A Cure That Doesn’t Kill

Posted: December 14, 2009

A Case for Allowing the Fed to Make the Overdraft System Healthier Before Congress Risks Dangerous Side Effects

Author: Dennis Dollar
Appearing in Lombard Street, December 14, 2009

It is probably dangerous to mix metaphors in today’s political environment.

Health care is at the center of the national debate. So is the future of the nation’s financial sector.

Just as in health care Congress must find the right prescription that strengthens the health of our nation’s uninsured without costing so much as to damage the long term viability of their coverage, so must Congress prescribe solutions to issues in the financial services sector that treats the disease but doesn’t kill the patient in doing so.

The overdraft issue, which has received a lot of publicity in recent months about some abuse in the program and is now facing possible congressional intervention to eliminate that abuse, is a good case in point.

Financial institutions earned, according to a study conducted by the Center for Responsible Lending, in excess of $23.7 billion last year from overdraft fees.

The assumption by many is that, if financial institutions are making this much fee income from any one product, there must be something...

Click here to read more of Dennis Dollar's article on Lombard Street