Overdrawn and Underwhelmed: A College Student’s Tale of Bank of America

Thursday, 02/4/2010 - 4:30 pm by Justin Lutz | 4 Comments

A senior at Sarah Lawrence feels the sting of Bank of America overdraft fees — and wonders why bailouts only seem to go to big banks.

It sounds vaguely biblical. And it feels as inexorable as God’s creation of the universe.

On the sixth day, Bank of America implements an Extended Overdrawn Balance Charge (EOBC) of thirty-five dollars in addition to a thirty-five dollar overdraft fee for each transaction for which there are not sufficient funds within the checking account.

Indeed, nothing short of divine intervention can pry that thirty-five dollars away from BoA, the largest bank holding company in the United States (by assets), and the world’s largest wealth manager. BoA, along with CitiGroup, was of course, a TARP recipient — hauling in a total of $45 billion in taxpayer dollars, along with $118 billion in guaranteed assets.

The causes of the financial crisis will continue to be disputed. This piece is not about causes, but the human cost of the bailout and the greed-ridden banking practices that persist even after the American taxpayer came to the rescue of the global financial giant known as BoA. Regardless of the cause, it was losing money. Effectively, it was overdrawn.

The case for TARP, at its core, is that there are financial institutions in this country — with global reach — that are too big and complex to fail. Assessing this risk, the federal government decides that it is in the interest of the public to save these private financial institutions by injecting them with capital made possible by the American taxpayer. Without the (non-consensual) aid of the American citizenry, these companies would have been another (in my opinion) rightful victim of the “invisible hand” so often lauded in American economics. But instead comes the very visible hand of the federal government — with billions in its palm — to pull banks back from the brink. Regardless of whether you support the bailout, there’s no denying it was a chivalric gesture on behalf of the federal government.

With such an explosive amount of assistance, one might fantasize about a world where these banks actually reciprocate the life-saving assistance afforded to them by rebuilding public trust and ushering in a new age of responsible business practices with consumers in mind, instead of aiming for higher and higher profits. Of course, there’s nothing fantastic about the banking sector in this country, and bailing out the banks did not increase lending, as was the goal.

As a Junior Fellow at the Roosevelt Institute, I work three days a week in Midtown Manhattan. I attend Sarah Lawrence College, a small private liberal arts school right off the MetroNorth in Yonkers. It’s a 30 minute commute to Grand Central. And because I leave at 9am and return at 5pm, I am required to pay peak fare on the MetroNorth — a daily commute that costs $17. Three days a week, that’s $51 a week, $204 a month. That’s nothing to scoff at for a college student.

When you’re out of money, but you have a job to do, you do the job. This was the case last Tuesday when I knowingly overdrew my BoA account by $17 dollars to get to work. “Well,” I thought, “I’m at the limit on my credit card — if I try to use that, it’ll be denied, and I’ll have to pay an over-the-limit fee, as well as risking an increase in my APR. If I overdraw my checking account, I will incur an overdraft fee, but maybe if I can borrow twenty bucks from a friend, I can just deposit the money while the transaction is pending, to cover the cost and avoid the overdraft fee.”

The latter won out.

$8.50 into the city, $8.50 back to Westchester. Two transactions. Two overdraft fees — $35 each.

My account was now negative $87. Even after rushing to the bank to cover the initial overdraft cost, and pleading with a customer representative from BoA, all I got was an e-mail stating that “On the sixth day, Bank of America implements an EOBC of $35.”

The panic soon turned to shame. Even though I had a job, and was just waiting to get my first paycheck, I still somehow felt that this was all my fault. Maybe I deserved a $70 slap on the wrist. Maybe that would teach me.

But then logic took over. Bank of America, just over a year ago, was in the same position I am in now — low on cash, and heading towards a negative balance. My negative balance, however, did not reflect some unforgiving pursuit to chase profits asymptotically; it did not reflect flagrant irresponsibility. It was simply me waiting for my paycheck.

Unlike BoA, I received no bailout. The only assistance I received was $70 to do a couple odd jobs for a friend. Because of this, I was able to bring my balance up to a whopping $0.73. And albeit minuscule, it is black — not red.

But my situation is not unique. In fact it is seen all across America every day. We are the citizens of the so-called “debtors revolt” — the citizens who have not managed their assets with pure disregard for consequences, but citizens who just need a little help at the moment. Who perhaps have even less time than money, who live paycheck to paycheck, and aren’t guaranteed a salary. We are the people that have shouldered perhaps the most staggering financial collapse in history. These banks are standing on our shoulders, at a time when everything seems to be trickling up.

A $700 billion bailout– that’s roughly $7,000 for every American household.

But forget the bailout. This is about something bigger than the specificity of TARP. It is about the relationship between those who have and those who have not. It is about those with economic power that fund our political process in America, and those politicians who — in return — reward these economic powers with legislation that is beneficial to them.

The blatant fact is that the status quo and the ruling powers have placed their crushing weight and their immense profits squarely on the shoulders of the American people, even after they have survived off of the money that we work for every single day. It is taken away from us to reward those who have run their business into the ground, to offer a lifesaver to those who have been deemed to important to lose. And while the government is taking our tax dollars to hand over to these banks, the banks themselves turn around to grab another $35 here, another $35 there.

What has become of the public/private divide in America? Are those $35 fees not just another form of taxation at this point? If the federal government owns a majority stock in some of these banks, where do we draw the line between what is governmental and what is purely business? And, more importantly, who can we trust to look after the public good when we can’t tell politicians from lobbyists?

And to those in America who extol the free market, what say you? Where are those Smithian virtues now? The point of a free market is that it is free. If it fails, it fails. In a free market, there is no such thing as “too ______ to fail.” Instead, failure is a natural process, and a very important one.

We have been living under the shadow of the free market and Algeristic virutes for some time now. We have been made to feel ashamed of government assistance, turning increasingly to the private sector and its neoliberal values to solve our problems, thinking that the corruption in Washington is somehow siphoned away in the world of business. It is time to wake up from this illusion and either restore the true meaning of the free market, and let it be free — to succeed or to fail, or to acknowledge the importance of government regulation and intervention in private markets, and accept that for that.

But the hypocrisy of those who extol the free market and the bailout simultaneously needs to end.

On the sixth day, Bank of America implemented a $35 Extended Overdrawn Balance Charge.

On the seventh day, God, having completed the heavens and the earth, rests from His work.

But there is no rest for the public here.

Justin Lutz is a senior at Sarah Lawrence and a Roosevelt Institute Junior Fellow.