Magazine article American Banker

Let Banks, Not Government, Decide Policies on ATM Fees

Magazine article American Banker

Let Banks, Not Government, Decide Policies on ATM Fees

Article excerpt

As most bankers know by now, two California cities -- Santa Monica and San Francisco -- have banned surcharges on ATM withdrawals. In turn, some larger banks have responded by refusing automated teller machine access to noncustomers.

The issue, clearly, is a contentious one. USA Today had a novel suggestion for heading off clashes among banks, the government, and the public over ATM fees: Reward banks that don't surcharge with municipal deposits.

One can at first laud this incentive approach. After all, if banks choose not to surcharge noncustomers in exchange for public deposits, local governments would have no reason to try to ban these charges.

But such a proposal could set bad precedent. Do we really want to create an environment in which government is rewarding -- or punishing -- banks for certain behavior?

Banks are free to bid or not to bid on government business. No one can force a bank to do business at a price established by the authorities if it prefers not to do business under those terms. All we can use are programs such as the Community Reinvestment Act that make it more difficult for a bank to gain permission for certain activities -- like opening a branch -- if it fails to comply.

For many decades, the placement of funds was set by cronyism, under-the-table considerations, and iron-bound tradition that few dared to oppose.

In our modern, more honest -- and effective -- environment, decisions about where public funds repose are made with more enlightened considerations, such as highest bidding on interest payments and a bank's ability to meet liquidity claims. …

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