Thursday, June 9, 2011

Pirate banks.

I had assumed the banks would win on the debit cards fees issue. But they needed 60 votes and they got 54 votes. Still -- bastards.

Even all the combined retail lobbies (you know, including the largest corporation in the world, Walmart and all the big retailers and all the supposed voters represented by the sainted small business class that the Republicans and Democrats alike profess to care so much about) could barely overcome the resistance of the pirate banks.

We are still so doomed.

**********

I've had a few days to think about Wabi Sabi and Powell's -- and I'm still envious.

They are carrying many items I wish I could carry.

Ultimately, however, I chose to go the route of printed material. My art books alone would probably be equal in value to all the urban vinyl in Wabi Sabi.

Candy and gag toys? I just don't trust myself not to eat the profits -- but really, I just don't have the room.

The only other option would be to have a store more the size of the old Boomtown, and I shudder to think how much work and overhead that would be.

So...don't mess with what's working, I tell myself. (At the same time, there is something reassuring about the idea that there are still viable things to carry if what I'm currently carrying fall apart -- )

**********

I'd probably get tarred and feathered if I mentioned this on any of the comic book industry bulletin boards but....

There is another highly regarded comic shop in another state that is apparently in real trouble. This is the kind of shop that is always nominated for awards. They are held up as examples of how comic shops should be. And very often, they seem to go out of business.

But I have to wonder if there is a direct correlation between their struggling to survive and their ambition.

It's all well and good to have a great looking store, stocked to the gills, with all kinds of social events etc. etc.

But you still have to live within your means.

I often have the urge to try to create my perfect store -- but it would be very costly, and ultimately, I'm not sure I would get enough business to reward my efforts. No matter how nice the store.

I even have an example in my own career.

Our store for the first year in Sisters was a tiny little 100 square foot space, and it did really well.

We rented the space next door, opened up and painted and repaired both rooms, bought new fixtures, and filled the tripled space with merchandise.

And our sales dropped.

I wonder sometimes if people realize that the size and shape of a store is dictated by the size and shape of the customer base -- not on the ambition and tastes of the owner.

19 comments:

Anonymous said...

Yeah, I am a bit puzzled about the store you are mentioning. Greatest thing since sliced bread, but not profitable. I think it is unrealistic to hold it up as the standard to be strived for.

I have a customer who tells me about a shop in S. California, around LA, when he was a kid(25 years ago) that was far better than my store. Of course it went out of biz 20+ years ago...

I keep my mouth shut.

Brett
Heroes Haven

Duncan McGeary said...

This store and the one in Brooklyn, if you know which one I'm talking about, their ambition was maybe a little too grand.

RDC said...

As far as the debit card legislation I suspect that it would have been better if the banks won. I suspect that the end result will be:

1. Limits on the max purchase size on debit cards
2. Reduction in the number of cards offered
3. Fees on the checking accounts that the cards are linked to that are not transaction based.
4. Some other adjustment not listed in 1, 2, or 3.


Basically the cost of the debit card and the associated risk of fraudulent transactions will be passed elsewhere. By existng a smaller max transaction size some will stay with the vendor. Some will be to reduce risk by not providing cards to some categories of customers. Some will be offset by directly charging the customers fees transferring the cost from the retailer to the consumer.

Bottom line since retailers will most likely not transfer the savings to consumers by reducing prices and banks will seek to recoup their costs elsewhere, the end result will be a negative hit to the consumers themselves that use debit cards.

Good idea on the surface, but one that will not have the desired effect which was to reduce costs for the consumers.

Duncan McGeary said...

RDC,

If you and Buster ever stood in the same spot, there would be a matter -anti-matter explosion that would end all existence...

Jack Goodman said...

The pirate banks comment just makes me think of The Pirates of Accountantcy from Monty Python. It isn't much different really. They just don't have the mobile office buildings with cannon/file cabinets. :)

Jack Goodman said...

...and btw I'm with you as I am most the time on this Dunc. The last thing Joe Average needs are things that cost him more. It is funny that in a time when people are hurting for money more than ever our government and big business seem bound and determined to do things that pull more non-existant money from our wallets. Of course I haven't been with a bank since the bailout anyway because I'm crazy like that.

