Big banks are rolling in record profits, branching interstate, gobbling up competitors, grabbing for new powers from the regulators and lobbying the Congress for even more of the nation’s economic pie. Rarely have those at the top of the banking heap had it so good.
For the customers of these financial giants it is a different story. The era of interstate branching and expanded powers has brought low and middle income consumers little more than new fees and autocratic “take it or leave it” edicts and rules issued from distant management posts.
Local communities have watched while mergers wiped out competition, eliminated jobs and closed thousands of neighborhood branches. Some have been startled when faced with demands that they submit to being fingerprinted if they wanted to cash a check drawn on one of these interstate banks.
Surveys conducted by U. S. PIRG reveal that the big banks–which argued that mergers and interstate branching would save them billions of dollars–are charging their customers the highest fees in the banking industry compared to the charges imposed by smaller banks.
Some consumers and public officials are beginning to revolt against the heavy handed ways of the big banks. They’ve had enough of the interstate arrogance and are devising means of making their views felt by pushing for the withdrawal of public monies on deposit in the interstate branches.
Last April, I questioned Edward Crutchfield, chairman of First Union of North Carolina, about his bank’s insistence on fingerprinting citizens who wanted to cash checks drawn on First Union. What I got back were generalities about saving billions for the banking industry by diminishing the incidence of check fraud.
I suggested that these savings, if real, be passed on to consumers in the form of reduced bank fees. The bank executive dodged the suggestion, telling me that “anything we can do to reduce any or all costs across the entire operating spectrum of this corporation that allows us to be more competitive, would be implemented.”
This type of bland answer to serious consumer complaints may be wearing thin. In New Jersey, for example, some state legislators–concerned about invasions of privacy and angered by demands for fingerprinting at branches of First Union of North Carolina–are asking that all public funds be pulled out of the bank’s branches in the state.
This apparently would mean the loss of hundreds of millions of dollars in deposits. Union County, New Jersey has immediate plans to withdraw its funds and seek rebidding on the county’s certificates of deposits held by First Union.
In New Mexico, the invasion by another North Carolina giant-NationsBank–is facing protests over the layoff of employees, the closing of branches and the imposition of new fees in the wake of its takeover of Boatman’s Bancshares in the state.
“The acquisition costs are coming off the backs of the people here,” State Senator Roman Maes of Santa Fe told the American Banker. “These guys are cold as steel. They have no emotions and no feelings for people.”
The City of Albuquerque said it would terminate it banking relationship with NationsBank, putting $20 million of deposits and a $450 million investment portfolio out for bids.
These actions should serve as a warning signal to the banking industry. The public is aroused about arbitrary bank fees, wholesale closing of neighborhood branches, reduced services and what they perceive as little concern about persons who maintain low and moderate income balances.
All of these banks receive free taxpayer-backed deposit insurance–a golden advantage over the rest of the financial services industry. The big interstate banks enjoy special status as institutions “too big to fail” and, thus, candidates for taxpayer bailouts. The Federal Reserve provides liquidity loans at below market interest rates and subsidizes check clearing operations. Many of their profitable loans for housing, small business and education are guaranteed by the taxpayers and sweetened with fees from the federal government.
Washington is often the last to get the message. Congress and the Clinton Administration continue to draft new schemes to expand the role and the profits of the banks while doing nothing to slow the tide of rising bank fees or to make sure that services remain for all consumers on a fair and affordable basis in the wake of interstate branching and mega mergers.
Public officials in New Mexico and New Jersey seem to be hearing the people’s voices. So, there may be hope that the call for consumer rights will reach the Congress as it considers legislation to give the big banks even broader powers and advantages.