Q&A: Will Reform Increase My Bank Fees?

Question: I’ve heard a lot about the new credit card rules that just went into effect, but what about the new rules on banks? Will I get a break on bank fees? — J. Stocke, Lawrenceville, N.J.

Answer: Probably not, and I’ll get to the reason why in a moment.

Let’s set the table first. On Jan. 14, President Obama, seeking to strike a populist pitch, announced a plan to slap $90 billion worth of fees on banks that participated in the federal government’s Troubled Asset Relief Program (TARP).

Calling big banks “fat cats,” Obama specifically called for a fee of 0.15% on big bank balance sheets on with assets topping $50 billion. White House economists expect that such a fee would raise $90 billion over 10 years. The fee would primarily impact bigger banks like Bank of America (Stock Quote: BAC), Wells Fargo (Stock Quote: WFC) and Morgan Stanley (Stock Quote: MS).

But back to your question. Typically, when the government slaps a levy on businesses, those businesses turn around and pass the added cost along to customers in the form of higher prices for service and, in the case of banks, higher bank fees and penalties. Industry workers and investors would be negatively impacted, too.

That seems to be the case here. According to a report released this week by the U.S. Congressional Budget Office, the Obama plan would not only hike bank fees, but also further restrict effected banks from making loans. Citing the impact on banks as a “small” one, the CBO said the ultimate financial burden would fall on bank customers and employees. The CBO reported that bank customers would face higher borrowing rates, while industry employees could face layoffs and pay cuts.

“The cost of the proposed fee would ultimately be borne to varying degrees by an institution’s customers, employees and investors, but the precise incidence among those groups is uncertain,” the CBO reported in a letter yesterday to U.S. Sen. Charles Grassley, R-Iowa.