Wednesday, September 26, 2007

Helping the big guy In a well-written Salon.com article, Andrew Leonard explores the way in which big companies can use the legal system and sympathetic government officials to screw consumers and override state laws with federal ones. The case is that of the Bank of America, which recently announced a hike of its ATM fees from $2 to $3 for non-BoA customers at its network of 17,000 ATM machines nationwide. This 50% raise in fees certainly does not correspond to any raise in the cost of the service, as Leonard points out. Essentially it is a tax on those needing cash and unfortunate enough to be out of range of their own bank's machines. Of course, consumers can avoid BoA's grab at revenue enhancement. But the way BoA used the federal government to squelch local laws in Iowa, Connecticut, and San Francisco, for example, that banned such fees. As Leonard puts it, Sure, you can call that unwarranted interference into the workings of the free market, if you like. But one also suspects that the politicians involved were representing the wishes of their constituencies. If the people are annoyed by bank fees, in a democracy they have the right to express their ire by electing politicians who pass laws that order banks to behave differently. In steps the Bush-nominated head of the Office of the Controller of the Currency (OCC), an office that was set up to protect the consumer by regulating banks. The OCC stepped in to protect not the consumer but the big banks. The "OCC, under the aggressive leadership of chief counsel Julie Williams, has a long history of routinely suing to stop states from imposing consumer protection laws on the big banks." The agency invoked the doctrine of interstate commerce to make sure that pesky local officials (so hard to lobby all of them properly0 don't try to take away the privileges of national corporations, bought at so a dear a cost in lobbying efforts at the federal level. As the article points out, it's not just the relatively small case of annoying ATM fees, but also the more immediately important issues of predatory lending practices, which the feds did nothing about and which the states were rendered powerless to regulate, helping to lead to the current credit crisis and the fleecing of many naïve buyers. The article quotes (indirectly through a New Republic article) a former state assistant attorney generate who fought and lost to the feds on these issues, "What's disgraceful is for a federal agency to spend all these resources preventing consumer protection activities….It makes it look like their clients are the banks and not the customers or the public." Business as usual. 8:43:07 PM

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