Political Corruption Is Responsible for $3 ATM Fees
How much does corruption cost you? When you use a non-network ATM, it’s usually a $3 fee, just for accessing your own money. The cost to the bank charging you that money, however, is just 37 cents. That’s price gouging, and when you add it all up, it’s a total of $7 billion annually that goes from those who use out of network ATMs straight to the banks, card networks, and independent machine operators. This problem is much worse if you are only taking out a small amount of money to get you through the day, like $20 or $50. Then the fees eat up a big chunk of what you have.
There have actually been campaigns to stop this price gouging. In fact, before 1988, banks didn’t charge ATM fees at all, because originally ATMs were a cheap replacement for human tellers. It was only gradually that banks realized that ATM networks were a potential revenue stream. Once they did, politicians began to react against these business practices. In 2002, Iowa passed a law mandating that banks establishing ATMs couldn’t charge fees. The banking lobby fought back. The Federal banking regulator John Hawke, who was appointed to head the Office of the Comptroller of the Currency by Bill Clinton in 1998, blocked that law from taking effect by using a doctrine known as “preemption” whereby national regulations could invalidate state consumer protection laws. In a textbook case of the Washington revolving door, Hawke then left the OCC, where he was charged with overseeing banks, to return to his old job — representing big banks in a lucrative practice at the well-connected law firm Arnold and Porter.
But the Federal route to capping or regulating these fees was still open. In 2010, after the financial system collapsed, several Senators actually proposed a bill to cap ATM fees at 50 cents. This was again blocked by bank-friendly Senators, who did not even let it get a vote in the Senate.
Ultimately, this comes back to campaign financing. Politicians need huge sums of money to run for office. Just one incumbent Senator (and remember, there are 100 of these) needed $9.4 million on average in 2008 to win reelection, and that cost is expected to hit up to $18 million in 2012. That sounds like a lot of money, and it is, in fact that means that the average Senator has to raise between $30,000-60,000 every single week they are in office just to stay in office. What is it used for? And where does it come from?
This money is largely used to buy television ads, so voters know who the candidate is and when and why they should vote for him or her. It’s basically a marketing campaign budget, only instead of soap or toothpaste, it’s marketing a leader for public office. And it works, too. In 2006, 2008, and 2010, four out of five incumbents won reelection, and these were considered elections with high turnover.
Where does this money come from? Well, unlike in other countries, where political parties get free TV time or public money to pay for elections, American politicians get this money from private interests. Some of the biggest donors, in fact the single biggest industrial sector giving money, is the financial sector.
According to OpenSecrets, this sector spent $6.8 billion on lobbying and campaign contributions from 1998-2011. This money went not only to campaign contributions but also to lobbying, so that regulatory agencies like the one that blocked the Iowa law stay under the thumb of the big banks.
Politicians aren’t necessarily bad people. Ok, well, they aren’t all bad people. They are people who have to get $30,000-60,000 from private interests every single week, which means they ultimately begin serving the agenda of those with the money to fund their campaigns. That’s why Senators blocked the bill to cap ATM fees. If they didn’t, they wouldn’t have gotten campaign contributions from the financial sector.
That’s corruption. And it shows up, every time you go to a non-networkATM. Today, the average fee is $3. I remember a few years ago it was just $2. I’m guessing that the sky’s the limit.