists" and the product of an irrational discussion.
"The public furor over the debit card issue has been overwhelming," Bove writes. "As usual, the issues have not been explored appropriately by the Congress, press, or the public. The concept to 'get the banks' was in full bloom over this issue and no thought of rational discussion was, or will be, considered."
The banks pointed to the cap on "swipe fees" paid by merchants on debit card transactions as part of the Dodd Frank financial reform law as the impetus for the debit card fees. Bank of America said it would lose $2 billion annually.
Bove notes that he is not aware of any retailer giving rebates for using debit cards or otherwise passing savings on to customers.
"It is giving a $12 billion windfall profit to the retailing industry at the expense of the banks," Bove writes.
Bove also takes on the argument that debit cards are using only the consumer's money and there shouldn't be a charge for getting it back. He says that wrongly assumes that there is no cost to running a bank and that banks are making so much money on deposit balances that other service should be free.
The part Bove says is Socialist is the idea of government setting prices for the private industry.
"Is it now public policy that the Congress will intervene in any industry that it deems appropriate to set product prices?" Bove asks. "Will Congress set the price of gasoline below the cost of producing it? How about food prices?"
Where do you come down in the debate?
Wednesday, November 2, 2011
Bank analyst calls dropped debit card fees a win for 'the Socialists'
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52 comments:
Well said Dick. And can we say bye-bye Demos (at all levels) in 12 mos.?
I thought when customers protested a price increase with their feet and the business responds we called that the "free market". Apparently if the consumer doesn't just bend over and take it that's socialism.
BofA simply overestimated their market power and when other banks didn't follow suit they got left with something hanging in the wind.
Joshua - the part that is wrong is congress setting a limit on the swipe card fee that Banks can charge - that is Socialist.
That fee is what prompted Banks to attempt to pass the cost to the card users (owners) instead of the merchants. Now they have to eat the loss because customers were outraged. I still don't understand why anyone thinks it is FREE to process a Debit Card transaction or that having ATMs all over the country and top notch on-line banking applications are free. All this costs tons of money - and the Banks are right to expect somebody to pay for it. They will now just raise the fee for a checking account by like $3 a month to get the money. Watch – in six months or so they will raise the checking account base rate – and everybody will pay that not just the Debit Card users.
Joshua, Other banks were following, they just pulled the parachute cord when they saw BOA losing ground. Where was all this protesting when gas went from $1.79 to its current gouge of 3.49
The bottom line is by charging the customer directly made their service less desirable. If people want to take their money and move to another bank that wasn't going to charge a monthly fee then they can and a lot did; but blaming the Government is a Busch League reason. The banks are going to make money one way or another. The fact they assumed most of their customers would take it was poor marketing.
Perhaps Mr. Bove should send a check to BOA for $5 each month since he feels so strongly about it. I thought capitalism was all about letting the consumer make a choice. Silly me.
I don't see why enforcing laws and principles which are designed to prevent collusion is socialist either. Merchants were getting squeezed and had zero recourse (other than folding up shop). There was no competition driving swipe fees down. I don't have a problem with a government stepping in there.
Additionally, these banks act like they're not saving billions from us using our debit cards. Do you have any idea how much cheaper the processing is versus the checks everyone was using everywhere 20 years ago. Did they pass those massive savings on to us, the consumers; their customers? No, they tack a new fee on and whine that they cant charge more.
I'm no socialist, but I don't have much sympathy for businesses with such practices.
Since when is "consumer backlash" socialism. That word is being thrown around freely these days without merit.
The public reacted and the bank retorted so Dick's commentary is totally off base.
Consumer money is available to banks at low cost to them(1% interest is ridiculous) and then they want to tack on more and more fees to boost their profit so executives and board members can get their bonuses and stockowners can get their dividends.
None of this stimulates the economy by enouraging consumer spending.
