As politicians and activists fought to regulate a bank ATM fee during a multi-year battle beginning in the 1990s, financial firms were busy developing collateralized debt obligations and the other exotic instruments that would nearly topple the global economy in 2008.
Maybe the ATM fee fight was a misplaced priority?
For the better part of a decade, from 1993-2003, the fight was on to ban the ATM surcharge, a fee for an optional financial service. Consumer activists had persuaded politicians to back federal, state and city ordinances aimed at regulating the fee that banks were charging non-customers for cash withdrawal transactions at the banks' proprietary network of ATM cash machines.
In other words, if you withdrew cash from your own bank's cash machines, your transactions were free of charge. You only paid a fee when you chose to withdraw money from cash machines outside of your bank's proprietary ATM network.
The service was optional. Consumers could avoid paying the fee. But for consumer activists and politicians, the ATM surcharge was just too good to pass up.
By supporting proposals to ban or limit the fee, politicians appeared to be standing up for everyday folks like you and me.
Edmund Mierzwinski of the U.S. Public Interest Research Group said in a San Francisco Chronicle story about the ATM fee: "It's unfair. Who is going to pay that? It's the little guy once again, the working guy, the family."
In one of many stories about the surcharge fee fight, an AP reporter wrote: "Banks are gouging consumers with a multiplying array of fees."
The British newspaper, the Daily Mail, reported: "Greedy banks triggered outrage…by slapping a new charge on cash machines."
Former U.S. Senator Alfonse D'Amato ordered a Government Accountability Office investigation of ATM surcharging. San Francisco, Santa Monica and other U.S. cities brought legislation to outlaw the surcharge. But a U.S. district judge blocked San Francisco and Santa Monica from enforcing their ordinances, and in May 2003, the U.S. Supreme Court refused to consider an appeal of the district court decision.
So much time and energy spent on the campaign to regulate an ATM fee when it might have been better to focus regulatory oversight on mortgage-backed securities and CDOs.
Do we need regulatory oversight of financial institutions? You bet we do, but such oversight must be on target, prudent and balanced. Activists and politicians need to understand this. They need to act wisely, without overreacting.
Harvey Radin, an independent public relations consultant, was a senior vice president at Bank of America and head of western region corporate communications and media relations.