H. Bruce Miller said...

Gosh, how did I guess RDC would be on the side of the big money?

Ohio Guy said...

It might get worse. Imagine in 2014 when our health insurance costs double and when you write the check to the insurer, you have to enter that new $5 fee for every check you write. It could happen!

RDC said...

HBM,

You really really just don't get it.

It is not a mstter of being on anybodies side.
The banks might be forced to reduce the fees to the retailer, but do you really think that is all that will happen.

They will move to replace the margin the cutbacks represent and they will reduce risk. One means an increase in non-transaction fees directly to the consumer. The other means not offering debit cards to as many people. A likely combinations is that for a fair number of people the only way they will get a debit card is to pay an annual fee. For others their free checking accounts will go away, it will now go back to being a charged for service.

The folks at the uppen end will probably not be affected, but those at the lower and potentially at the mid economic levels (you know the group you claim to be looking out for) will pay a price.

Are the retailers going to drop their prices by any amount? I doubt it. Those funds will drop to the retailers bottom lines. Now the majority of the retail benefits just happen to be going to large retailers (the benefits go in direct relationships to the amount of retail business done by debit cards).

So any large and small institutions that issue debit cards (including small ones like local banks and local credit unions) will be impacted negatively. But they will make up for it in other fees.

Large and small retailers will benefit. Those savings will drop to their bottom line. Big Box stores will get the most benefit. Small retailers will get some.

The consumers will not benefit from lower prices, and they will get hit with non-transaction based fees or losses in free services that they have been getting.

You really don't get how things work.

RDC said...

Ohio Guy,

Not that bad. However, the banks will replace their revenue.

Here is how it will most likely happen. They will look at their customer base and decide which customers are not profitable. They will then takes steps to either make those customers profitable or will move to eliminate them. First move will be to change the criteria for free checking and the associated debit card. These changes will start at the poorer customers first.

What you will probably see are the old fixed fees on checking accounts and debit cards. More in the nieghborhood of $20-50 per year for a debit card or 10-15 per month for a checking account.

Some at the low encome levels will be forced out of the banking system all together or atleast will be forced out of debit cards.

This is emphasized by groups such as the NAACP coming out against the change due it concerns over it negatively impacting low income groups.

“This rule should be thoroughly and expeditiously reviewed prior to implementation, allowing a full and appropriate impact study to be performed to ensure that it will not raise fees or otherwise harm at-risk communities, including communities of color,” Hilary O. Shelton, vice president for advocacy and policy at the National Association for the Advancement of Colored People, said in the March 7 letter.

The last time I checked the NAACP was not exactly an advocate group for big money.

RDC said...

HBM,

It is nice to see that you are taking the side of Wal-Mart.

"The Fed proposal set off a lobbying fight on Capitol Hill between the financial-services industry and retailers such as Wal-Mart Stores Inc. (WMT), based in Bentonville, Arkansas, and Minneapolis-based Target Corp. (TGT)"

Leitmotiv said...

RDC acts as if the banks couldn't live without those new fees! How could they ever have managed to live without them!!?!? Fraud has existed long before the internet, so that's nothing new.

The biggest difference is in how banks are investing your money that you keep with them. They need to stop losing it on poor investments like legalized gambling known as complex derivatives.

Leitmotiv said...

There's plenty of other ways of getting the banks to better manage their money and stop taking advantage of the consumer.

http://www.alternativeradio.org/programs/WOLR001.shtml

RDC said...

Leitmotiv,

If you go back and look at fee generation. Originally in the 60's and 70's before credit cards and ATMs really kicked in the normal fee structure involved both per check and account fees. Over the years as credit cards increased the banks have shifted more of their cost structures to credit cards and ATMs. That resulted in a considerable reduction is account based fees. The requirements were reduced to very low dollar amounts or even none with direct deposit. This was strengthened with the recent movement to debit cards.

