Sen. Alfonse M. D'Amato's recent statements on ATM fees appear to come straight from the movie Network-he's mad as hell and he's not going to take it anymore.
Apparently Sen. D'Amato, R-N.Y., doesn't like paying surcharges when he goes to a cash machine any more than the rest of us do. Every time he took money out of an ATM, he got madder and madder until he couldn't take it any more. So he told the whole country he had decided to do something about it.
The rest of us have to grin and bear the insult of paying a bank to get our own money out, but Mr. D'Amato is a U.S. senator and Chairman of the Senate Banking Committee. So by declaring to the press that ATM fees are "wrong, unconscionable, and ... must be stopped," the senator began his personal jihad by trying to get the Senate Banking Committee to approve a bill banning ATM fees.
Unfortunately for Sen. D'Amato, the majority of the Republican- controlled Banking Committee does not agree with his desire for new federal legislation and regulation. Some senators said they needed a bona fide public policy reason for passing major laws that regulate banking services.
The Republicans don't consider Sen. D'Amato's discontent a good enough reason to impose a new form of banking price regulation. None of the Republicans on the Banking Committee will currently vote for regulation of ATM fees.
Sen. D'Amato has found himself in an unusual position. All the Democrats on the Banking Committee support his position, and will vote to ban ATM fees. The Democrats apparently believe that when consumers don't like to pay for services, it is the job of the federal government to set price controls.
My advice to Sen. D'Amato is to stop being mad and to look for legislative and regulatory precedent for controlling ATM fees. If Sen. D'Amato inquires, he will find a strong and established public policy for regulating prices of goods and services-even banking services-when the free market does not establish competitive price levels.
Federal and state legislation preventing anticompetitive behavior and price fixing has been an integral part of the American economic system for generations. Though Republican "free marketeers" might like to deny the existence of government price controls, the economy relies on certain forms of intervention in setting prices.
A recent personal experience can illustrate why established public policy should give precedent for controlling ATM fees. On a recent business trip, I flew to the Miami airport. When I discovered I did not have enough cash for a taxi, I went looking for an ATM machine.
The only ATM I found had a $2 surcharge for use. I was mad, but since I had no other choice, I used the machine and paid the surcharge.
Later, in downtown Miami, I needed more cash. All the ATMs I could find had a surcharge, and the surcharge was exactly the same regardless of the sponsor bank.
This time I decided not to use an ATM but to try to cash a check. Since I am not from Miami, none of the banks I went to would cash my personal check. I didn't have a choice. I had to pay a surcharge to use banking services.
In the Miami airport, the single ATM had a monopoly on the market and set a price without the constraint of competitive pressure. In downtown Miami, no bank had a monopoly, but all the banks had acted in concert- either intentionally or unintentionally-by setting the same surcharge for ATM access.
Monopolistic and oligopolistic behavior is not sanctioned by current public policy or law. Price fixing-even unintentional price fixing-is strongly discouraged. A core strength of the U.S. economy is fair pricing and consumer choice. At least in the Miami airport and in downtown Miami, there is no such consumer choice.
The price of ATM services in downtown Miami presented a classic case of price fixing. Why, in that restricted geographic area, did all the ATMs charge the exact same fee? Did each bank have all the same costs, marging, and operating procedures? Or did the providers of ATM services in that market review one another's pricing and signal as to the "correct" ATM fee to charge consumers?
Banks claim fees are necessary to support the ATM systems that provide 24-hour customer service. Of course, banks neglect to mention that ATMs were developed to enhance profitability by being less expensive than traditional branches with human tellers. Few advocates of ATM fees point out that consumers must use ATMs because there are no longer enough human tellers to service the banking population.
Banks particularly neglect to mention that ATM fees cause consumers to pay twice for ATM access: first, through interbank usage fees that are passed on to customers by their "home" bank; second, through the ATM fees that have made Sen. D'Amato so mad.
Sen. D'Amato's instincts are good: He knows he is being ripped off by the banks. He knows consumers have very limited options to avoid paying ATM fees. He knows something is wrong when ATM fees are exactly the same at all banks in a given market.
Anti-competitive behavior that results in billions of dollars of consumer charges is unfair and should be banned. Maybe if Sen. D'Amato bases his legislation on established public policy precedent and an old movie quote, he could get a bill banning ATM fees passed. u
