Banks battling for more of your money

Russell
Russell Wangersky
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As tempting as it is to jump on board the good ship Social Media, where Kathy Dunderdale and crew are sinking far faster than they can bail, I think I’ll restrain myself.

Why? Because while the government’s efforts to toss NDP MHA Gerry Rogers out of the House of Assembly for the places her name appeared on Facebook — while government members are travelling to far more shocking places — shows a lot about the tone and temper of our current government, it is still essentially a tempest in a teapot and one that actually affects the people of the province very little.

But it’s not the only tempest, nor the only teapot. (I will point out that when you decide to shoot at the opposition, you don’t usually point the cannons down at your own deck.)

And it’s interesting to consider how teapot tempests generally serve the purpose of obscuring real issues.

Another fuss worth looking

at are the recent complaints by financial institutions that federal Finance Minister Jim Flaherty was tampering with the free market when he suggested that, for their own good, Canadian financial institutions stop battling to be the lowest-cost lenders.

The banks’ strident defence? That Flaherty shouldn’t interfere with the idea of consumers getting the best deal possible. That’s right: the banks are on your side, keeping the world safe for the two per cent mortgage.

Flaherty said all he was trying to do was to ensure that the banks, always hungry to grab new customers from each other, didn’t overextend themselves. Not a bad message, seeing how much money worldwide has gone into saving banks from their overextended selves. (To the point that governments now suggest that failing banks should essentially magically convert savers to shareholders, so that if the banks get into trouble, they can levy a charge on their customers to make up shortfalls. That’s a little like having the company that made your car come to the door and say, “We know you bought it four years ago, but we’re broke now, so you have to pay more.”)

Suitably chastened after being accused of proto-leftist government interference, Flaherty has quietly disappeared from the field, allowing the banks the usual mode of play — setting their own rates and collecting their massive profits.

All for the good of you and me, the little customers who need to borrow.

But the fact is, if the banks and Flaherty really wanted to benefit consumers, they’d look somewhere else.

The “battle for the bottom” may seem like some kind of win for consumers — and it is, to a degree, allowing customers to leverage themselves even further and buy even larger houses that can be seized for arrears when interest rates finally rise — there are far better places that everyone could be looking.

What hasn’t gotten as much press? Well, perhaps tasty financial details about how the banks operate: on June 1st, for example, the Royal Bank of Canada will raise its fees on Interac withdrawals by its account holders from $1.50 to $2, a single-day increase of 33 per cent. Sure as anything, our “independent” banks will work in lockstep, and everyone else’s rates will soon rise, too. No battle for the bottom here, unless it’s the bottom of the trough.

I’m sure Canada’s financial institutions are quite happy to cry plenty of crocodile tears about having a federal finance minister suggest they shouldn’t all battle for the bottom and actually charge less for a service.

They may be complaining, but the finance minister is clearly acting to their own benefit. If they actually wanted to help consumers, there are plenty of places they could start.

During all contretemps about lowering mortgage rates, interest rates on credit cards stay pleasingly, pocket-fillingly high for our immensely profitable banks, and service charges rise to the point of usuary.

Think about it: you ask someone to hold onto $100 of your money, and, later in the day, they give you back $98 of it. To add insult to injury, they’ve been lending out your $100 and collecting interest on it, too.

And if you get at your money through a different bank’s ATM, the fee rises to $3.50.

And while all that was happening, oh-so-concerned-about-the-customer Finance Minister Flaherty removed a tax exemption on customer-owned credit unions, giving those struggling big banks yet another advantage.

Any way you slice it, Flaherty has the best interests of the banks at heart, and the banks have the best interests of the banks at heart as well.

It may sound like they’re crying on your behalf, but they’re really laughing. All the way to the bank.

 

Russell Wangersky is The Telegram’s

editorial page editor. He can be reached by email at rwanger@thetelegram.com.

Organizations: Royal Bank of Canada

Geographic location: Canada

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  • crista
    April 21, 2013 - 11:01

    interesting article and the way you have to be told in a article surely it tells you some thing, and we noticed you did not mention if you use a personal cheques you have to pay $2.00 per???? not to mention your interest rate???? in your account(s) your return you get and like you said your money is working for some one else???? while they are trying to pay it back???? so what are your options???? and they inform you when you go to the bank what has changed???? it could be on your statement or go through your statements and find out what has changed and what has not????yes, it is your own personal bussiness, if some thing is not right and you do not notice it???? we are talking about one bank here now. and they say things are looking go???? and they talk like it is simple and easy! for every one living in our today's world????