A Reader Responds: Bank regulations (Chicago Tribune June 20th)

You are among the most-respected money oracles in the business, and here, you are just pointing to shortcomings in government prescriptions for consumer protections. But missing are your alternative ideas on how to achieve the same goals but at lower cost to all concerned.

1. Obamacare aimed to reign in healthcare costs that were rising faster than inflation by bringing the uninsured under the umbrella for society’s good. In most cases, society was already paying their healthcare costs via the back door, since they just showed up at emergency rooms, and the mandated cost of caring for them ended up on everybody else’s insurance bill. Despite foot-dragging by the insurance industry and other vested interests, and glitches, many of the goals were met. Many more would have been met except for Republican governors refusing to accept the program, especially as it pertained to Medicaid, where the underserved caused most of the hidden costs anyway. This you did not address. The whole idea of insurance is everybody in, everybody pays a little to avoid bankruptcy if bad health strikes. If you have a better idea, by all means get it into the public discussion.

Why is it Europe’s industrialized nations can provide first-rate healthcare to all their citizens for roughly half the cost suffered here? You did not offer this comparison either as a possible solution for us. Yes, you must come to grips with the facts as they are, but why acquiesce in them without suggesting better solutions?

2. The banking regulations passed in the Great Depression served the nation well, until watered down bit by bit by compliant legislators hungry for campaign money. Bankers are not social workers, nor are they expected to be. But their insatiable pursuit of profit at any cost has to be reigned in or they destroy the very system that lets them profit. They became behemoths, “too big to fail,” and look where it got the global economy. Complying with federal regulations may be onerous and costly, but they would not be necessary except for vulture banking practices. You did not even allude to this reality. It took Franklin Delano Roosevelt to restrain bankers’ worst impulses. It took Teddy Roosevelt to reign in the “Robber Barons.” Must we await yet another Roosevelt to come along to protect consumer from rapacious bankers who brought the regulations on themselves. Again, you cite the costs, but offered no prescription that would or could level the playing field. Arguably Jamie Dimon and his sort need not be paid the sumptuous sums they get paid, nor need their minions receive the outrageous sums they are paid in bonuses. It doesn’t happen in overseas banking systems.

Much else is going on in global economics that contributes to the rise in bank fees and such. Once banks reach phenomenal performance heights, bankers and shareholders embrace those heights as the new normal, and when setbacks occur, including the cost of regulation compliance, they help themselves to consumers’ money with outrageous fees for every aspect of banking interaction: ATM fees; overdraft fees at slightest infraction; check-printing charges, stop-payment charges, etc., etc. etc. Nowadays, Chase is even pushing customers to their robot kiosks to cut down on payroll. Minimizing operating costs is one thing; but the banking picture today is a far cry from what it was 50 years ago, with home-town or neighborhood banks who felt part of the community.
Today, it’s consumer beware more than ever. Yes, we’re all grownups. It is what it is. But is it right for the good of the nation’s population or its financial future? Yes, these are philosophical questions you may consider outside your purview as an advisor coping with what is, not musing about what could be or should be. But some would say you owe it to your readers to be more of a mensch than merely a referee or scorekeeper. It would not undermine your reputation as a financial guru, and would shed light in some dark and foreboding places. This is especially so now, when Janet Yellin is treading water and suggesting storm clouds are gathering; when global growth is so anemic Germany’s bonds carry negative interest, paying nothing but costing investors instead; when today’s Brexit vote could send shock waves through the global system; when so much of the world is in abject turmoil trashing their economies and sending waves of refugees outward; and so forth.

I hope you find this to be food for thought. Expand your scope. It would be helpful.

Terry Says:  Thanks so much for your comments.  Food for thought.  My problem is they only give me 650 words for each column!  So I raised the issues to make people think about whether these latest government moves are working.  Two quick thoughts.  There’s no way to escape rising costs of healthcare — except to ration care either by the ability to pay, the ability to choose, or the ability to wait (in line).  Otherwise costs will rise — Obamacare, or not.  Wait till you see the 2017 premiums that insurers will charge to provide mandated coverage.  And wait till you try to find an insurance policy that gives you access to your current physicians and hospitals.  I’m not saying we shouldn’t have universal coverage — only saying that it won’t look like what it used to for those who had health insurance before Obamacare.

And re the banks — take a close look.   After all this Dodd-Frank, the big banks are even bigger!  And small banks are merging because they cant afford the cost of regulation.  And the cost of regulation and higher capital requirements are impacting lending –and  the charges people pay for bank services.  So we get a slower growth economy and pay more, not less, for all this protection.  Again, not saying the banks should get away with bad behavior (and there was plenty of it), but there are costs — financial and economic — and we should be asking if the presumed benefits (many of which are doubtful) are worth the impact on our economic growth.

It would be nice if the next election revolved around thoughtful discussions about issues like the ones you raised!  Thanks for taking the time to write.  Terry