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The Bankers' New Goat

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According to the Biblical story, on the day that the people were to atone for the sins committed for the year, they would send a goat off from the village to its death. The goat symbolically carried the sins of the villagers and by casting it out the villagers were cleansed and forgiven by God. So began the tradition of picking a scapegoat which has, over the years, been refined and honed into an art form.

A prime example comes from U.S. banks. These banks have had many reasons to cast blame elsewhere for their shortcomings. A remarkable example is the very loud discussion of checking fees. Some might say that the concept of free checking accounts has always been a myth. In fact, a Bank of America spokesperson said just that last summer: "Customers never had free checking accounts. They always paid for it in other ways, sometimes with penalty fees."

Yet the concept of free checking has been powerful enough that banks have searched for one excuse after another to justify getting rid of it. In November 2008, the Wall Street Journal reported that "banks are responding to the troubled economy by jacking up fees on their checking accounts to record amounts." At the same time, other news outlets reported that the banks were charging record-high service fees and customer penalties to make up for losses from bad mortgage loans. Other banks said that they would raise fees due to industry consolidation and proposed increases in FDIC rates for deposit insurance.

The truth, summed up nicely by an executive from TD Bank, was: "all banks have to be looking for ways to meet the requirement of shareholders." That pressure means banks consistently leave no stone unturned in their drive for additional revenues.

In May 2009, it was time for a new scapegoat. The Financial Services Roundtable and Bank of America claimed that with higher unemployment, customers became riskier, and higher fees were necessary. One could be excused for wondering why customers giving their own money to banks in checking accounts was risky. The added irony was that American consumers had only months before put up $700 million to bail out the banks for their own "risky" practices.

The next sacrificial goats were a 2009 credit card reform bill and regulations of overdraft charges. As USA Today reported, banks responded to credit card regulations by "extending some of their most profitable -- and controversial -- credit card practices to checking accounts." This provided a new, and politically convenient, source of blame.

An amendment from Senator Durbin now follows as the latest goat. The amendment will eventually rein in the swipe fees that banks can charge. And, though it won't take effect until July, the bankers have wasted no time raising checking fees and casting blame. It is interesting to note that when the reform first passed, Citi CEO Vikram Pandit was quoted by the New York Times saying that the regulations would not be a problem for Citi. Sensing a scapegoat, however, the banks are now aggressively blaming the Durbin amendment for forcing them to raise fees.

The current blame game ignores the banks' cries of raising fees over and over again over the past few years. And it ignores that in their haste for the latest scapegoat, banks have raised their fees long before the regulations have gone into effect. According to CNNMoney, as of January 24th U.S. Bank was one of the last banks in the nation to offer "free checking" but "that may be about to end."

Banks are always looking for ways to make more money. The bottom line is that even if swipe fee reform were to magically disappear, the banks would do all they could to charge more fees on their customers' checking accounts. The banks have been doing this for years, since long before the Durbin Amendment was conceived, let alone passed. The pattern is getting old and weary. Banks will raise checking fees whenever and wherever they think they can get away with it. And they will blame any convenient development for their choices.

Eventually, our ancestors gave up the practice of sending away a goat to atone for their sins. We can only hope the bankers reach a similar enlightened age and stop blaming others for their own business decisions.

David Balto, is an antitrust attorney and former policy director at the Federal Trade Commission.