The loony right throws around the word "socialism" as a synonym for "anything we don't like." Sorry, but words have meaning, and this regulation is no more "socialism" than it is a "tractor" or a "marshmallow" or a "whoopee cushion." Joshua is correct; this is the free market at work. BOA's customers made it known that they would not stand for it, and BOA responded accordingly. Hooray for capitalism!
I think too many people fail to understand that every economy in the world is built on the easy flow of money. Everything from printing money, loaning money, ATM, debit card, credit card - all of this stuff - is driven by Banks. Without the effective banking system we have we would still be in the dark ages. Think about it - everything your do is fueled by the easy flow of money. What is money really? A brilliant tool used to convert everything we sell into something we can buy with immediately. Without money you would have to trade oranges for apples - but what if you need to buy apples and the person who is selling them doesn't want your oranges? With money you just sell them to someone who does and then you buy the Apples. Without money it isn’t so simple - and without Banks managing the flow of money where would we be? Just saying - Banks in general are not the issue.
Anon 3:56 - the original issue is the regulation of profits, i.e. the government decided how much profit and to who - that's Socialism. The backlash didn't occur until the company tried to recoup the losses caused by the new policy. A true consumer backlash is when a company does something truly of its own volition and experiences feedback from its customers outside of regulatory action.
This goes to show ANY right-winger that loves throwing around the word "socialist" that Banks don't care about "Free-Market"!
Anything, and I mean ANYTHING that doesn't fit what they say, even if it fits the description of "Free-Market" exactly, will be smeared.
I know a lot of you will ignore this bright shining message brought to you by those that really don't care about the "Free-Market", but maybe this will wake some of you up!
The real issue is Wall Street has turned into a giant ponzi scheme. Banks are victims to the Street always pushing for higher profits, higher dividends, etc. 401K plans, IRAs and all investing is no longer about holding the stock for 20 or more years - it is about what have you done for me this quarter. Banks have been pressured to show revenue growth every quarter and if they don't the stock price gets pounded. Look at BOA's stock price! Then consider everything they own... So these companies get forced to move jobs to China, India or whereever so the can show revenue growth. At the end of the day - most of us are a part of the problem and the solution is not going to be easy.
Joshua McCorkle
Spot on comment. They will make it up elsewhere.
Soon we will be hearing how Visa is too big to fail. And the only solution is a government bail out. The Obama Visa will have no credit limit or fees of any kind. We'll just raise taxes on the merchants to pay for processing the transactions which can always be passed along to the consumer.
Poor Dick Bove; He lost! Now he's whining and calling people names. Socialists, Communists, Anarchists...who cares, Dick! Why was there never, ever a charge prior to the Dodd-Frank Act, nor was there going to be? Oh, so NOW it costs the bank money. Sure, when the Debit Cards were being pushed, so that the banks could get away from processing cash and checks, it was okay.
Dick, Dick, Dick...you can try selling it all you want, but no one is buying it. It's a Public Relations gaffe and you can't run from it. Dick, there are no excuses and you know you're wrong.
BWAHAHAHAHAHAHAHAHA!!!!
Poor Dick Rove; you lose!
The REAL issue is this hapless adminstration using Bofa and the useful idiots that are OWS as a wedge issue in next years elections. If you didn't want to pay a whopping $5 a month, then don't you dopes, move to another bank. Meanwhile DUKE POWER wants a 17% rate increase due to President Dopey's energy policies. Guess which one is going to hurt worse? The sub prime meltdown had it's genesis in the government and that is easily researchable. If you don't want to do the leg work to figure out why banks were forced to give loans out, good for you. Which makes you the perfect brain dead Obama voter who is destroying this country one Solyandra at a time.
You know what gang? I just pulled up the Dick Rover, or Dick Bove website.
Guess who it's sponsored by?
Merrill Lynch. No, there's no subjective opinions from Dick.
Good for you Sparky (Rick). Pull up this since you are so interested in the truth - Wall Street has given more money to Obozo this year than all of the GOP candidates combined which includes Bofa, Goldman Sachs, you name it.
Enough already! Let's move on!
