JP Morgan threatens small depositors

By Felix Salmon
January 14, 2011
Ron Lieber for calling bullshit on Chase's PR spin:

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Well done to Ron Lieber for calling bullshit on Chase’s PR spin:

Chase sure doesn’t sound happy. In a remarkable display of staying on message, it gave the same comment last week when The Wall Street Journal, CNN Money and the trade publication US Banker asked it to explain the reasoning for the new monthly fees.

“We don’t want to raise fees on our customers,” a company spokesman said. “But unfortunately, regulation is forcing us to do it. And as a result, some customers may end up unbanked.”

This statement is striking for a number of reasons, and the eye-popping earnings the bank announced on Friday don’t exactly make the company more worthy of sympathy. So I’ve spent the last week trying to figure out why I was so sure I did not believe it the instant I read it.

As Ron says, the Chase statement is trivially false: of course Chase wants to raise fees on its customers. That’s what it always wants. It already has the maximum amount of US retail bank accounts that it’s allowed — which means that it can’t increase earnings by becoming so attractive that more and more people flock to it. Instead, it would rather increase earnings by steadily culling the least profitable parts of its customer base, and replacing them with richer and more profitable depositors.

JP Morgan Chase CEO Jamie Dimon and CFO Doug Braunstein said on their earnings call today that roughly 5% of bank customers “may be pushed out of the banking system” as a result of the Durbin Amendment on debit interchange. Ron says he “sincerely doubts” that’ll happen — but I take it more as a threat than a forecast. Banks can kick out any customers they like — even embassies. The not-so-subtle implication here is that if the Consumer Financial Protection Bureau starts getting all bleeding-heart on America’s biggest banks by asking them not to gouge their poorest customers, then just maybe those poorest customers might find themselves with no bank at all.

This is pretty evil, and I hope that the government doesn’t stand for it — especially when JP Morgan earned $17.4 billion this year. Is it fair to ask JP Morgan to use some tiny part of the profits from its investment banking, wealth management, and other businesses to cross-subsidise the cost of providing free banking for poorer customers? Frankly, yes, it is. It’s the least that they can do, given the billions they’re making from the Fed’s loose monetary policy and Treasury’s implicit backstop on the debts of too-big-to-fail institutions. But instead they’re pushing back, grubbing for every dollar they can extract from those who can least afford it. Shameful.

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