Was "Financial Reform" Really Robin Hood In Reverse?

At the dark end of the street
That's where we'll always meet
~ Gram Parsons

One of the insights I got from Gary Rivlin's book, Broke USA, is that people often use payday lenders because they don't have access to traditional banks.

I didn't realize that many banks won't give a checking account to people with bad credit.

Under the alleged "Financial Reform" changes, banking services for lower income people is only going to get worse.

"Too big to fail" banks are racing to charge fees for checking, raise the minimum balance required to get free checking and hitting consumers with a bunch of nickel and dime charges.

Those nickels and dimes will add up to billions in profits for the banks we bailed out only two short years ago.

In reaction to financial reform, Jamie Dimon, whose Chase Bank earned a $4.8 billion profit last quarter, seemed to speak for all of Wall Street when he told the New York Times, "If you're a restaurant and you can't charge for the soda, you're going to charge more for the burger."

The burger is going to come out of the hides of their poorest customers.

As payday lenders and others in the poverty business have found out, it is easy to stick it to poor people. They have the fewest options.

More and more of them will fall out of the traditional banking system altogether.

They will cash their paychecks at Wal-Marts, liquor stores and payday lenders.

"Financial Reform" will be a boom for people in the payday loan business. There will be many new customers who need bank-like services.

It's almost like Congress implemented a plan of "Reverse Robin Hood." Rob from the poor to give to the rich.

It is not really a surprise. Reverse Robin Hood is a good way to describe the past couple of decades.

Wall Street made much of its profits sticking it to Main Street.

I wonder what "Financial Reform" actually accomplished. As Paul Volcker noted, the bill is so watered down that it really did little to avoid financial meltdown.

We had a system that worked for 80 years. It was called the Glass-Steagall Act. It became law in 1933.

Under Glass-Steagall, banks were banks and brokerage houses were brokerage houses. They stayed in the businesses they knew best. And, more importantly, each was required to stay out of the business of the other.

Glass-Steagall fell during Bill Clinton's administration. The person who championed its fall was Dr. Lawrence Summers.

The same Dr. Summers who went on to become president of Harvard and who is now President Obama's chief economic guru.

With Dr. Summers whispering in the president's ear, it's easy to see why bringing back Glass-Steagall was not on the table.

I've been championing a concept first proposed by Arianna Huffington and others at Huffington Post: Move Your Money. You can learn more about it at MoveYourMoney.info/

I'm hoping that two things will happen.

First is that people keep moving their money from "too big to fail" giants to community banks and credit unions.

Second is that the community banks and credit unions have an open door to the segment of society that the big banks are running off.

Being fair to your customers is a great marketing opportunity for community banks and credit unions.

Everyone knows that the Wall Street banks have not played fair. If you need further proof, call Citibank and try to speak to a "customer service" representative.

Making money with small depositors is hard work. But it can be profitable.

It's not the multi-billion dollar casino games that Wall Street has been playing, but it is a money-making, steady business. It provides a service at a decent margin and makes their communities better places to live.

Small banks and credit unions can make or break a community. They can truly add to the quality of life.

I doubt Main Street banks will be looking for a future bailout. Most of them missed out on the first round of handouts.

Banks can make money without squeezing every last nickel out of their customers.

Banks can make money by doing good, just as George Bailey showed us in the movie, It's a Wonderful Life.

I'm counting on people to move their money and I'm counting on community banks and credit unions to do the job that Wall Street banks ought to be doing.

If it doesn't happen, I'm counting on it being a big year for the payday lending industry.

Don McNay, CLU, ChFC, MSFS, CSSC is an award-winning financial columnist and Huffington Post Contributor.

You can read more about Don at www.donmcnay.com

McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000. You can read more about both at www.mcnay.com

McNay has Master's Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University.

McNay has written two books. Most recent is Son of a Son of a Gambler: Winners, Losers and What to Do When You Win The Lottery

McNay is a lifetime member of the Million Dollar Round Table and has four professional designations in the financial services field.