Big banks lifted more than $19 million out of the wallets of poor people in California in 2012, by charging them unnecessarily high fees for withdrawing cash from their EBT [Electronic Benefit Transfer] cards.

That’s the conclusion reached by a just-released study of ATM fees charged to Californians who receive benefits under CalWORKS –the state’s public-assistance system. The study was conducted by the California Reinvestment Coalition [CRC], an organization that advocates for the right of low-income communities and communities of color to have fair and equal access to banking and other financial services.

From what I can see by reading the report, the ATM fee structure is bad on two levels: It nickel-and-dimes economically disadvantaged people out of nickels and dimes that are significant in their monthly budgets. And it constitutes a not-so-subtle form of corporate welfare, in which big banks reap undue profits by transferring public money to their private coffers.

Here’s how it works

In California, individuals who qualify for benefits under TANF [Temporary Assistance for Needy Families] can opt to receive their assistance via an EBT card, and 96.4 percent of them do. The average TANF allotment per family in California is about $510 month.

TANF recipients can use the cards like cash at supermarkets and convenience stores, or the recipient can withdraw cash from the card by using an ATM machine. Some ATMs charge only minimal fees, such as 50 cents per transaction. Some of the biggest banks—namely Bank of America, Wells Fargo, JPMorgan Chase, Rabobank and Union Bank—charge $2,  $3 or even $4 per use. Check cashing stores also charge a fee to withdraw money using EBT cards—usually 1 to percent of the amount withdrawn. [Do the math: For a typical recipient, that can be as much as $5.] The big banks have far more locations than the low-fee outlets, so they are more convenient and therefore are more frequently used by EBT card holders.

Together, these charges totaled over $19.4 million in 2012 going to fees instead of the intended purpose of the benefits.

According to the report:

The amount spent [on ATM fees] in just one month is enough to buy a year of school supplies, estimated at $688, for 2,349 children. In Alameda County alone, families lost $60,000 in CalWORKs funds a month to ATM fees in 2012- enough for over 25,500 round trip bus rides on [public transit]. In Los Angeles County, one month’s worth of ATM fees on EBT cards could cover the co-payment on 90,000 prescriptions.

“For families trying to escape poverty, these fees siphon away money that could be used for school supplies, transportation or medicine,” says Andrea Luquetta, the author of the report. “The current system leads too many people to pay fees just to access the very benefits they need to survive. It is a diversion of taxpayer dollars away from their intended use of supporting families.”

Subtler shenanigans

There’s also a lesser known, behind-the-scenes ripoff that the report doesn’t delve into:  When someone swipes an ATM card—whether it’s a bank card or an EBT card–the machine reads the information on the magnetic strip and knows which bank is the source of the money. If it’s a card from a different bank, Bank A charges Bank B a nominal fee for the money transfer and the cost of communicating. Usually, the charge is 25 cents or so. [This interbank fee is not seen by the customer, and is not part of the visible ATM fee.]

But here’s the twist: In California, all of the CalWORKS money is held by Bank of America. So, if someone goes to a Bank of America ATM to get cash from an EBT card, Bank of America doesn’t have to communicate with any other bank at all. Bank of America handles 12 percent of all EBT withdrawals in the state—making it the largest processor of EBT withdrawals. And yet, the bank is charging the state the interbank fee. Those 25-cent fees add up, too–or should I say subtract?–and it’s all pure profit for Bank of America.

Recommendations

CRC recommends that state and county governments work to increase CalWORKs recipient’s knowledge that they can opt to have their benefits direct-deposited into a bank account, thereby avoiding ATM withdrawal and check-balance fees.

In addition, says CRC, banks should offer inexpensive, safe bank accounts for recipients to receive their benefits via direct deposit without incurring fees, while also building a financial history.

Also, California can and should renegotiate its contract with vendors who provide EBT services so that beneficiaries are not losing money to ATM fees. This outcome is doable, said Luquetta, noting that CitiBank has already agreed to waive its ATM fees for EBT users.

The bottom line—and it’s a big one—is that big banks are reaping free profits by sucking up taxpayers’ dollars via ATM fees on EBT cash withdrawals. The CRC report focuses only on California, but EBT cardholders face similar issues in other states.

