The Patriot Post® · Biden's Junk Fee Populism
It’s a fact of living paycheck to paycheck: Sometimes you run out of money before you run out of week, and the check you thought would clear the bank bounces back with a hefty fee tacked on for good measure. As the late comic George Carlin once asked, “Why is it that when we bounce a check, the bank charges us more of what they already know we don’t have any of?”
The banks would be quick to tell you that such fines are intended to cover their expenses, and the realist may consider it a toll for stupidity. Some people make a habit out of gambling that they can kite a check until payday comes — “The check’s in the mail,” and all that. But the bank then has to process multiple transactions.
Yet these fees and other common business practices have come under fire from the Biden administration, which has turned to dubbing these charges “junk fees,” claiming that overdraft charges “far exceed the marginal cost of the service they purport to cover.” In his State of the Union show, Biden promised to do away with these fees, mixing in with his lies a hardy class warfare perennial — that these fees disproportionately affect the poor and middle-class people of color.
The nation’s largest banks seem to be getting the hint. Recent announcements from Bank of America, Wells Fargo, U.S. Bank, Truist, and Regions Bank have seen an easing or elimination of these fees. But the banks aren’t going to eat the loss of revenue. “There’s no such thing as a free financial product,” warns the Wall Street Journal editorial board. “If regulators limit one source of revenue, businesses will find another to cover their costs. That is one lesson from the Dodd-Frank Act, which limited debit-card fees that banks charge retailers for using their network. As a result, banks increased overdraft fees.”
However, no one would necessarily notice those fee increases or reduced rates on investment instruments — even if they did, they could easily be chalked up to inflation. Like his proposal to forgive student loans, Joe Biden has hit on a populist idea that, on the surface, appeals to the average voter who has experience with these fees. It’s also a sure bet the Republicans aren’t going to object like they did with the student loan scheme.
Yet while the Biden administration has called on Congress to enact what’s been dubbed a Junk Fee Prevention Act, the administration’s primary method of changing the rules will be through rewriting the regulations already tying the banking industry in knots. And since regulators aren’t voted out, it’s likely they’ll be around to try to clean up the mess they’re sure to make out of this situation.
Of course, part of the reason such junk fees exist is government intervention itself. So the question has to be asked: Why will more intervention suddenly fix it?