Now compared to the pre-credit card/ATM/debit card period the banks also have the issues with fraud that occurs with those mechanisms (which they did not have before they exisited and in wide use). The levle of fraud has increased significantly during the last 10 years with more and more of it being groups concentrating on more and more sophisticated types (large scale identify theft, credit card and debit card info stolen by hacking attacks, increasingly sophisticated phishing attacks.

So with the reduction of those fees the banks will move to replace them. They will replace them by cutting services or increasing other fees. The decisions on how much and what to do will be based upon what they can do in a competitive environment. Will they put account charges in place on some accounts that are free today? Certainly. Will what are now free debit cards going to have a cost associated with them for some accounts? Yes also certainly. Thee only question is how many accounts are impacted and how high are those fees.

RDC said...

Leitmotiv,

Kind of mixing apples and oranges a bit.

The linked you referenced was dealing with the bailout. It primarily focused on the vary large banks with the derivative issues being on the investment bank side.

So first of all you need to separate out the credit unions, community banks and regional banks. They do not play in that space. They mostly make loans and then either hold or sell them. The losses those institutions suffered were directly from loan failures.

The reference you linked to is primary the very large institutions. The BoA, Citibank, etc.

Now if you look at the bailout the government has actually made a profit from that. The banks actually paid more back then what the government loaned to them in the bailout. The two areas where the government lost money was on the auto industry and the insurance side (AIG).

To clean up that would be very very simple from both a regulatory and execution point of view:

1. Reinstate Glass-Steagel
2. Make it illegal to sell or purchase credit defualt swaps if the party purchasing them does not hold an interest in the asset that the CDS is written against.
3. Treat CDS's as insurance and anyone issuing them must follow insurance standards

That is all it would take to prevent a 2007 type financial meltdown.

H. Bruce Miller said...

"It is nice to see that you are taking the side of Wal-Mart."

Hey, even Wal-Mart needs a little love. ;^)

But seriously: At least Wal-Mart, for all its scurvy piratical practices, provides some value for the customer's money. Banks, as best I can figure them out, are in the business of charging people exorbitant fees for accessing their own money.

"[Banks] will move to replace the margin the cutbacks represent and they will reduce risk. One means an increase in non-transaction fees directly to the consumer. The other means not offering debit cards to as many people. A likely combinations is that for a fair number of people the only way they will get a debit card is to pay an annual fee. For others their free checking accounts will go away, it will now go back to being a charged for service."

Hey, isn't glorious free market competition supposed to prevent that? The invisible hand and all? I seem to remember quite a few years back there was a move by banks to charge depositors fees for using their (the banks') own ATMs. The public outcry shot that down pretty damn quick.

But if not -- fine, I'll draw my money out of my 0%-earning checking account and my near-0%-earning savings account, get myself a safe and put the cash into it. That's what people used to do, and they can do it again if the banks' fee gouging gets too outrageous. Debit cards are a convenience, not a necessity.

The way I see it, I'm doing the bank a favor by lending it money virtually interest-free, which it then lends out to others at double-digit rates. Will I be willing to continue this arrangement if the bank starts charging me a fee for the privilege of lending it money? We shall see.

H. Bruce Miller said...

"To clean up that would be very very simple from both a regulatory and execution point of view:

1. Reinstate Glass-Steagel
2. Make it illegal to sell or purchase credit defualt swaps if the party purchasing them does not hold an interest in the asset that the CDS is written against.
3. Treat CDS's as insurance and anyone issuing them must follow insurance standards"

In other words make investment banks act more like banks again instead of casinos. Hallelujah, I agree with RDC! I think this makes twice in five years.

Unfortunately these measures are anything but simple from the political point of view.

Leitmotiv said...

I'm sorry did I miss something? Who was trying to push legislation through Washington? Oh that's right, the big banks.

You can add all the fees you want to fight this horrible and unfair rise in fraud that you speak of. Or you could actually change your practices that lead to such things occurring.

Fees won't fix the problem. It will only make them reliant.

And by the way, complex derivatives continues to be a big problem, but I see you don't like to address that issue. That's where most of the money is going.

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