Lloyd's Op-Eds

The Weekender - November 10

November 10, 2011

Tags: The Weekender

Fifty reasons to spank your (big) banker

Last Saturday, Nov. 5, was International Bank Transfer Day in Chatham, on the Isle of Manhattan and throughout the world, at least according to the label. On or by that day people were urged to take their money out of big banks and establish accounts at the tens of thousands of credit unions and community banks spread across our nation. And in the four-week period preceding transfer day, some 650,000 Americans had done just that, a rate 1,400 percent greater than usual for switching accounts.

The day conceived by Los Angeles art gallery owner Kristen Christian as a Facebook event had many parents and catalysts, including the Occupy Wall Street movement, but only two causes — the enormous greed and chutzpah of the biggest American banks.

The last straw for many depositors who have or plan to take their money out of the megabanks was the $5 monthly fee that Bank of America, the nation’s second largest, announced it would begin charging most depositors for using B of A debit cards to make purchases at stores. J.P. Morgan Chase, America’s largest bank, and every one of the 10 biggest were implementing similar fees for use of their debit cards. Jamie Dimon, the CEO of Chase, had smugly and condescendingly blamed the new fees on Congress saying “If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger.” Dimon’s scapegoat was the Dodd-Frank Wall Street Reform and Consumer Protection Act and more specifically its so-called “Durbin Amendment.” Under the authority of that law, on Oct. 1, the Federal Reserve reduced the fees banks charge stores for processing debit card transactions. But as fully explained in The Weekender’s Oct. 6 New York Times op-ed titled “Debit Card Fees Are Robbery,” the reduced rate that stores are charged for debit card transactions is still much higher than a competitive rate. The mandated reduction comes after nearly three decades in which banks, led by Visa and MasterCard, illegally deceived and forced stores into paying extortionately high debit card fees ultimately passed on to American consumers.

In 1996, an antitrust lawsuit on behalf of the nation’s stores challenged this longstanding and illegal bank practice and in 2003, resulted in a $3.4 billion cash settlement to stores and a lowering of the debit fees in an amount that the court valued at upward of $87 billion over a 10-year period. The per debit card transaction rate dropped from roughly 63 cents to 42 cents. But that reduced rate was still much too high, since banks save several dollars each time a debit card is used to replace a paper check for payment.

Acting under their Durbin Amendment powers, the Fed initially decided to lower the fees to a range of 9-12 cents, but after massive bank lobbying, it revised the lowered fees to a range of 21-24 cents per debit transaction, effective Oct. 1. At that rate each debit transaction is still extravagantly profitable for a bank and if big banks were truly competing, the hefty margin would set off a healthy competition among banks to further reduce debit fees to both stores and depositors until prices dropped to a lower but still profitable level. That’s how competition works. But America’s big banks have operated like a cartel for decades in the market for consumer payment systems, mostly under the leadership of Bank of America, a.k.a. Bank Americard, later renamed Visa. So rather than compete, the big banks’ response to Durbin was virtually uniform: To charge new fees for depositors accessing their own money in a manner already highly profitable for the banks.

Editorials and op-eds like mine, a call by Congress for an antitrust investigation and the consumer revolt all ensued. By Nov. 1, the 10 biggest banks had all abandoned their plans for new debit fees, with B of A petulantly bringing up the rear (see “In Retreat Bank of America Cancels Debit Card Fee, New York Times, Nov. 1).

Graceless and tone deaf as usual, the big banks planted articles insinuating that they were glad to get rid of what ultimately may amount to millions of transferred accounts because they sneered that those accounts were owned by low-rollers who didn’t have much money in their banks anyhow. An earlier spate of bank-planted stories predicted that people wouldn’t transfer their accounts because of all the new “sticky” features that banks had added to their checking accounts (see “Online Banking Keeps Customers On Hook for Fees,” NY Times, Oct. 15).

The real lesson from this unprecedented, swift and successful consumer revolt is that it should not stop with just one victory. To paraphrase Rhymin’ Simon, there must be 49 more ways to spank your big banker and starting with the behemoth prominent in both of The Weekender’s communities (my day job is in the old Bank of America tower).

B of A is no doubt figuring out new ways to recoup the reduced fees mandated by the Fed under Durbin. It is also planning to lay off 30,000 American workers (more than 10 percent of its workforce) after a quarter in which Bank of America reported a $6.2 billion profit and raised the total annual compensation of its CEO, Brian Moynihan, from $6 million to more than $10 million. Brian presumably is being rewarded for all his good work, including the massive downsizing as the nation struggles to create jobs, the debit fee and his stewardship of Merrill Lynch and Countrywide Financial, two of the biggest culprits in the 2008 worldwide financial collapse. Those two entities were acquired by Brian’s predecessor, Kenneth Lewis, a fact I must report in fairness, a commodity that has had little currency at Bank of America in recent history. There are lessons here also for the occupiers down on Wall Street and encampments throughout the nation. A subsequent The Weekender will discuss what the occupiers can learn from the revolt against big banks.


  1. December 14, 2011 12:52 PM EST
    After reading your Op-Ed in an October 2011 New York Times, I bought, read, and loved your "Priceless." As a former multi-district patent litigator, I hope your book becomes required reading in every anti-trust course.
    What an epitome of planning, simulation, discussion, execution, and chutzpah you successfully carried out.
    But, back now to the subject of this message. There seems to be a major error in the last "Payday" chapter. On page 225, it says that there was a "review of more than 225,000,000 hours of attorney and paralegal work descriptions..." I wonder if that hour figure is not too high, and by several orders of magnitude.
    Since, as stated on page 231, the fee the Judge awarded was $220,290,160.44, that means he awarded only just about $1 per hour worked. And I know that figure can't be right.
    Perhaps, attorneys probably weren't covered by the minimum pay laws, but the paralegals probably were. To make sense out of this, tell me that the 220,000,000 hour figure was a misprint and should have been 2,200,000 or that you reduced the number of hours actually submitted by a factor of 100 to 22,000. Either way, resulting in an average pay of a mere $100 per hour.
    Otherwise, there could be some sort of by-now time-barred minimum pay violation, itself a possible subject of a class action.
    Thanks for any thoughts you might have on this.
    Gerald K. Flagg
    - Gerald K. Flagg

Regular contributor to the Sunday "Perspectives" (Editorial) section of Hearst's Albany Times Union with op-eds on government, law and public policy. Read and comment at timesunion.com and on this website. "The Weekender" social commentary column appears on ccSCOOP.com, Columbia County's Home on the Web, and past columns are archived on this website under the Op-Ed button.
A book about the ground-breaking case that shook the business and legal worlds to their very cores, New York-based law firm Constantine & Partners sought to end a devastating credit monopoly that personally touched millions of consumers. Its efforts culminated in the largest federal antitrust settlement in U.S. history.
Journal of the Plague Year
The March 10, 2008 disclosure that Governor Eliot Spitzer patronized prostitutes shocked admirers around the world who had celebrated him as the "Sheriff of Wall Street" and a likely future president.  Ironically, the author's disillusionment with Spitzer had begun to disappear 15 hours earlier, when Spitzer confessed to him what others would soon learn in a media storm of unprecedented intensity.  Journal of the Plague Year is Constantine's intimate account of the 17 calamitous months preceding the March 2008 revelation and the futile 61 hour battle waged by the author and the governor's wife to persuade Spitzer not to resign, but to instead fulfill promises made to the voters who had elected him in a record landslide.

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