Biden’s Blarney on Bank Fees

On January 14, the White House issued an emotionally charged bulletin on overdraft fees. It outdid itself, packing the release with vituperative claims that overdraft fees were sneaky, hidden, just plain wrong, and exploitative, that they raked in excessive profits for the wealthy and padded the banks’ bottom lines, all at the expense of hardworking families.

“Junk fees may not matter to the very wealthy, but they matter to most folks in homes like the one [Greek, Jewish, and Puerto Rican] I grew up in,” Joe Biden said in March. “They add up to hundreds of dollars a month.”

In his homage to class warfare, and imaginary ethnic experiences as a child, Biden promised in a January 2024 presidential statement to curb or slash junk fees in banking: “This is about companies that rip-off hardworking Americans simply because they can.”

He claimed that Republicans defend exploitative fees, give way to wealthy and big corporations, and undermine competition among banks, punishing hardworking families. It is an election year; expect more blathering.

The administration postulates that junk fees amalgamated with greedy profits are at the root of impoverished, oppressed Americans. The Consumer Financial Protection Bureau (CFPB) director Rohit Chopra provided this declaration of war: “Today’s rule ends the era of big credit card companies hiding behind the excuse of inflation when they hike fees on borrowers and boost their own bottom lines.”

This inflation deflection is playbook propaganda. This is not a campaign trail whopper from President Pause, whose staff must clean up what he meant. This is an official communiqué of the White House, written by staff, reviewed before release, and echoed in other pronouncements. It is composed of four shameful lies and a storm of curated half-truths designed to condition headline grazers that federal intervention is necessary.

Anachronistic dialogue from the 2010 Consumer Protection Act, passed after the major recession, contained three invasive banking regulations. Senators Elizabeth Warren and Dick Durbin as well as their tribe imposed more regulations on banks. Debit card charges, credit card premiums, and banking fees came under attack. This recent bombast is taking thirteen-year-old banking practices and attacking them as current 2024 procedures. The next target is buy-now-pay-later offers from retailers.

A common, working definition of propaganda is the “dissemination of information—facts, arguments, rumors, half-truths, or lies—to influence public opinion. It is conveyed through mass media.”

Faustian reporting by mass media is the echo chamber for the lies and curated half-truths influencing public opinion. Using headline news captions from this presidential statement, main street media outlets parroted the allegations. MSNBC, CNN, Axios, the Associated Press, the New York Times, CNBC, Barron’s, and the Wall Street Journal reported “facts” from the release without comment at the time.

Four lies, or abject confusion, comprise the alleged savings for typical families. The new rules would supposedly save a typical family $150 a year for a total of $3.5 billion every year and encourage competition.

Reporters seeking a byline repeated logical impossibilities as factoids, inviting a click past the paywall. The media stories all contain a “could” clause, which are word bunkers to hide in when information blows up the original statement. The claims were all modified in the last lines of the articles: CNN used “potentially, as much as”; Reuters said, “could save”; AP used “could lower”; CBS used “could limit”; and so on.Hannah Arendt wrote in “Lying and Politics” that “the trouble with lying and deceiving is that their efficiency depends entirely upon a clear notion of the truth that the liar and deceiver wish to hide. In early 2022, the CFPB published a report that families who pay “junk” fees pay $150 a year. The CFPB had isolated a cohort of families for this application. Typical families do not pay overdraft fees. The word “typical” substitutes for the report’s “who pay” phrase to imply broader perils to a larger cohort. This reworded statement is a lie.

The current overdraft charges are an average of twenty-seven dollars. To reach $150 for a typical family, it would need six violations. Claiming an average fee savings of $150 per year, the typical family rescued by the act gains three dollars a week.

The savings claimed are worth nine eggs a week at my grocery store, so tighten your belt for one less soufflé this week. It does not impact the 21 percent rise in the entire typical market basket for all typical consumers.

“Banks are hiking fees” is the second lie. According to the CFPB reports, bank fees have decreased over the last four years, dropping over 50 percent for the period of 2019–23.

The third lie is about the overdraft and nonsufficient-funds charges. Account holders claim that the charges are a surprise. Banks contract with consumers to cover insufficient funds. This is not an arbitrary action by the bank. All banks use CFPB wording in their contracts. Account holders agree to overdraft actions instead of an exchange refusal. Overdraft fees have dropped in two years from thirty-three to twenty-six dollars, and further reductions will occur.

That Republicans undermine bank competition is the fourth lie. Major banks have adopted features that prevent overdrafts. The more common service is waiving fees or reducing them to ten dollars if there is a linked account (savings) to the checking or debit account. This benefit is offered by eight of the top ten banks. Multiple overdraft charges for the same day are waived. Other banks allow a dollar amount overdraft, most often fifty dollars.

These improvements are from competition between banks. Banks also compete on banking services such as phone apps, interbank cash machine costs, and maintenance fees. This competition will continue to cut costs as the recent charges are adopted by more of the banking community.

In Weapons of Math Destruction, Cathy O’Neil addresses bellicose campaign fallacies. She posits that comparisons and conclusions drawn from sloppy math are destructive. We need to view the remainder of this campaign fallacy in the context of Weapons of Math Destruction: “Problematic mathematical tools share three key features: they are opacity (opaque), scale (difficult to contest) and damage.”

The greatest weapon is using curated data to create “averages.” The widespread repetition by the media gives scale to the underlying fallacy, making it difficult to contest.

Opacity and unregulated analysis appear frequently, encouraging us to think the consumer is at the mercy of banks and needs federal rescue. By shifting the comparisons in CFPB databases, mathematical congruence between reports is impossible. We could try to relate the weaponized numbers to validate the claim of saving $3.5 billion. However, it is all blarney. The purpose of these misstatements is to bewilder or condition the public to accept more controls.

Cohorts are contradictory. An estimated twenty-three million people pay overdraft charges. The twenty-three million annual number is 27 percent of all families.A later report claimed that 9 percent of account holders who had more than ten overdrafts annually paid 80 percent of the combined fees, or $720 dollars each. Are overdrafts affecting a small or large subset of all families?

Comparison predicates are incongruent. CFPB used opaque comparisons of unregulated averages to report that a quarter of the eighty-three million families making less than $65,000 frequently pay overdraft fees. Among households that made $30,000 or less, more than a third said that they had been charged an overdraft fee six or more times in 2022. Are those with lower income impacted, or are the fees profoundly affecting middle-income customers?

More confusion in propaganda supports a federal rescue.Fees and charges are dropping and will continue to shrink. The words “typical” and “average” will continue to misconstrue facts. Lies will resurface. Incongruent statements will suspend reason for emotive headlines.

Inflation squeezes the cash flow of lower-income and single families, pushing these families to overdrafts, but there is no relief in Biden’s baloney or Chopra’s calumny.

Originally Posted at https://mises.org/

By Mises