Run on the Bank of America

About the new BofA five clam a month charge to use their debit cards?

It’s not the best thing in the world, but it’s also not the worst thing in the world.  What gets my goat is that the same kind of people making it out to be a total travesty are the same ones who don’t show one iota of concern about anything else getting more expensive.  There’s more bitching about $5 that BofA wants from you than about $500 that Uncle Sam wants from you, ceteris paribus.  Bank of America wants $5 for a month from you?  End of the freakin’ world.  Ameren UE has raised its electric rates three times since Obama took office, mainly due to Obama’s anal-retentive enviro-nut fixation about coal?  No outrage at all, even though you’re paying way more than $5 a month on average for it.

Evidently, the whole thing is a result of Dodd-Frank.  I haven’t bothered to grok the exact nuance, but I’m not surprised that something the left wing Democrats wanted and got is to blame.  I love it when their own shit blows up in their faces.

On the flip side of the coin, BofA and the other banks doing this aren’t handling the PR very well, and it’s going to hurt them and hurt them badly.  I predict that they will either reverse course or reduce this charge to $1 or $2 a month, or something similar.  The reason is that the public paranoia over these fees are going to lead to bank runs and, if left unchecked, it will strain the fractional reserve system and collapse the banking system.  If people get it in their heads that they “need” to do as much of their financial business in cash as possible to avoid a piddley monthly fee, then people are going to go to their banks asking for cash as much as possible and as often as possible.  It’s called a run on the bank.  I’m sure the bank execs will find it better that they simply absorb these extra costs and not pass them along than pass them along and create public anger and create constant runs on their banks.

As an aside, for those of you who think that you can ditch this dinky little monthly fee and live in a personal cash-only microeconomy?  Money orders aren’t free, I know the Post Office wants a buck a piece (maybe more) for each one, and even more if you purchase high dollar amounts (over $300).  Just five money orders will cost you at least the same $5 you think you’re saving — I know you have more than five monthly bills.  Too, you’re not allowed to buy more than a certain amount of any kind of money orders per day (I think it’s $1,500), thanks to the PATRIOT Act, because money orders were a staple of the financial lives of the seventh century throwbacks among us before 9/11.  On top of that, I think the PATRIOT Act mandates a legal maximum $1,000 for any single money order — A lot of people have mortgage payments higher than that.  On top of that, other PATRIOT Act regulations of money orders have gotten so stringent that a lot of places won’t accept them anymore as payment.  And that’s not counting all the time and hassle and running around you’ll have to do – In case you haven’t noticed, gas still isn’t cheap.  Point is, a typical middle class American household cannot reasonably financially operate on cash and money orders alone.  Then again, a typical middle class American household should be able to afford the extra $5 a month — If it can’t, then it has a lot of problems.

Just thinking out loud here, maybe this is why BofA et al. won’t do away with this fee, because most of the people popping off about it now will realize that they have no real functional alternative.  I do imagine that the banks will, or will be prodded into, adopt(ing) workarounds and/or forebearances for lower-income account holders.

A number of years ago, Citibank did something that pissed the NRA off.  Gun owners ran Citibank asking to close their accounts and get their money in cash.  Citibank quickly reversed whatever they did and got on their hands and knees and begged for forgiveness.