Obama Backs Down On BofA Fee Criticism

WASHINGTON–President Obama sharply criticized the financial sector Oct. 5 in response to questions about the Occupy Wall Street movement, the small number of prosecutions related to the financial crisis, and his recent comments about Bank of America's plan to impose a fee on debit-card users.  

During a press conference, Obama walked back somewhat from comments the made to ABC News earlier this week regarding BofA’s debit fee when he said banks do not have an "inherent right" to a certain amount of profit, if they are mistreating their customers.

Asked if the government has a right to dictate how much profit American companies make, however, Obama backed off.

"I absolutely do not think that," the president said. "I was trying to make a broader point, which is that people have been using financial regulation as an excuse to charge consumers more."

Still, Obama maintained that BofA’s charge is unfair.

"I mean, basically the argument they've made is, 'Well, you know what? This hidden fee was prohibited, and so we'll find another fee to make up for it'," Obama said, referring to the new cap on debit interchange fees (see story). "Now, they have that right, but it's not a good practice. It's, it's not necessarily fair to consumers."

Across town on Capitol Hill, Treasury Secretary Timothy Geithner faced similar questioning about the president's comments to ABC News from Republican Sen. Richard Shelby.

"The president does not believe that we get to determine how profitable individual financial institutions are," Geithner told Shelby.

"Markets should determine a lot of that, shouldn't they?" Shelby responded.

"They should, of course," Geithner said. "But what we do believe, though, is that you want to have a system of oversight, a system of protection, where consumers have the ability to understand what they're being charged for financial services, what they're being charged for borrowing. Part of what we're trying to do is encourage much more transparency and clarity, so that consumers will be less vulnerable to being taken advantage of."

Testifying before the House Financial Services Committee later in the day, Geithner was asked whether Obama erred in speaking out against the BofA fee (see story). Geithner declined to answer the question, and said he would not address the fee specifically.

House Financial Services Committee Chairman Spencer Bachus said that while he did not support the fee, it was at least clear and fully disclosed.

"I don't understand how there is anything misleading about a $5 charge," Bachus said. "I'm not defending it but I think it's transparent."

During the press conference, Obama kept the pressure on the financial sector, expressing sympathy for protesters on Wall Street and elsewhere.

"I think people are frustrated and, you know, the protesters are giving voice to a more broad-based frustration about how our financial system works," Obama said.

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