How Ben Bernanke "F*d" the Banks and Fixed Income Savers at the Same Time

Hello Ben. It seems your ploy to hold interest rates at preposterously low levels has backfired into a run on Bank of America assets.

Bank of America Customer Frustration Grows

Inquiring minds are reading Bank of America Customer Frustration Grows

Bank of America's plan to add a five dollar a month debit fee has angered customers.

Bank of America customer Molly Katchpole is one of those customers, "I'm 22 years old, I'm working two-part-time jobs, I don't have an extra 60 dollars a year to give to Bank of America," says Katchpole. "

She started an online petition calling on Bank of America to repeal the fee.

Four days later, she got 125-thousand strangers lending their support.

Meanwhile smaller, local banks are reaping the benefits from big bank customer anger, says John Heaps, President and CEO of Florence Savings Bank,"We call Bank of America and the big banks the gift that keeps on giving, because over the weekend we opened more accounts from Bank of America on line than any other time in the history of the bank," says Heaps.

Fee Parade

Things are now so "F*d" up that banks cannot make money on deposits and consumers cannot even get access to their accounts.

It's not just at Bank of America. Wells Fargo and Citigroup have joined the fee parade.

Please consider Citibank is next with a new banking fee

Another day, another new bank fee.

As the uproar swelled over Bank of America Corp.'s planned $5 monthly charge for debit card use, megabank rival Citigroup Inc. was notifying many Citibank customers that they soon would have to start paying for their checking accounts unless they maintained significantly higher balances.

Letters are going out across the country alerting Citi customers of account changes, said the bank's retail banking chief, Stephen Troutner. In many cases, that means customers will have to maintain fatter balances to avoid fees, although Troutner said a basic account option makes dodging charges easier.

Higher fees are the new reality in retail banking, where regulations adopted in the aftermath of the bank bailouts have reduced revenue from several controversial fees by billions of dollars. At the same time, banks have seen their lending income decline due to the sluggish economy and low interest rates.

That has caused major banks to impose a variety of new customer fees, although the exact formula varies. Citibank, for example, decided not to impose "usage" fees such as the $5 a month that Bank of America, starting next year, will charge most customers who use their debit cards to purchase goods and services.

"We conducted extensive surveys with our customers, and no one wanted to pay to use debit cards," Troutner said.

One day after announcing the new debit card fee, Bank of America was inundated with visits, calls and emails from customers.

"We are doing our best to explain the impacts, the value and convenience the debit card offers and how to avoid the fee if necessary," spokeswoman Anne Pace said.

By the way, this brings up another point. I worked for two decades at banks on the programming side. Evey bank wanted accounts no matter how small for economies of scale.

The reasons for that policy are that it costs next to nothing to process incremental accounts, and costs can be spread out over all of those accounts.

I fail to see how the same cannot be true today. After all, if savings and loans and small banks with no economies of scale can handle these smaller accounts and at least break even, then why can't Citigroup and Bank of America?

Two Answers

1. Organizations of large banks are so bloated with multiple layers of fat, they need increasing numbers of fees to make a profit.


2. Major banks are so capital impaired they desperately need new fees to cover losses elsewhere.
   

Ultimate Irony of Fed Policies

Here is the ultimate irony in the asinine policies of Ben Bernanke and the Fed:

As a result of "too big to fail" policies of the Fed, the big got so big they are not even profitable at the low interest rates Bernanke has set for the alleged benefit of the banks and the economy.

Not only did Bernanke "F" those on fixed income, he "F*d" all the banks that cannot make a profit on small accounts.

Congratulations Ben. It is not easy to be that big a failure.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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