As much as you say the word Dick, or talk about Dick Rover's, one might easily deduce that you are a big fan of all things Dick.
SCORE one for the OCCUPIERS!!!!
The banks are nickel and dimeing custormors up the wazoo. How is it socialist when banks listen to the custormors?
4:11
Merchants were able to absorb the cost of the swipe fee until we the consumer started demanding places like McDonalds or Starbucks accept them for minor purchases. I'll bet if you ask some people, using a debit card for purchases is now a god given right. If these places were no longer able to accept visa, there would be rioting in the street. Or wait until the bank can no longer post your account balance to your online banking account so you can access it on your smartphone. Gov't intrusion into the market is causing our troubles, but you have to look past the soundbites and class warfare rhetoric that the political class is using. Please.
Lot of selective reading in here. The socialist comment is not in reference to the customers. It has to do with government intervention. Read more than the headline, people.
Snoopy, the banks were giving you the opportunity to opt out of using the debit card service. What more do you want? Now they will have to find a way to charge everyone for it regardless of whether you use a charge card or not. Read the article again.
To Skippy...
Hey Skippy, are you the dude from Family Ties? Well, you've got to be as big of an idiot as the role he played.
Duke Energy has their hands in numerous Erector Sets. Yes Skippy, that's right; Duke Energy is planning on a whole lot of construction projects that don't concern YOU (my sis works for them, so I have intel). See Skippy, there's not enough money in Duke Energy's piggy bank (or they just don't want to touch their own money), so they want the consumers to pay for all of their projects, ideas, and toys. WOW, it must be nice to not worry about a budget and just go to every house and force them to give you money. Therefore, they want the State to legally approve a door-to-door heist.
Hey Skippy, How would you like to work for Duke Energy and play King George III? It's the same freaking principle! Oh, and great timing, too while this Country is headlong into our second Great Depression in the past 80 years.
Yeah Skippy, let's talk about that Duke Energy merger, as well. The one where Duke Energy doesn't have enough money, so they are going to to A) Raise rates, B) lay off more employees, and C) Force early retirement on other employees during this economic crisis.
Oh, and Skippy, I would be remiss if I didn't tell you that I used to work for B of A...and you're logic regarding the $5 issue has no merit at all. It's all about the principle, the timing, the PR, keeping the Deposit Accounts and Deepening the Relationship with the Consumer (B of A terminology).
Now, Skippy Handleman...run along before I decide to give you a wedgie!
I have to hand it to liberal politicians. They have done such a masterful job at stoking wealth- and class-envy that the public gives them a free pass when they pass SOCIALIST legislation like Frank-Dodd, they can stand in front of the cameras and bloviate about evil companies that charge fees that they don't agree with, and actually have the cajones to say, "You have to agree that at some point, you have made enough money" (that's a direct quote from the President).
What is Socialism? It is an economic/political system where the government makes the decisions on which individuals and companies will be successful by creating policies that will benefit them, and which ones will not by assigning punitive taxes to them.
The current liberals have decided that all financial companies and energy companies that produce energy through fossil fuels should not flourish, and are in the process of putting them at severe disadvantage with legislation like Frank-Dodd, ObamaCare and the insipid cap and trade (which really should have been called cap and tax)legislation.
Not only is all of this Socialism morally wrong, it is hypocritical. There is no more egregious Ponzi scheme in history worse than Social Security. Every year that the SSA has taken in more money than it gave out, they fed the public this lie about a "Social Security Trust Fund" that never existed, as the excess SSA tax revenue was spent on other government programs. As a result, everyone that is receiving SSA/SSI right now is getting it through the FICA taxes being paid by current taxpayers, and there's not a man or woman alive under age 50 who will ever see a single penny of the money they paid into the system. And the government gets all high and mighty about "greedy Wall Street" and "big oil" and going ape over companies that own their own airplanes. Spare me.
I can only hope and pray that all over America, people are actually realizing this and will go to the polls and vote for the candidates who will repeal all of this nonsense, and not vote for candidates based on if they are cool or are the race they prefer or who MTV tells them to vote for.
