JPMorgan CEO Dimon: "If you can't charge for the soda, you're going to charge more for the burger"

[Amerigo Vespucci]

NEW YORK — Big banks facing big drops in revenue are looking to Main Street to make up the difference.

Checking accounts, bank statements, even popping into your local bank branch could carry a hefty cost as the nation's mega-banks scramble to offset expected damage from the sweeping financial overhaul. The uncertain future has overshadowed otherwise strong second-quarter earnings at JPMorgan Chase & Co., Citigroup Inc. and Bank of America Corp.

All three companies beat expectations this week with profitable results. Yet their stocks tumbled, helping send the wider market sharply lower Friday.

The reason: Investors are worried about banks' future earning power after Thursday's passage of the most dramatic rewriting of banking rules since the Great Depression. Adding to the pessimism are falling trading profits – which all three banks mentioned in the their earnings reports – and weak U.S. loan demand.

***SNIP***

"Checking accounts are a potential source of income. That's the No. 1 thing that banks are looking at to recoup some of these costs," said Shannon Stemm, a financial services analyst with Edward Jones.

The changes reflect the new reality of the U.S. banking industry in the aftermath of the 2008 financial crisis. The overhaul approved by Congress on Thursday and soon to be signed into law by President Barack Obama tightens rules on everything from simple debit card transactions to the most complex securities.

Staying nimble and adjusting their business models accordingly is crucial for the big banks to stay competitive. And bank CEOs are making no apologies for the defensive moves.

"If you're a restaurant and you can't charge for the soda, you're going to charge more for the burger," JPMorgan Chase CEO Jamie Dimon said Thursday after his company reported a $4.8 billion second-quarter profit. "All these (regulations) will eventually get priced into the business."

While overdraft and other types of fees became overly "punitive" for some customers, other services have been a relative bargain and must be paid for through higher fees, Dimon said.

"A checking account ... costs us $300 a year. For that, you get ATMs, branches, debit cards, access to cash," Dimon said. "You get all of these. You have to charge for all that."

http://www.huffingtonpost.com/2010/07/16/financial-reform-banks-al_n_648756.html

[marmar]

1. .........

[SammyWinstonJack]

9. +1

:thumbsup:

[hobbit709]

2. Or I'll go somewhere cheaper

That's why I switched to my credit union years ago.

[aquart]

4. I LOVE my credit union.

[aquart]

3. Can't let those bonuses drop!

Don't you just love the way he assures us that he will always win and we will always lose?

[jwirr]

5. Business, both big and small, seem to have a real problem with

fixing this mess we are in because they are not the losers. What it looks like to me is that they are calling us socialists but it is the capitalist who do not seem to believe in capitalism anymore - they are the holdouts.

[BzaDem]

6. That isn't even entirely true from an economics standpoint. There are limits on the burger as well.

If they just raise the price of the "burger" to make up for something else, eventually the price of the burger will be higher than many people are willing to pay (necessitating a drop in the burger price).

In general, there are limits to how much of an excise tax or a regulatory expense can actually be passed onto customers. The more elastic the demand (i.e. the more customers are willing to just not buy the product at higher prices), the less of the tax/regulatory cost they can pass on to customers. The less elastic the demand (i.e. if customers are willing to buy the product at any price), the more of the tax/cost they can pass on.

In this case, the much of the regulatory cost of the bill primarily affects big banks. (This is the point -- we need to tax "bigness" to reduce the incentive for banks to become so big.) So if big banks start charging for checking accounts, people will move to smaller banks -- necessitating a lowering of the cost of checking accounts even at the big banks. In other words, demand for big-bank checking accounts is highly elastic.

[mbperrin]

7. When people quit coming into your restaurant, you will sell neither soda nor burgers.

Happy I am that I left banking in 1978. Haven't had a checking, savings, or loan from any financial institution since. Couldn't be more satisfied.

Dimon and his ilk are exactly why I made the break. They feel they're irreplaceable and entitled to folks' hard-earned money. No to both.

[sandnsea]

8. They're charging for the chair and napkin

along with the burger and pop.

I agree with the "Jump You Fuckers" sign.

[EC]

10. Well, at least we'll have a choice as to get screwed or not

Me, I'd just as soon pay what bills I can in person and do without the checking anyway...

[drmeow]

11. I have a novel suggestion

why don't you bring salaries (including bonuses) of the CEO and top players (compared to the average worker) more in line with what they were 20 or 30 years ago. Why don't you accept that profits and dividends should be reasonable, not sky high. Oh, wait, that would mean that you would have to have integrity and honesty and slightly smaller egos. Silly me.

Raise the income tax rate for top earners and raise the capital gains tax ... that's harder to pass on to the consumer.

[Clovis Sangrail]

12. "A checking account ... *costs* us $300 a year" 0o

Isn't that money channelled into profit making activities for the banks?

They give us the convenience of checks and atms in exchange of the use of our money.
If they start charging $300/year the cost will outweigh the convenience.

If each checking account *cost* them $300/year they'd stop offering checking accounts.
Dimon==asshat

[Cleita]

13. BS. You are going to charge in a restaurant what people

are willing to pay or they will eat someplace else. You too don't have to go to a bank but join a credit union. I get ATMs, branches, debit cards, and access to cash from my credit union and I also get interest on my money for my checking account as well as my savings account. Pull the plug on these banksters. Don't use their services anymore.

[dixiegrrrrl]

14. Hopefully they will price themselves out of the business.

Right now, our cell phone company, AT&T, charges a fee for an in store payment.

DISH charges a fee for a credit card payment.

It soon will be cheaper to buy Money Orders for out of town payments and use cash for in town expenses.

You can shear a sheep many times, but you can skin it only once.

[tech9413]

15. Bullshit! Does Mr Dimon think we're dumb enough to buy that?

When you put your money in a bank, they count that as an asset and leverage it to loan money at interest which is their income. Charge me for services when you already make money off my assets under your control? Not on your best day would I be dumb enough to accept those terms. I'd rather stuff my money in a mattress.

[geckosfeet]

16. Credit. Union. The banksters are simply thieves.

[BrklynLiberal]

18. I have switched to a credit union....

[geckosfeet]

20. mihi quoque

[BrklynLiberal]

17. Dimon was a disgusting P.O.S. when he was just a protege of Sandy Weil's when I worked for

SmithBarney..and I have no reason to assume he has changed his stripes in the intervening years.

[Liberal In Texas]

19. Been with a Credit Union about 30 years.

I wouldn't set foot in a bank again if THEY paid me.

[HCE SuiGeneris]

21. What's the price-tag on a guillotine? n/t

[EstimatedProphet]

22. Off-topic: Nice avatar!

[mdmc]

23. 1

[Amerigo Vespucci]

30. Thanks! That one's a custom job.

:toast:

[Initech]

24. Fuck the big banks!

I'm seriously looking at pulling my money out of Wells Fargo and putting it in a local bank.

[KamaAina]

25. "A checking account ... costs us $300 a year."

Bullpucky! How much do they make from investing the money us peons are essentially loaning them interest-free? If it's not enough to fund their 100-foot yachts, then let 'em look at the 80-footers. :eyes:

[msongs]

26. how bout they slash expenses like unemployed people do. start with CEO income nt

[Initech]

28. Exactly, they can justify their CEO's ridiculous salaries but they cant justify hiring new people.

:argh:

[HipChick]

27. move everything to a CU

[MilesColtrane]

29. Smells like horseshit to me.

They make more than $300 a year off of checking accounts just in the interest they accrue in the lag between when you deposit a check, and when you can actually access that money.