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Ralph Nader > In the Public Interest > Big Banks Special Privileges

Big Banks in this country have given new meaning to “special privileges” in the past two decades. Citicorp, Bank of America, Nations Bank, Morgan Guaranty and other top dozen megabanks are on an informal government list described as “too big to fail.” That is, if they are mismanaged or speculating themselves toward bankruptcy, you, via the federal government, will bail them out.

You do not exactly vote on this bailout. Nor does the U.S. Congress. It is all done oh, so indirectly, through the Federal Reserve, the Treasury Department and other federal agencies working the fields of corporate socialism.

When Continental Bank of Illinois, then the 9th largest bank, got into serious trouble with speculative investments in 1984, the Feds came to the rescue in a big way. Of course, when these bailed-out banks became profitable again, you the taxpayers, who were the guarantee for the federal bailout, were not repaid for the rescue.

Imprudent loans and other mistakes got Citicorp into a technically bankrupt situation in the late Eighties and very early Nineties. Alan Greenspan, head of the Federal Reserve, came to the aid of his friend, John Reed, head of Citicorp. Citicorp was given “supervisory forbearance” so they did not have to establish the required loss reserves for their massive problem loans.

Then the Feds assured the banks of the largest spread in many years between the interest they charged their borrowers and the interest they paid their savers. Profits started going skyward for commercial banks, soaring to a record $32 billion in 1992 and then to $43.1 billion in 1993 and another record in 1994.

Having soaked both the taxpayer and the small savers, the banks are now going after their consumers with reams of special bank charges and fees. It has gotten so ridiculous that there is a charge for just about everything you do with a bank except the wear and tear on the bank carpet when you walk up to the teller.

Speaking of tellers, two big banks are charging you for using a teller (a real human being) instead of the ATM. And, not surprisingly, banks are ringing up more and more fees for certain uses of the ATM itself.

This is big business indeed! Service fees on deposit accounts alone totaled more than $15 billion in 1994, an increase of 34 percent since 1990. The strategies for assessing additional types of fees and making it more difficult for consumers to avoid fees now occupies specialized consulting firms that advise the banks on how to fleece their customers.

The bank trade associations claim that customers willingly pay higher fees because they are getting value. Well, where’s the value for an innocent victim who deposits a check that bounces and is charged a fee? Why should consumers pay for ATM transactions when this technology lowers bank costs, eliminates employee assistance and, in some cases, has replaced full service branches?

The banks need your money to stay in business, and when you give it to them through deposits, they keep overcharging you for the privilege!

When customers open accounts, they are given forms mistitled “Signature Cards” to sign. Hidden in small print on the card is an agreement that gives the banks the authority to change the terms of the account at any time, including raising new fees. In the same way a growing number of Banks, led by the Bank of America in California, require that disputes be settled by binding arbitration, thereby stripping you of the right to go to court.

A few years ago, in a court case, a California bank had to pay back millions of dollars to their customers because it charged too much for bounced checks. Under binding arbitration, appeals to the courts are not permitted.

What bonanzas? When the big banks get into self-inflicted trouble, the government helps them take it out of the hide of taxpayers and small savers and does nothing to regulate the fees imposed on consumers. Whatever the banks want to charge, they pay themselves from the money you have deposited in their trust.

There is too little bank competition for smaller fees and no charges. As the big banks buy up the smaller banks, now that the bans on interstate banking operations have been repealed, there will be fewer smaller banks to offer a possibility of competition. However, credit unions are still around and should invite your interest in switching.

For the time being, regulators should require banks to obtain a signed agreement from their customers for each special regular charge to be imposed and how that charge is to be paid for -­whether by debiting the account or direct billing. At the end of the year, banks should send their customers a statement detailing all the charges and their totals.

Banks brag about their computers; let them put these machines to work for their customers’ benefit here.

Once consumers see all these charges on one page or more, they may become more assertive.