×
USA Today reports on the efforts by Sheila Bair, the head of the FDIC, to restrict bank overdraft fees. It then presents the views of economists who say that such restrictions would be a bad idea. Including the remarkable comment: "other analysts say that onerous restrictions could also make it harder for the troubled industry to recover."Of course, if bank executives were raising money by robbing people at gunpoint it would be true that restricting these armed robberies "could also make it harder for the troubled industry to recover."Restrictions on overdraft fees reduce the incentive for banks to use their brilliant minds to find deceptive ways to gouge consumers. If the government gives them free rein to tack on fees with little or no notification, then basic economic theory suggests that banks will devote considerable resources to this effort. This results in waste from the standpoint of the economy as a whole and a redistribution from bank customers to stockholders and top executives.--Dean Baker
