WSJ: Bailed-Out Banks Face Probe Over Fee Hikes

[flpoljunkie]

Bailed-Our Banks Face Prove Over Fee Hikes

David Enrich and Marshall Eckblad
April 13, 2009

Article from: The Wall Street Journal

THE US committee overseeing federal banking-bailout programmes is investigating the lending practices of institutions that received public funds, following a rash of complaints about increases in interest rates and fees.

Since the Troubled Asset Relief Program was launched in October, banks bolstered by capital infusions have boosted charges on a wide range of routine transactions, hiked rates on credit cards and continued making loans criticised as predatory by consumer advocates.

The TARP funds are intended to open lending spigots and make it easier for people to borrow money.

Last week, for example, Bank of America told some customers that interest rates on their credit cards will nearly double to about 14 per cent. The bank, which got $US45 billion ($62.6 billion) in capital from the US Government, also is imposing fees of least $US10 on a wide range of credit-card transactions.

Elizabeth Warren, chairwoman of the Congressional Oversight Panel, the body named by US Congress to oversee the federal bailout, said the panel is working on a report examining instances of potentially inappropriate lending by banks that got taxpayer capital. “The people who are subsidising the activities of the banks through their tax dollars are the same people who are furnishing the high profits through consumer lending,” Ms Warren said. “In a sense, we're asking taxpayers to pay twice.”

Last month, a Senate committee narrowly approved a bill that would rein in many credit-card marketing and pricing policies, including ballooning interest rates. Proponents of the legislation say many of the largest card issuers have received government aid and so should be subject to greater scrutiny.

Banks say that raising fees and rates, even on low-risk customers, is a legitimate way to recoup some of the costs of the bad loans still on their books. They also say taxpayers have a financial interest in seeing the industry quickly return to profitability. Any revolt over price hikes could intensify the crisis by depriving institutions of a key income source, say banks. New restrictions on these lending practices “may truly have an impact on profitability”, said Gerard Cassidy, a bank analyst with RBC Capital Markets.

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http://www.theaustralian.news.com.au/business/story/0,28124,25326845-36375,00.html

[PBS Poll-435]

1. Could the same argument be made regarding the ever-increasing amount and instances of "Fees" paid

To city/county/State governments?

[belpejic]

2. It's about freaking time

I am simply furious that my responsibly paid taxes--which have not been kind to me financially--are going to these usurious institutions. We all need to share the pain, and they seem to be getting all of the kindess, funded by my money.

[flpoljunkie]

3. Indeed, it is.