It’s another example of the massive, American corporate welfare system that politicians don’t want us to know about, while at the same time deriding public assistance programs and cutting supportive services and financial aid for people who actually need help. Worst of all, this form of corporate welfare is being financed by the poor people it directly affects.

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Perhaps our banking crisis can be solved in part by borrowing a technique from the Affordable Health Care Act. The AHCA requires that all insurance companies allocate at least 80 percent of their revenue to direct benefits for policy-holders. Their overhead and profits can only come from the remaining 20 percent.

Why couldn’t a similar system be used with America’s banks? There has been considerable criticism that the TARP bailout was nothing more than a method for banks to replace lost losses that occurred due to ill-advised and in some cases illegal investments prior to 2008. Where the goal of most politicians and economists, and certainly the public in general, was for the banks to put their assets back into circulation to individuals, families, and small businesses, this hoped-for outcome has not happened.

Neil Barofsky, the former inspector general for TARP, has recently published a book simply called Bailout. He writes:

I now realize, though, that Treasury’s dismissal of our warnings has produced a valuable byproduct, the widespread anger that may contain the only hope for meaningful reform of our system. I now realize that the American people should lose faith in their government. They should deplore the captured politicians and regulators who took their taxpayer dollars and distributed them to the banks without insisting that they be accountable for how the bailout money was spent. They should be revolted by a financial system that rewards failure and protects the fortunes of those who drove the system to the point of collapse and will undoubtedly do so again. They should be enraged by the broken promises to Main Street and the unending protection of Wall Street. Because only with this appropriate and justified rage can we sow the seeds for the types of reform that will one day break our system free from the corrupting grasp of the megabanks.

Barofsky, a lawyer by training, spent most of his time as inspector general looking for legal violations by large banks, as well as accounting malfeasance. He found plenty of both. His remedy is greater oversight, with the Treasury Department, Congress, and the President putting more energy into ensuring that the banks do not sacrifice the American people at the expense of their own ill-earned profits.

One idea might be to ensure that banks use 80 percent of their assets, or at least their income, to directly help the American people. Barofsky points out that this is difficult to do because money is fungible, meaning that it is hard to trace. Does a loan to a small business come from the bank’s regular earnings or from aid that came from TARP? Is it possible that regulation to this degree might be so cumbersome that it would be more than either the regulators or banks could do.

Another option has been suggested by Ohio Congressman Dennis Kucinich. In his bill, HR 2990, he suggests an idea embraced by the American Monetary Institute. The core of the plan is to essentially neutralize banks by having the Federal Reserve Bank directly make money available to the federal government, rather than banks, for distribution. Thus, if money is needed to rebuild our infrastructure (which it obviously is), no money would go to banks but all would go to fund programs that would address the goal of repairing infrastructure. Money could go to the Department of Transportation or the Department of Housing and Urban Development to design, implement, and evaluate these programs. This directly puts money in the economy for positive purposes and stops banks from preventing directing money to where it is needed most.

Whether it would be the 80 percent plan or the American Monetary Institute plan, there are options to prevent banks from hoarding money, as health insurance companies have for years. We can only hope that our elected and appointed officials consider these ideas.

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They sell piggy banks on the streets of Bogotá, and I imagine across Colombia, daily.  Handmade in the red clay of Rolland Garros, these piggy banks proliferate.  They are cute, desirable, large to small, a great variety of piggies, and you have to smash them to pieces to access your savings.  My personal piggy, bought on the street, is now very heavy, solid, and so far resistant to my desire for a new sweater from Zara!  But wait, something so simple as a piggybank might just support a booming economy?  Savings – what a concept.  Every penny might count.  From a very young age, we might encourage saving money, taking responsibility, making a connection between desire and reality.  Is Colombia onto something basic?

Lest anyone think that I am being third-world biased in introducing Colombia by way  of clay piggies, let me state here and now that I have never encountered a bank as sophisticated as mine in Bogotá, Helm.  Entering an branch of Helm is like entering an exclusive boutique hotel.  A (money) concierge greets every arriving customer.  How might he or she help?  A money deposit?  Let me direct you to our automated deposit machine which counts (or rejects) your every bill, and provides you with a photographic record of your deposited check.  A banking problem, let me seat you for our next available associate.  While waiting, enjoy our ambiance of contemporary furniture, lighting, color choice – mainly very hip orange and white –  and typography.  Feel free to avail yourself of our free water bottles and candy.  Everything communicates that your patronage is important.  What a concept!  We want you to know that your money means something.  And Helm’s on line site savings account logo features, you guessed it – a clay piggybank.