I would love to kick that analyst as$$ what a low life moron!
Come on man, it is a bit of a stretch to say you worked for BAC, when all you did was clean the offices after everyone went home for the night.
I hope that "Rick Thames" post came from a hacker. Though I rarely agree with Thames, I know he's much more intelligent than that post. I'm not going to waste time responding to the Duke Energy rant. Assuming the hacker knows how to read, he can go to the NC Utility Commission's website and view all the documents needed to reach a much more intelligent conclusion.
But I did want to say one more thing about the bank fees. I'm a B of A customer. When I saw the notice of the new fee, I didn't stop and scream like everyone else. I actually read the entire notice, and came up with a plan on how to avoid it. Take a lithium, people. Next time a company you do business with announces a new fee, read the entire notice, take note of the ways to avoid the new fee (there are always ways, especially with bank accounts) and plan accordingly. If you can avoid it, avoid it and move on. If you decide you can't avoid the fee and are opposed to it, take your business elsewhere. It really doesn't require all this screaming about hellfire and bloody damnation.
"they pass SOCIALIST legislation like Frank-Dodd"
The Frank-Dodd Act is a weak act. What the Country needs is to put the Glass-Steagall Act of 1933 in place.
Socialists? Please, what a freaking dope! These Banks and financial institutions have been able to get away with murder for the past 12 years. Do you want to take a good look at our economy NOW? Of course, you're not bright enough to put 2+2 together.
Yeah, it's all about the Government. Yeah, the Republicans forced Clinton to repeal the Glass-Steagall Act in 1999, and this is the chaos we are left with.
Spare you? Please, tell me where your Finance degree is from, because the only thing it sounds like to me is that you're just another freaking "ME Generation" bag of wind! That generation's philosophy is ENTIRELY screwed up and I can't wait for them to die of cancer!
ok so why don't we all go back to using cash.....thoughts, comments....because basically that debit card is the same as cash...hmmmm....but alas the banks will still charge us to hold what little money we have.....
And now that I think about it...why don't we all go back to cash? I mean no one loses and we all live within our means....throw away the dag on debit cards...since its costing the banks so much that they have to charge us to use it....last i heard retailers love cash....makes me wonder now why we (consumers) were so ready to accept use of a debit card anyway?
Really J...Oh, I guess there is ONLY one John Smith in the World, too!
No, Bozo...I just told you more information than you can get on an "Official Website." Yeah, there they tell you what they want you to know. I just told you what is really going on. I could give a flying fig if you believe it or not. Yet, you're not coming to MY house like King Charles III and shaking me down for money when it ONLY benefits YOU!
Apparently, you go to church and believe everything they tell you there, too. What a sheep. Hopefully you got good money when you donated your brain.
What a turd. Big bank and upper income people don't get it. They need to be made poor in order to get another view of our country. Jerks.
I don;t see this as socialist either, it shows we are a free country and the citizens have a voice, the majority voice was heard and the bank reacted. Charging $5.00 and losing customers in droves and going under or keep customers happy and make money, maybe a few billion less, but think about the billions you do make already. The Republican party want's a communist style government so bad it hurts, just so they can ram stuff like this down our throat
So I suppose this man would say that credit unions are essentially socialist institutions? What a crock!.
Free market... go Credit Union. Simple. You don't like it - WALK Away. The market will eventually whip the banking snobs into shape.
Skippy, Skippy, Skippy, there you go hating on the President of the United States of America again. Does your Mommy know that you are on her computer again? Is everyone there in Cornelius so uninformed?
kingward, I only bank at a credit union but fully support BOA in this. I expect the credit union will be even harder hit by this unfair government intervention and they fought against the swipe fee rules along with the banks. The only socialist institution in play is the Obama administration and corrupt democrats in congress.
A smarter choice is out there!
http://www.asmarterchoice.org/
https://cmcu.org/index.asp
I moved. Got tired of funding the Wall Street boys who do harm to our communities and families by their pyramid schemes. Housing market.. I give you.
