The U.S. Federal Reserve has a tangible coup to wave in front of politicians this week: A move by Bank of America to sacrifice overdraft fees on debit cards.
Just as lawmakers are discussing the Fed in disparaging terms -- how it failed to prevent or even predict the recession, how it bailed out banks and left Main Street to pay the bill -- one of the nation's largest banks tossed in the towel on a $35 per event fee that accounts for 60 percent of its revenue from overdrafts.
For the industry, Moebs Services, a research firm, said such overdraft fees generated $38.5 billion for banks in 2009, The Wall Street Journal reported.
Bank of America is set to withdraw its overdraft fee because, "what our customers kept telling me is 'just don't let me spend money that I don't have,'" deposit and card product executive Susan Faulkner told The New York Times.
Sincerity aside, the bank "wanted to help them avoid those unexpected overdraft fees," as Faulkner said, just months ahead of a Fed rule change that would require banks to obtain permission from customers before imposing such a fee.
The development also comes soon after an idea floated by Sen. Christopher Dodd, D-Conn., and Bob Corker, R-Tenn., to house a consumer protection division in the Fed was met with incredulity by some lawmakers who said consumer interests were not the Fed's first priority.
The issue is sometimes philosophical and sometimes practical: Do you save a bank, because consumers need banks or do you save a bank because your golfing buddies work on Wall Street. Treasury Secretary Timothy Geithner sounded like a broken record last year repeating his assertion the bank bailout was a necessary step that consumers would eventually appreciate. Lawmakers are now rewriting bank rules with just that in mind: To make the link between bank rules and voter appreciation a little bit clearer.
Corker, meanwhile, has met with inquisitive reporters wondering if he would admit to a connection between contributions to his election campaigns from payday lenders and his proposal to keep payday lenders out of reach of a new consumer protection agency -- whether it is housed in the Fed or anywhere else.
Under the proposal, the new consumer-focused program would be able to write rules for payday lenders, who charge as much as 400 percent interest on quickly approved emergency loans, but would not be able to enforce those rules without first petitioning other regulators.
W. Allan Jones, the founder of the third largest payday lender, Check Into Cash, is a "longtime friend and supporter," of Corker's, the Times reported, the catalyst for $31,000 in contributions to Corker campaigns since 2001. In addition, Advance America founder George Johnson Jr., the firm's chief executive officer and its political action committee, has tossed $6,500 into Corker's campaign chest funds since 2008, the Times said. As a whole, Citizens for Responsibility and Ethics in Washington, said payday lenders spent $2.1 million on lobbying in 2008, three times what they spent in 2005.
But Corker said, "categorically, absolutely not," when asked if the contributions influenced his legislative acumen.
"Our goal in this legislation should be to level the playing field so that the same rules apply to all involved in lending," Corker said in a statement.
In international markets Wednesday, the Nikkei 225 in Japan lost 0.04 percent, while the Shanghai composite index in China lost 0.66 percent. The Hang Seng index in Hong Kong rose less than 0.01 percent on a gain of 0.74 points.
The S&P/ASX 200 in Australia lost less than 0.01 percent, down 0.14 points.
In midday trading in Europe, the FTSE 100 index in Britain rose 0.07 percent, while the DAX 30 in Germany rose 0.22 percent. The CAC 40 in France rose 0.29 percent, while the pan-European DJ Stoxx 50 shed 0.15 percent.