Banks, from the Outside

The Banks are in the news constantly these days, and not in a way that is pleasing to The Banks. I suppose this has been the case for some time, thanks to the financial near-Armageddon that almost validated Y2K anxiety eight years late, followed by TARP bailouts coupled with very unpopular executive bonus structures and general nose-thumbing, then followed by our latest situation. It looks even worse for The Banks now, or at least it does if you read Yves Smith and Moe Tkacik, who will get you up to date on the Foreclosure Crisis that has yet to have been given a snappy name, which now looms in ways that remind you of the opening acts of the Great Recession.

So as long as it's open season on The Banks, now seems like an opportune time to revisit an original complaint against The Banks, that has to do with how we personally interact with The Banks and not with macroeconomics: ATM fees.

ATM fees will not be collapsing the global economy anytime soon—though who knows what we'll learn in the Great Bank of America Wikileaks Dump of 2011!—but they are a pain in the Aunt Petunia which you yourself have certainly complained about, and as such, useful to examine as a symptom of the evil that The Banks may or may not be doing.

Evil is a strong word, of course, and I mean it in the gentlest sense of conversational exaggeration, because evil is not an easy thing to quantify without tripping over Godwin's Law. But it is hard to avoid the feeling that The Banks are a single sentient enormous creature, nowhere but everywhere at once, that we can attribute motive to. In the right light, The Banks are The Man. I'm not assuming that this is actually the case. As a gesture of good faith, this will be the only sentence containing the word usury. The Banks are a business, like any other, and they are not in business to make friends.

ATM fees, the amorphous blob we rail against, actually come in three flavors. The first is the fee that your own bank charges you to use that bank's ATMs. Not all banks do it, but it still happens. The second is the fee that your bank charges you to use an ATM that is owned by another bank, or some other third party. The third is the fee that the owner of an ATM, which owner is not your own bank, charges you. This one is the one that gets noticed because it's not buried on your statement, but listed on a well-worn sticker on the ATM, and on the screen you click through notifying you that the transaction will cost you $3.00, or more if you are at a gambling establishment or strip club. (There are related fees, as well: for instance, the scheme behind debit overdraft fees—but those fees are avoidable by means of not running out of money, which is nice when it can be managed.)

That's how it works. Nothing egregious on its face, just a fixed charge for a service, or at least for the convenience of a service. Well, not a charge so much, but a surcharge. Your institution is already charging (or waiving, in some cases, for large average balances) a maintenance fee for your account. If you enter the bank, stand in line and hand a nice teller a slip of paper, you do not get charged a surcharge. A human being, vastly less efficient and more expensive to maintain, is not convenient to the customer, while a robot that can spit out bills in seconds and never calls in sick or demands vacations is very convenient, and so the customer will be charged extra for the robot.

This is why phone, ATM and Internet banking was created. The real cost to banks in transactions is human labor cost. By using ATMs (and the Internet, etc.), these systems are actually saving the banks money.

So the logical next step in that money-saving is making the ATMs make money. According to a study conducted by Bankrate, last year the average fee charged by your own bank to access a non-native ATM was $1.32, and the average fee charged by a third-party ATM owner was $2.22. That's $3.50 total. On a withdrawal of a couple hundred bucks, it's a negligible fee. But if, say, you're pinching pennies, waiting for a check, and only pulling out $40, all of a sudden that comes out to be a 8.75% fee, which seems to be an awful lot for the privilege of accessing your own money.

So when we complain, it's not a complaint that a fee is being charged at all, as tempting as that may be. Nobody is against profit (well, most people are not). It's the principle by which we live our lives: put something in and then get something back, and it's as inescapable as broken hearts and unintended consequences. But the profit being taken by The Banks, in certain circumstances, is unreasonable. If there was a consumer savings account that offered an interest rate of even half of 8.75%, then the egregiousness of The Banks would be lessened. This is not the case.

The Banks are well aware of how this might be seen as unmitigated gall, or even gall mildly mitigated, and is trying to head it off at the pass — see for example this American Bankers Association summary of defenses, which all invoke convenience for the end-user. Unfortunately, the defenses are not exactly calming. Yes, an increase in fees has created an explosion of conveniently-placed ATMs, but is this convenience significant enough to excuse steep surcharges? We are not all Griffin Dunne in After Hours. Sometimes, it's well before the middle of the night and we'd just like a couple Yuppie food stamps.

And there is an implicit threat in the ABA publicity (“It'd be a shame if anything happened to that convenience you enjoy…”), but I'd like to give the benefit of the doubt and assume it's unintentional, or at least purposefully vague, as the heart of these defenses is that it's not fair to take away a business practice that already exists. This business practice is decades old, and the time to call foul passed long ago. It is ingrained into revenue projections and all the other dirty-fingernail aspects of running a country-sized business. For us the little people to ask for the practice to be modified is one thing, but business practice is now calcified into a revenue stream and therefore inviolable. To willingly give up (or even lessen) ATM fees would be contrary to sound business principles—i.e., increase revenue and decrease expenses.

To excuse The Banks is counter-intuitive, but remember that we're coming from an entirely different context. The Banks are not people with some compunction to do the right thing, and they should not be mistaken as such. They are business entities, organized or incorporated according to the laws of the state of their creation. The core legal precept behind business entities is the concept of limited liability — that the shareholders, directors, officers, etc. are not personally liable for the behavior of the entity except in cases of screaming criminal incompetence. It begs the question of corporate ethics, as the flesh and bloods pulling the levers have limited consequence for the actions of the business entity they own and/or are employed by. That is the intent behind the laws that govern business entities. This is a nutshell version, certainly, but were a corporate decision-maker ever to say, “We can't do this, it's just not right!” they would be fired or subject to a shareholder suit. When it comes to corporate governance, moral questions are not for flesh and bloods to speak on unless they rise to criminal level. So it is unreasonable to expect the banking industry to respond to a feeble outcry of consumers about some fee or other not being fair with anything other than a straight-faced justification of the fee and an absolute inability to even conceive of the idea of fairness.

Which brings us to futility, which is not only an undercurrent of this issue, but also of now. The Banks do not have to pull strings behind the curtain. The Banks gave up on the curtain years ago. Either you want to have a bank account, in which case you will be doing business with The Banks, or you elect not to, and pay even more onerous fees from an array of terrifying check-cashing joints. The Banks don't have a market share, they have the market. They are unavoidable. And the concept that we as mere citizens have some sway, have any say at all, is a signal that is losing coherence. With The Banks, with anything.

But despair aside, the evil The Banks may or may not be doing? The answer to that question is that it's the wrong question—evil doesn't apply here any more than the laws of physics do. And to persist to apply a broad-brush label like “evil” is a distraction—is the weather evil for occasionally raining on parades?

But this is a smoke/fire issue. If an unavoidable industry acts continuously in a fashion that makes a sensible person wonder if they are being exploited in more than the MBA sense of exploitation, then maybe there is some there there. And even though The Banks have shown exactly no indication that they intend to govern themselves accordingly, that's no reason for sensible persons to not talk about this more, and persistently.

Brent Cox is all over the Internet.

Photo by Patrick Hawks from Flickr.