Bank Regulation Fails As JP Morgan Shows 67% Profit Gain On Fees

Posted on April 13, 2011

At the time Congress introduced new measures to regulate banks and their loan mechanisms – including credit cards, BAC thumbed its nose at the efforts and vowed that it would have to raise fees to make up for the lost income.  Indeed at least one large bank has done that to a remarkable extent and success:  JP Morgan-Chase.  Their profits for last quarter were up 67% largely due to raised level on fees for investment banking fees. [AP via Yahoo News]

They have, at the same time, cut their losses through more careful management of credit card and other kinds of debt held.  Ask anyone.  It is just about impossible to get a loan these days.  Instead of letting the banks fend for themselves as a result of their own barbarous practices, we propped them up at great cost to ourselves and now face tougher, more potent challenges from them.

So  who has lost in all of this?  Certainly small business and anyone who wants a mortgage  or a new car but also the average consumer with a checking account.  Here is what they have planned for us:

Debit cards are just one of several banking products that will carry additional fees this year. People familiar with their thinking say several banks are considering raising fees on automated-teller machines for noncustomers, which currently average $1.63 a transaction. Banks have long griped about such transactions, saying that providing cash to noncustomers isn’t a priority for them.

Banks also are continuing to add fees to checking accounts, a trend that began last year. Next month, for example, customers of the former Washington Mutual will see their free checking accounts replaced by fee-based accounts from J.P. Morgan Chase & Co., which bought WaMu in 2008. Customers can avoid the fees if they meet certain criteria such as maintaining balances.

“We don’t want to raise fees on our customers, but unfortunately, regulation is forcing us to do it, and as a result, some customers may end up unbanked,” said a Chase spokeswoman. Bank industry executives have said the new regulations will squeeze low-income customers out of traditional banking, sending them to high-fee alternatives like check cashers and payday lenders. [Online WSJ]

The Federal reserve has even been threatened by the banks for their proposed policies:

New proposals from the Federal Reserve call for limiting how much banks can charge merchants for debit-card transactions. The proposals, released last month, are part of the Dodd-Frank financial-overhaul bill that was enacted last year. The Fed has proposed capping debit-card merchant fees, known as interchange, at seven to 12 cents a transaction. That represents a drop of as much as 84% from the current average rate of 44 cents .[Online WSJ]

Perhaps all of the above is why we don’t hear much from Congressman Barney Frank, Chairman of the House Finance Committee.  “…[Frank was] one of the chief authors of the financial regulatory reform bill that passed in July 2010, which is often referred to as the Dodd-Frank bill [NY Times]. Having announced his re-election bid, he is no doubt hard at work on some monetary magic:

CNN is reporting on air this morning that certain banks are not notifying customers of some fees even though it is now mandated by law.