Perhaps these two contrasting images of Colombia, are the same thing, expressed differently.  Money counts.  Street vendors of piggybanks want you to begin saving money.  The extraordinary number of banks in Colombia are also invested in wanting you to save money.  It is a very competitive world.  Most people here don’t have a checking account; they have a savings account.  Point made.  There are an incomparable number of bank branches on block after block here, of that much I am sure, focused on savings.

I am not writing a scientific article here, numbers of penny savers in Colombia versus numbers of penny savers in the United States.  How could one ever figure that out?  I’ve tried, and statistics are hard to come by.  Number of home or property owners per square foot or square meter in Colombia versus number of property owners in the United States, good luck.

However, one of the most surprising things about this country for me is that even the most unassuming neighborhoods here have offices, apartments, and store fronts For sale.  For rent is the norm in many countries, but strikingly the number of For Sale signs in visible windows (the most popular advertising venue here by far) in Colombia is impressive.  Vendo!  En Venta!  This country divides its municipalities into economic strata, 1 through 6 (6 being the most exclusive), hard to get a handle on.  However, even in Estrato 1 (the lowest of the Estratos), in the most unassuming neighborhoods, the concept of ownership runs deep.  The piggy banks of every street corner take on power.  Every penny saved here is a penny saved toward destiny, toward control of destiny.  Pride of ownership, even in the poorest of neighborhoods here, has value.

Now that instability in terms of property ownership has established itself worldwide, and now that the questioning of economic foundation has become mundane, savings are hardly the beacon that stand out as the road to salvation anywhere.  And yet, piggy banks line the streets of Bogotá.  Here, in Colombia, in a country far off the mega-dollar landscape, a penny saved is still a penny earned.  The foundation of growth is still strong here.  Piggy banks are as common here along the Calles and Carreras as lottery tickets are along the highways and byways of first world countries.  Chance versus discipline.  To buy a small or large ceramic piggybank and start to deposit change daily versus an investment in the odds of the national chance of Who WantsTo Be a Millonaire, well it seems to come down to that.  Not that you can’t do both.  Just, count your pennies first.  And start saving.

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What would your life be like if you didn’t have a bank account? Ask a member of one of the 9 million American households who manage their money without access to a checking or savings account, and you’ll find that their lives can be quite inconvenient, requiring them to spend many hours and hundreds of dollars each month conducting transactions that you assume to be routine.

Many of America’s “unbanked” are families and individuals who receive public assistance. A recently released [March 11, 2012] report from the New America Foundation documents the disadvantages of being “unbanked” and offers some suggestions for public policy that could make things work better. The report comes from a qualitative study of the financial attitudes and behaviors of individuals currently receiving Temporary Assistance for Needy Families (TANF) cash assistance benefits—commonly known as welfare—in  California. The findings are based on in-depth interviews with 37 recipients in two major California cities. [To qualify for public assistance in California, a single parent with two kids must earn less than about $12,000 annually; the maximum benefit is just over $600 a month.

Some of the issues that emerged during interviews included:

The cost of getting cash

In many states, the mechanism for receiving public-assistance benefits is an EBT [Electronic Benefits Transfer] card issued by the state. The card is issued through a bank, but it doesn’t mean that you have an account. You can use the card to buy qualified items, by swiping it at the point of sale. You also can use the EBT card to get cash, but you’ll pay a fee—perhaps as much as $5 per transaction—for that service. That’s a lot, if you just want $25 to tide you over.

To avoid transaction costs, recipients commonly withdraw the entire cash value of benefits at one time. Another tactic is to get cash back at the point of purchase—for which there is no fee.

No bank account by choice or by blacklist

According to the study, “unbanked” people often choose to opt out of the banking system. Reasons include lack of trust, bad experiences with previous accounts and/or customer service, and unreasonable and/or hidden fees imposed for minor overdrafts or routine transactions. Others can’t get accounts because of previous problems they’ve had with banks, including being overdrawn—even by a very small amount—or refusal to pay fees and penalties—both of which can result in having your name placed on  Chexsystem’s banking blacklist, which can prevent you from getting an account at other banks for as long as five years.

