Date: Fri 16-Apr-1999

Publication: Bee

Author: CURT

Quick Words:

Powell-bank-fees-atm

Full Text:

COMMENTARY: Bank Fees Are A Barometer Of Competition And Antitrust Enforcement

By Chris Powell

The Savings Bank of Rockville meant to be satirical the other day when it

published an advertisement announcing that it would levy a $5 charge on

customers doing business with a bank teller.

A few customers didn't get the joke and withdrew their accounts. A competitor,

Tolland Bank, responded with an ad announcing that it didn't "play games" with

its customers' money.

Meanwhile Connecticut's biggest banks continue to charge for services that

customers long have taken for granted. And Connecticut Attorney General

Richard Blumenthal and some state legislators continue their crusade to

prohibit banks from charging for use of their automatic teller machines by

customers of other banks.

If wishes were horses -- as they often seem to be in Connecticut government --

people would not only be riding white stallions all the way to the bank and

using all ATM machines for free; they'd also have in their accounts more money

than they could ever spend.

But in the real world government doesn't fix prices, and especially not for

inessential things like service at ATM machines; the market does that. If big

banks don't want to be bothered anymore with small customers, that's their

business. Nobody has to pay a bank's fees if he can find another bank that

doesn't charge them. That's really what the ads by the Savings Bank of

Rockville and Tolland Bank were about.

Rather than to fix prices, the government's business is to ensure that markets

remain competitive, since competitive markets provide the best value and most

innovation. And that's where the attorney general and those state legislators

who have made such a show over the trivia of ATM fees could be helpful. They

could do something about the plan of Connecticut's two biggest banks, Fleet

Bank and BankBoston, to merge, a plan that promises to concentrate the banking

business in the state to an unprecedented extent, to close dozens of branch

offices, and to lay off thousands of employees.

The market areas of Fleet and BankBoston overlap not only in Connecticut but

throughout New England, so their merger is attractive to them precisely for

its liquidation of competition. But the attorney general's intervention seems

likely to be limited to ensuring that the banks do only what they are planning

to do anyway: divest themselves of certain branches with overlapping markets.

Even if all the divested branches are purchased by other banks and reopened,

the merged bank will retain most of the combined deposits and the market share

and economic power of its two predecessors.

Fleet and BankBoston don't need each other particularly just to get bigger;

each easily could merge with banks from other parts of the country, banks that

do not yet serve New England. Merger with banks outside New England would

avoid reducing competition here.

The attorney general and General Assembly could use antitrust and banking law

to prevent anti-competitive mergers like this one. If they ever did,

Connecticut might never have to worry about trivia like ATM fees, for in a

more competitive banking industry such fees would be fading away, not growing

explosively. Indeed, banking fees are a good gauge of government's failure to

enforce antitrust law.

(Chris Powell is managing editor of The Journal Inquirer in Manchester.)