As parents, we have all faced a conundrum when we've discovered that our children are being bullied. On one hand, we tell them not to fight back and lower themselves to the antagonist's level. However, sometimes you need come back harder and beat the you-know-what out of the bully.
Most people have similar feelings when it comes to the banking industry. On one hand, people blame these institutions for doing the country wrong due to the financial meltdown and excessive consumer fees. However, it is important to remember that banks are not non-profit organizations. They are corporations with a responsibility to make a profit. The fees that they charge are disclosed upfront and in a free economy such as ours, you have the choice to decide if you want to do business with them or not.
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On the other hand, some people also feel for the banks due to incessant Big Government oversights and intrusion in their daily business.
Yesterday, Bank of America (NYSE:BAC) announced that it would charge a monthly fee to its customers if they opted not to do business online. My response: Can you really blame them? Bank of America has been demonized for the last three years publicly and financially and this is simply a defensive move to protect its business.
Although some of criticisms of big banks may be justified, due to all of the new regulations, "fines and other levies" put on them, the banks have no choice but to find a way to make money for their shareholders.
The numerous oversights included in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is a devastating blow to the financial balance sheet of all major banks. Compliance is extraordinarily expensive and limits their ability to do business as they have in the past.
The Durbin Amendment provisions that became law in October limits credit card transaction fees for individual consumers, but places a larger burden on the banks. Banks have no choice but to accept what the government is placing on them – so can you really blame them for fighting back?
While it is true that many of these laws and regulations protect banking consumers, the banking industry as a whole still must do something in order to offset these regulatory fees.
If you are wondering if you should blame Bank of America, go ahead, but let the free market run and appreciate the fact that if you don't like it, you can always take your money somewhere else.
Ed Butowsky is an internationally recognized wealth manager. His upcoming book titled "Are You Committing Financial Suicide?" is expected to be released this spring.