Was it the free market operating as intended? Not so sure. The threat of mass deposit exodus to credit unions was perhaps the largest driver of this backstroke. However, credit unions are not part of a free and unregulated market - they're actually govt created special constructs that exist & thrive because they are given the competitive advantage of tax exempt status.
If it were not for them, the consumer choice would be too limited by the current market dominance of the largest financial institutions, and in short, we (the masses) would get stuck with subsidizing this revenue stream for the banks, as Dick Bove apparently wants.
The lesson learned here is that competition IS good, but sometimes, it actually has to be protected. Our so called free market is so out of whack and fundamentally unbalanced that we're at a point where we have to protect/artifically create competition so that the consumer still has choice, which, by the way, is the mechanism by which the so called free market works.
BTW, Dick Bove, I do agree that reform was actually a "grab" by the retail establishment - but you're whining that the banks had to take it, rather than the middle class. Somehow, I don't have a problem with it. Nope. Just chedked it again. Not one damn bit.
5:30, he is not the President, he is the Kenyan Klown and I pay way more in property taxes that you will ever do in your entire pathetic plantation voting life on this planet.
Google the Democrat John Corzine and the scam he has going on and his involvment in Goldman Sachs, and troll Bill Clinton was the President who could have vetoed that, but he was too busy molesting interns.
Sincerely - Your hero Barney Frank.
This is the height of absurdity. When the marketplace works against you, then socialism is at work? This action happened totally within the marketplace. To suggest otherwise is to show that you are nothing but a cry baby, unfit for your place there.
I have run a small business for 33 years, lost customers for reasons that I thought were unfair, but knew that when I opened my doors, fairness had nothing to do with it.
Whomever this person is who claims that the socialists won, he should be horse whipped and turned out to pasture. It is the most absurd thing I have heard and the man is not fit to call himself a participant in the marketplace.
Do you want my undergrad finance degree from UVa, or my MBA from Kellogg? I know those might not be as impressive as your undergraduate degree in economics from UNCC, but not of us are as smart as you.
Good lord, the comment about socialism has nothing to do with the bank instituting or eliminating the debit card fee. In fact it has nothing to do with the bank or consumers at all. If you can't comprehend that then you should probably stick to reading something on your level, like the comics.
Read for comprehension people.
He said:
""It is giving a $12 billion windfall profit to the retailing industry at the expense of the banks," Bove writes."
What exactly is wrong with this? I see no documentation. Retails hires. Banks fire.
Interesting comment @7:33pm since 2 of the top 3 employers in Charlotte are banks.
Richard Bove may not be aware of any retailers giving rebates or passing on savings to customers who use debit cards, but he hasn't been looking hard enough. Ikea is one such company - when you use your debit card, you get a coupon on your receipt good for 1 percent of your purchase that can be used toward a future purchase.
A $5 fee imposed if you use your card once or 1,000 times in a month sounds a bit socialist to me.
Charging a few cents per transaction sounds like the Free Market.
Why do banks prefer the $5 fee? Because they want to soak the people who are not paying attention!
Dodd Frank is socialist but bailing out banks, allowing banks grow in all sort of cancerous ways, allowing banks to destroy the old idea of usury limits, allowing banks to expand to the point of being able to bring down the nation's economy; all of this is just the marketplace at work?
There are enough laws on the books, backed by big banks, enabling all sorts of conduct through redefinitions, to sink a tanker, yet one law that seeks to create balance in this atmosphere is socialist?
We are a nation of fools. We allow the rich to get richer by destroying jobs here and moving them elsewhere, without constructing any tariff walls to protect the jobs here, all of which is a give away to the rich. We allow corporations to buy our government and act in ways that are as anti-market as anything in any socialist state. And then we turn around and call out socialist to anyone who loves this country enough to want to protect it from these pirates.
Dodd Frank is a good law, what has been put into effect, for it establishes some balance in the marketplace, balance that too many feel that they are above.
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