Using pre-paid cards

Many of the people interviewed for New America’s study reported using pre-paid cards instead of bank accounts. Reasons for this strategy included a basic desire to stay away from banks, the ability to use MasterCard- or Visa-branded pre-paid cards to make purchases where state-issued EBT cards are not accepted, and safety. The downside of pre-paid cards are the associated fees, which tend to be high. But interviewees said that, even though the fees were high, they were predictable and transparent—unlike the fees they had encountered in traditional checking and savings accounts.

Emergency money

Without a bank account, the low-income individuals interviewed for New America’s study generally had nowhere to go for a conventional loan in an emergency. Without steady employment and a credit history, they couldn’t qualify for short-term credit, and they had no liquid cash to dip into. Many said they relied on friends or family to help them out in a pinch—a strategy that may avoid conventional-bank interest charges, but may involve an emotional cost and uncertainty.

When asked about alternative financial sources, such as high-interest payday and title loans, many interviewees said that those were the routes that had helped get them in financial trouble before they applied for state assistance.

Institutional barriers

Another reason cited by TANF recipients for not having a checking or savings account was the fear that their benefits would be reduced or revoked if they had savings. While there are asset-limit rules, they’re not well understood by recipients, says New America. Another strong impression among interviewees was that state agencies were monitoring TANF recipients’ bank accounts, as well as all of their financial transactions—an impression that made interviewees even more wary of maintaining bank accounts. In addition, TANF recipients said they stayed away from banks because they thought that state agencies could raid them for wage garnishments, child support payments and money owed to the state for restitution of crimes.

Policy changes that could help

Reading over that list of reasons for avoiding banks, it’s clear that, while some strategies are the result of choice, many others are problems created by a banking and public-assistance system that is sometimes less than user friendly, and often punitive toward low-income families and individuals.

So, New America’s report concludes with some suggested policy changes that could make financial life less cumbersome and potentially more stable for low-income families. Among these improvements are:

–Create basic bank accounts: States should work with banks to create accounts that are safe and affordable for low-income customers—accounts with “a transparent fee structure and stripped of many of the complexities—such as overdraft and its variants—that often ensnarl low-income families and burden them with tens to hundreds of dollars in fees.”

–Offer Automatic Savings Options: Provide those who receive assistance with the option of having a small percentage of their benefits withheld in savings. These savings can then be tapped when needed to cover an emergency expense or used to make a productive investment. Savings could be matched with public or private dollars

-Offer small loans for those transitioning off assistance: Current…recipients are rightfully wary of taking out a loan against their benefits, as current payments are already seen as insufficient to make ends meet. States could, however, consider creating a small-dollar loan program for those transitioning off assistance. This would provide these families with the flexibility they need to cover emergency expenses without having to fall back on assistance or turn to high-cost credit products such as payday loans.

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On Saturday, September 17, an estimated 2,000 activists gathered in One Liberty Plaza in New York City’s financial district to protest the “greed and corruption of the 1%” who caused the global financial meltdown. They call themselves the “99 percenters” and they are mostly in their twenties and thirties, unemployed and struggling to find jobs.

It’s September 20, day four of the Occupy Wall Street action, and a few hundred protestors remain. They have brought tents and sleeping bags and plan to stay for weeks or even months. They want to send a message to the Lloyd Blankfein’s of the world, to Congress, and President Obama, that there must be meaningful regulation of the financial industry and criminal prosecution of those who brought the economy to its knees. They are demanding that those who wiped out the housing values and retirement accounts of tens of millions of ordinary Americans—and plunged additional tens of millions worldwide into poverty—be brought to justice.

