Banks Take TARP Funds, Raise Consumer Fees: So What's the Problem?

Since the TARP program was launched in October, banks "have boosted charges on a wide range of routine transactions, hiked rates on credit cards and continued making loans criticized as predatory by consumer advocates," The Wall Street Journal reports.

The Journal cites some examples of how consumer fees have risen in the past six months:

• Average annual credit card rates have risen to 12.35% from 11.3%.
• Median industry overdraft charges are up 10% to $27.50.
• Short-term products like "checking account advance" and "tax return anticipation" loans carry annual interest rates of 100% or higher.

The banks will tell you they are "responding to competitive pressures" and (if they're honest) trying to make up for years when lending standards went out the window.

But Elizabeth Warren, chair of the TARP oversight committee, believes banks are engaging in predatory practices. "The people who are subsidizing the activities of the banks through their tax dollars are the same people who are furnishing the high profits through consumer lending," she tells the Journal. "In a sense, we're asking taxpayers to pay twice."

Of course, there's logic and reasoning in both points of view. This fee-issue speaks to the folly of having banks that are quasi-nationalized vs. either fully private or totally under government control. It also shows why banks that can pay back the TARP money should be encouraged to do so - not discouraged - so the strong banks can return to operating their businesses as they see fit (within legal limits, of course).

And the weak banks? Well, they should be dealt with as insolvent banks have been for generations - put into FDIC receivership - rather than continuing this charade that certain banks haven't already been nationalized.