Tag Archives: banks

Complexity and Money

Scott Adams (Dilbert) has a blog and on it he recently wrote about banks.  I found myself nodding when I read the following:

As a general rule, you can usually assume that someone is trying to screw someone else whenever you find these two elements working together:

  1. Complexity
  2. Money

Complexity is how evil schemes are hidden from the public. Complexity is what caused so many people to get mortgages they couldn't afford. Complexity is how hedge funds hide their treachery. Complexity is how the derivatives debacle was possible. Complexity is how your financial manager can get away with charging you for doing nothing. Complexity is why you don't know if you can get a better deal with another phone carrier.



Kicked When They’re Down

While the banks might have abandoned their plans, for now, to start charging debit card fees they do have one group they're hitting with fees – the unemployed:

Bank of America recently aborted plans to charge ordinary banking customers $5 a month to use their debit cards in the face of national outrage. But the bank has quietly continued to mine another source of fees: jobless people who depend upon the bank's prepaid debit cards to tap their benefits. Bank of America and other financial firms — including U.S. Bank, Wells Fargo and JP Morgan Chase — have secured contracts to provide access to public benefits in 41 states. These contracts typically allow banks to collect unlimited fees from merchants and consumers.

In short, the same banks whose speculation delivered a financial crisis that has destroyed millions of jobs have figured out how to turn widespread unemployment into a profit center: The larger the number of people who are out of work and dependent upon the state for sustenance, the greater the potential gains through administering their benefits.



Failure is an Option

In this post Lex shares these thoughts from Barry Ritholtz on what might happen if too-big-to-fail banks are actually allowed to fail.  My favorite line from Ritholtz is this: "Real Capitalists know failure is part of the process. I suspect we may have another chance at a banking reorg. Let’s hope we do it correctly this time."