However, they are focused on more than prosecuting criminals. They want deeper changes in government policies beyond the ones currently being proposed, i.e. stimulus, deficit reduction, the promotion of consumption. Michael White and Kalle Lasn, writing for the Guardian, report that the protestors want a “Robin Hood Tax” on financial transactions, a reinstatement of the Glass-Steagall Act, a ban on high-frequency “flash” trading and the break-up of too big to fail banks. They want banks that serve the people, the economy and society at large. In addition, they want a whole new way of measuring economic and social progress that goes beyond consumerism. They are dedicated to ending:

• capital punishment
• wealth inequality
• police intimidation
• corporate censorship
• the modern gilded age
• political corruption
• joblessness
• poverty
• health-profiteering
• American imperialism
• war

Spanish activists and Adbusters inspired Occupy Wall Street

According to White and Lasn, the Spanish activists who occupied Madrid’s Plaza del Sol earlier this year to demand jobs and social and economic reforms inspired Occupy Wall Street. The idea was floated  in August, 2011, in the Sept/Oct issue of Adbusters magazine. Unaffiliated, independent activists immediately spread the “Occupy Wall Street”  idea through social networks. A plan emerged to enter lower Manhattan on September 17, set up tents, kitchens and peaceful barricades and occupy Wall Street for a few months. They put up a website and held an organizing meeting in New York City. 150 people showed up and became the core organizers of the occupation, and the group “Anonymous” endorsed the action.

The Spanish indignados (“the angry ones” who occupied Plaza del Sol) planned a solidarity event in Madrid’s financial district. Activists in Milan, Valencia, London, Lisbon, Athens, San Francisco, Madison, Amsterdam, Los Angeles, Israel and beyond planned similar events. The companion international movement is called, Antibanks: Global Action against banks and banksters. According to White and Lasn:

There is a shared feeling on the streets around the world that the global economy is a Ponzi scheme run by and for Big Finance. People everywhere are waking up to the realization that there is something fundamentally wrong with a system in which speculative financial transactions add up, each day, to $1.3 trillion (50 times more than the sum of all the commercial transactions). Meanwhile, according to a United Nations report, “in the 35 countries for which data exist, nearly 40% of jobseekers have been without work for more than one year”.

“CEOs, the biggest corporations, and the wealthy are taking too much from our country and I think it’s time for us to take back,” said one activist who joined the protests last Saturday. Jason Ahmadi, who travelled in from Oakland, California explained that “a lot of us feel there is a large crisis in our economy and a lot of it is caused by the folks who do business here.”

Salon .com reports:

“Optimism — that’s what brought us down here,” said 40-year-old Dan Bryk, who was carrying his eight-month-old son, Henry, in a snuggly while holding a sign saying, “Oligarchy Is Not Healthy for Children and Other Living Things.”

“There’s a delightful naiveté to this crowd,” added Bryk.

“Like everyone our age, we’re overeducated and unemployed,” said Patrick Bruner, a 23-year-old native of Tucson, Arizona who recently migrated to Brooklyn. Bruner said that he and his fellow protestors were prepared to hold the Wall Street square for a long time.

Think Progress: Protestors have a reason to be occupying Wall Street

While many of the conservative defenders of Wall Street may be quick to portray protests against the American financial establishment as driven by envy of its wealth or far-left ideologies, the truth is that people have a very simple reason to be angry—because Wall Street’s actions made tens of millions of people dramatically poorer through no fault of their own. In 2010, the International Monetary Fund and World Bank conducted studies of the effects of the global recession— caused, largely by Wall Street financial instruments that were poorly regulated by government policies—and found that the recession threw 64 million people into extreme poverty. . . .

And nearly three years after the start of the global economic crisis—where taxpayers in multiple countries were called upon to save the financial industry—most of the banking elite’s top executives remain virtually untouched. There have been almost no high-profile convictions for fraud and related financial crimes, banking profits continue to soar, and unemployment not just in the U.S. but globally remains very high.

According to White and Lasn, if the current economic problems in Europe and the US spiral into a prolonged global recession, people’s encampments may become permanent fixtures at financial districts and outside stock markets around the world, until the global economic regime is fundamentally reformed.

Personally, I am grateful for those courageous souls Occupying Wall Street. May they continue to inspire a global uprising against business and politics as usual.

Photo: Occupy Wall Street, Flickr Creative Commons

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Don’t believe ‘em when they say the progressive agenda is unloved by American citizens. Much has been accomplished in the first two years of the Obama administration, and ordinary people are benefiting. Of course, some progressives feel disappointed that the administration hasn’t pushed hard enough, that its policies are too centrist, and/or that it has failed to communicate its accomplishments. And there’s justification for some of that disappointment.  But, just to be sure that we don’t forget who’s behind the policies that address the common good, here’s first in a series of reminders about what has been done, and how it helps.

