Occupy Wall Street Gets It - When Will Politicians And The Media Sign On?The 2008 “sub-prime” mortgage crisis threatened the health and financial stability of the US banking sector. In response to the crisis, the US Treasury and Federal Reserve Bank devised a plan to “save” the industry. The Troubled Asset Relief Program (TARP) initiated by US Treasury Secretary Henry Paulson, enacted into law by Congress, and signed by President George H.W. Bush, authorized the government to purchase or insure up to $700B billion dollars in “troubled assets” that were reflected on the balance sheets of American financial institutions. It is widely believed that TARP prevented many of the larger banks that were saddled with sub-prime mortgages, from failing or being forced into bankruptcy proceedings.
Critics of the government intervention call TARP corporate welfare, and believe that the executives of large banks have a “too big to fail” ethos, that has manifested itself by granting immunity to large corporations. Wall Street executives have yet to be held accountable for the egregious acts, and risky bets, they wagered that nearly toppled our economy.
Last March of 2011, Neil Barofsky, special inspector general for TARP, testified before Congress and said that TARP’s “most significant legacy may be the exacerbation of the problems posed by ‘too big to fail,’ particularly given the manner in which Treasury executed the bailout.” He also added that “executives, shareholders, creditors and counter parties, reinforcing that not only would the government bail out the largest institutions, but would do so in a manner that would do little harm to the responsible stakeholders.”
Not one executive of any Wall Street bank has been indicted for making speculative bets on the US economy. Millions of Americans have lost their jobs and homes, while many millions more are underwater on their home mortgages. These facts enrage a large segment of our population, and has resulted in the Occupy Wall Street movement sweeping across the country.
Reuters reported in February 2009 that “banks, automakers and other companies that have received U.S. bailout money spent $114 million on lobbying and campaign contributions last year.” Can it be any more obvious that the recipients of government funds are engaged in corruption?
The 2 largest recipients of TARP funds were Citibank, and Bank of America, as they both received $45B billion dollars from the federal government.
In 2010 Senator Dick Durban (D-IL) sponsored an amendment to a bank reform bill that capped the amount of money that banks could charge for debit card transactions. According to Marketwatch.com:
The Fed rules, which took effect Oct. 1, has retailers paying 23.9 cents on the average debit card transaction of $38. That’s significantly less than the 44 cents they previously paid. By one estimate, every month banks collected $1.3 billion in fees from U.S. consumers using debit cards mostly at retail outlets.
Halah Touryalai at Forbes.com wrote:
There’s new data out today about just how much money merchants are saving on the so-called Durbin Amendment, or Durbin Tax as it’s been dubbed lately.
Princeton, New Jersey’s Heartland Payment Systems reports that it’s passed on nearly $ 2 million to its merchant customers in the first three days after the Durbin Amendment went into effect.
Consumers were supposed to benefit from this law by seeing no increase in fees, and American retailers and merchants would see a decrease in fees, which would increase their bottom line. After being bailed out by the American people - the banks cried foul!
Reuters reported last Wednesday that Wells Fargo Bank’s CFO said:
“In a conference call with analysts, Chief Financial Officer Tim Sloan reiterated the bank's estimate that the new law will cost the bank $250 million per quarter after taxes, but the bank expects to recover half of that over time with increased volume and "product changes."
Sloan told Reuters on Monday that the bank was still in the first stages of testing the fee and had not decided to expand or contract the program.”
How will a reduction in fees cost the bank money? It will reduce income, but by characterizing the reduction in fees as something that will “cost the bank” money infers that each electronic debit card transaction incurs a loss for the banking giant - and I don’t buy that. It’s an arrogant assertion by a bank executive that is irresponsible, and at best is a lie.
Is it any wonder that Americans have such enmity for these financial institutions?
Molly Katchpole, a 22 year old student started an online petition in response to Bank of America’s inane announcement that they would start charging customers who maintained a balance below $20K dollars, $5.00 a month for using debit cards. To date, the change.org petition has 294,000 signatures.
I'm writing to express my deep concern over Bank of America's decision to charge customers $5 a month to use their debit cards when making purchases.
The American people bailed out Bank of America during a financial crisis the banks helped create. You paid zero dollars in federal income tax last year. And now your bank is profiting, raking in $2 billion in profits last quarter alone. How can you justify squeezing another $60 a year from your debit card customers? This is despicable.
American consumers can't afford these additional fees. We reject any claims by B of A that this latest fee is somehow necessary.
Please, do the right thing. Reverse your decision to charge customers $5 each month for using their debit cards to make purchases.
We are witnessing a sea change of discontent that is squarely aimed at the status quo. The stalled economy, high unemployment, and a disregard for the values that middle class Americans hold dear, has pissed off the entire country.
Our country has always stood for fairness, and equal justice under the law. If you got an education, and worked hard, we all thought we had a shot at what we refer to as the American Dream.
The corruption of our banking system, and inaction in Congress, is a nightmare. As Molly Katchpole said, the behavior of Bank of America, and their brethren, is despicable. The lack of reform and political cover provided by regulators, and mostly GOP politicians, is outrageous!
Timothy Massad, acting assistant secretary of the Treasury for the Office of Financial Stability testified before the Congressional Oversight Panel responsible for overseeing the Troubled Asset Relief Program, in March 2011, and said:
“The true cost of this crisis to the economy, however — the jobs, wealth and growth that it erased — is much higher than previous crises, but that damage would have been far worse without the government’s emergency response.
We need to have a system where firms can fail no matter how big they are. The actions taken in fall 2008 were appropriate, but we have to work to create a system where that doesn’t ever happen again and where firms do fail if they have taken excessive risk.”
Wall Street and our banks seem so out of touch and far removed from reality. Will we ever have a system responsive to consumers? Will these banks ever be penalized for taking excessive risks?
You can participate in voicing your objection to the staus quo by signing Molly Katchpole’s petition at change.org.
In the meantime - we’re still waiting, and expecting business as usual to change.