Comment: D'Amato Fight Against ATM Surcharges Is Good Theater, Bad

If Sen. Alfonse D'Amato was looking for good theater and lots of publicity the other day, he got them. The media gave extensive coverage to the Senate Banking Committee's hearing on fees charged by banks for use of their automated teller machines.

I happened to be in the Republican senator's home state of New York at the time of the hearing. I sent about a dozen E-mail messages from my hotel and was charged $3.91 to $4.65 per call. When I send similar E-mail messages from my home, the long-distance charges average about 50 cents.

This particular hotel was better than a lot of them. It didn't charge for local calls, calls to "800" numbers, or credit card calls. These types of calls are accessed for free from home but cost 50 cents to $1 at many hotels.

Banks have invested $7,000 to $50,000 (depending on the features) for each of the 150,000 teller machines they've placed at airports, supermarkets, and other locations. They spend $1,000 to $3,000 per month to operate each machine. While my hotel probably spent a good amount to install its phone system, the cost per room was undoubtedly modest, and the hotel spends next to nothing to operate the system.

Banks invest heavily in teller machines partly to lower the cost of serving their customers and partly to provide convenient access to banking services 24 hours a day, seven days a week. Hotels invest in phone systems because they can't operate without them and no one would stay there unless they had them.

I'm not suggesting that Sen. D'Amato hold hearings or introduce legislation on telephone charges by hotels. But the case for doing so is far more compelling than regulating charges for access to teller machines.

Bank customers can decide not to use teller machines. Hotel guests are pretty much captive customers, particularly when the phone fees are not disclosed in advance. I don't use teller machines, but if I did I can't imagine spending as much on access fees in a year as I was surcharged by my hotel for phone calls in two days.

There are lots of examples of consumers having to decide how much they're willing to pay for convenience. It costs more to buy soda or candy from a vending machine than a grocery store or stamps from a machine instead of the post office. The owner of the vending machine has to balance the price per item with the desire for more volume - just as a bank has to do with its teller machines.

For more than 50 years, the banking industry was prohibited by government regulations from competing in the marketplace. It was unable to evolve as technology and competition changed.

In 1980, with the decision to deregulate interest rates, banks were subjected to the vagaries of the marketplace. They made a lot of mistakes.

Some banks paid too much for deposits, some took too much risk with their investment and loan portfolios, and some took too much interest rate risk. Thousands went out of business.

The banks that remain are a lot stronger and wiser. They're determined not to repeat the mistakes of the past. They're reducing their costs, making better use of technology, developing new products and services, and learning how to price their products and services more effectively.

The last thing banks need is for the government to impose new restrictions on them. They will get quality and pricing right, or they will go out of business. That's the way the marketplace works day after day, year after year. If you don't believe it, go talk with the folks at General Motors or International Business Machines.

Republicans were elected to get the government off peoples' backs, not to impose new regulations. Sen. D'Amato's proposal to regulate teller fees may make for good theater, but it represents very bad public policy.

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