In  August 2010, the final provisions of the Credit Card Accountability, Responsibility and Disclosure Act [CARD] of 2009 took effect.  Designed to hold credit-card companies accountable and to eliminate deceptive practices, the CARD act addresses the interests of the “nearly 80 percent of American families who have a credit card, and the 44 percent of families who carry a balance on their credit cards.” Here are some of the provisions of the 2009 CARD Act, as listed by International Business Times.

• Requires creditors to give consumers clear disclosures of account terms before consumers open an account, and clear statements of the activity on consumers’ accounts afterwards;
• Requires issuers to make contracts available on the Internet in a usable format;
• Bans retroactive rate increases;
• Requires contract terms be stable for the entirety of the first year;
• Requires institutions give card holders a reasonable time to pay the monthly bill – at least 21 calendar days from time of mailing – and it ends late fee traps such as weekend deadlines, due dates that change each month, and deadlines that fall in the middle of the day;
• Requires companies to apply excess payments to the highest interest balance first;
• Ends the confusing and unfair practice by which issuers use the balance in a previous month to calculate interest charges on the current month, so called “double-cycle” billing;
• Restricts fees on subprime, low-limit credit cards;
• Requires institutions to obtain a consumer’s permission to process transactions that would place the account over the limit;
• Requires issuers to display on periodic statements how long it would take to pay off the existing balance – and the total interest cost – if the consumer paid only the minimum due; and also to display the payment amount and total interest cost to pay off the existing balance in 36 months;
• Requires regulators to report annually to Congress on their enforcement of credit card protections;
• Holds regulators accountable to keep protections current;
• Increases penalties for card issuers that violate these new restrictions;
• Increases protections for college students and young adults.

The last pieces of the act took effect over the summer. They require credit-card companies to honor gift-cards for five years, and prohibit them from reducing the amount of gift cards that are not used quickly. Also, credit card issuers will no longer be allowed to charge a late fee larger than your minimum payment, or charge you more than one penalty fee for a single violation of your agreement, or charge a fee for not using or terminating your account. Credit card companies, since 2009, have been required to  give 45 days notice of a rate hike. Now, the company must also say why it’s raising rates, and it must re-evaluate the hike every six months.

Certainly, it’s not a perfect law. But there’s a lot to love there. So–pun intended–let’s give credit for this where it’s due.

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The Bank of North Dakota (BND) is owned and operated by the state of North Dakota, and is the only publicly owned bank in the United States. Founded in 1919 as a response to a credit crisis, BND has helped North Dakota weather the current economic recession. According the North Dakota Department of Commerce, in 2009, the 90-year-old BND turned a profit of $58.1 million, which went into the state’s general operating fund. No surprise that North Dakota is currently one of two states still showing a budget surplus. (The other is Montana.)

You can find two excellent articles on the growing push for publicly owned banks, here and here. According to author Ellen Brown, there are bills pending in Washington State, Illinois and Michigan to create publicly owned banks, and seven candidates for governor are campaigning for state-owned banks.  The proposed public banks are modeled after BND.

The Bank of North Dakota acts as a “bankers’ bank,” partnering with other banks in “participation loans,” which allow them to compete with larger banks. In a participation loan, the community bank originates the loan and takes responsibility for it, while the participating bank contributes funds and shares in the risk and profits. The Bank of North Dakota also makes low-interest loans to students, farmers and businesses; underwrites municipal bonds; and provides liquidity for more than 100 banks around the state.

Brown is passionate about the need for publicly owned banks, and sees them as an ideal way to keep wealth in the community.

We the people have given away our sovereign money-creating power to private, for-profit lending institutions, which have used it to siphon wealth from the productive economy. If we were to take that power back, we could generate the credit we need to underwrite a whole cornucopia of projects that we don’t even consider because we think we lack the “money.” We have the labor and we have the materials; we just lack the “liquidity” necessary to put them together to create products and services.

Money today is just a ticket, a receipt for work performed and goods delivered. We can fund the work we need done by creating our own credit. The real promise of publicly owned banks is not that they can bail out subprime borrowers but that they can jumpstart the economy by creating real wealth. They can provide the liquidity to put labor and materials together, allowing the economy to build and grow. Our private, profit-driven banking sector has been bleeding wealth from the rest of the economy. Public-interest banks can transfuse the economy with the credit it needs to flourish and be productive once again.

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