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Democratic Congress hurting consumers dept.

Congress passed laws restricting checking overdraft fees, a genius marketing tool that effectively had banks' irresponsible customers subsidizing their responsible customers, and permitted banks to offer free checking to the latter. Now banks are finding free checking accounts unprofitable, and will have to return to monthly fees—which will drive many poor people away from the banking system and to the far more expensive check-cashing services, leaving them unambiguously worse off. Even those who get to keep high-minimum free checking accounts will be effectively paying the hidden opportunity cost of lower interest rates. Thanks, Elizabeth Warren and her ilk! [WSJ]

Remember, kids: paternalistic elimination of consumer choice always leaves consumers worse off. There's a reason market equilibria develop around checking overdraft fees.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute

Katherine Lazarski
Press Officer,
Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.