Posts Tagged ‘bank profits’

Really, Big Banks? Really?



Even before the ink was dried on President Obama’s signature on the credit card reform bill, the banks were already on the hunt for loopholes in the law to exploit in the name of profit.  In the absence of loopholes, they wanted to find new ways to generate the same amount of profit as they had before the law took effect.

An article on, which is a subsidiary of the Wall Street Journal and certainly no friend of Main Street,  predicted that banks would stop offering free checking accounts.  Probably the single most laughable comment in the entire piece is this shining gem:

Already cash-strapped banks anticipate declining revenue from credit cards as rules from the CARD Act take effect, says Hank Israel, director of Novantas, a financial services consulting firm in New York.

If the banks are so cash-strapped, then how can they afford to give their top executives such large bonuses? It is true that the new law will cost the banks revenue, and recent action by the Federal Reserve to limit overdraft fees starting this summer will cut those profits even further. Let’s be clear here: the new law won’t bankrupt the banks…not even close! The banks will still bring in revenue, and plenty of it. It just won’t be quite as much.

That said, those profits that the banks are trying to reclaim can be fairly characterized  as “ill-gotten,” and complaining about their curtailment is a bit like a bank robber complaining that he can’t rob any more banks after he is caught. Further, finding new ways to make the same sorts of profits is akin to that bank robber switching to robbing armored trucks.

“The banks need to make up the lost profits due to the law in other ways,”  whine bank cheerleaders and apologists, with the inference being that but for passage of the law, the banks would not resort to such tactics.

Don’t get me wrong: there is nothing wrong with making money. There’s nothing wrong with making a lot of money. The wrong lies in how that money is made. It is just as wrong for banks to make 80% of their revenue from 20% of their most vulnerable customers as it is for someone to make his money by thievery.

Instead of whining about being regulated after years of massive deregulation that precipitated the financial crisis in which we now find ourselves, the banks should be looking at new ways to make money that add value.  No one would complain about paying for  a service that is helpful and actually does something.

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