Much Ado About Nothing
From the flurry of articles and broadcasts not long ago dealing with ATM
charges, one might assume that the matter was important. Of course, it
isn't, because the ATM machines themselves aren't important. I, for
example, do not have an ATM card, and wouldn't use it if I did. I am sure I
am not unique. True, there were, in 1996, almost 11 billion ATM
transactions, but these were matters more of convenience than necessity.
The raging question seems to be: should customers be made to pay for this
convenience, and if so, how much? Senator Alphonse D'Amato quivers with
outrage that some banks are "double-charging" for ATM use, although,
according to his own statistics, a nearly equal number are not. This policy
may result in some individuals paying as much as two or three dollars for
the withdrawal of twenty. That, says the Senator, is "outrageous."
Well, he's right. That's a charge of ten to fifteen percent--just about
the lowest rate at which people pay income tax, except that in the case of
the ATM they're paying for something they want, and voluntarily, as
contrasted to paying for lots of things they absolutely don't want, under
compulsion. I think it safe to disregard Senator D'Amato's position as that
of a pompous populist windbag.
The other side of the argument is presented by, for example, the
Libertarian Party, which has issued a paper defending the ATM charges as an example of free enterprise, with companies---in this case, banks--offering a service to people who are free to accept it or reject it. Ban ATM charges, say the Libertarians, and the banks would simply raise other charges, so that the ATM costs would be spread among the entire population of bank-users, instead of just those who use the machines.
If I were a banker (God forbid!) I would find the debate amusing, because
it fails to take into account the fact that banking is not like any other
business, or, at least, any other legitimate business. As long as this
misapprehension exists, the banker is safe to continue his depredations. In
fact, banking is unique, and the banker is the only one among us who gets a
free lunch.
The free lunch, or the assertion that there is no such thing, is the epitome of the hard-knock school's economic wisdom. "You get what you pay for" is another version of the same almost-true aphorism. Let's see how we
can get ourselves lunch for nothing--without being anyone's guest.
It is simplicity itself. Pay with a check. Now before you get all
outraged and indignant, bear with me a while. Let's suppose that the
restaurateur, instead of taking the check to the bank, uses it to buy pay
his laundry service. The restaurant is now considered paid, and will not
dun you for the amount of the bill. You have bought lunch, and not paid for
it. The launderer, in turn, endorses the check over to the filling station
for gas. The station operator in turn endorses it over to his employee, who
uses it, in turn, to "pay" for some videos. Look at what's happened: the
check has bought you lunch, the restaurateur laundry, the launderer
gasoline, the filling-station operator the services of an employee, and the
employee some recordings. And, of course, the chain could go on and on,
until there was no more room on the check for endorsements. At that time,
the check would be brought to the bank, and, finally, the amount of your
meal would be deducted from your balance. Then, and only then, would you
have paid for your lunch.
But what if you were the banker, to whose bank the check was brought for
"payment?" Does the bank have an account with itself? If you, a banker,
had taken potential customers to lunch, and paid for your lunch with a
check, the only "expense" you would have incurred was that of adding the
amount of the check to the account of the person who eventually presented it for deposit. And, of course, that "expense" would be paid with---your
paycheck!
Alternatively, if the paper instrument were elaborately engraved, and
marked "legal tender," it would never be presented for payment, being
thought of as "money" in and of itself. Banks can get currency by buying
it, and they buy it with---a check! From four to five percent of the annual
growth of the money supply is money created by banks for their own use,
since it would be absurd for them to lend it to themselves, although lending
is the process by which they create it for non-bankers. As a prominent St.
Louis banker once declared on the witness stand, banks cannot spend money.
If they try to, they merely create it instead.
Hence, the "cost" to the bank of running the ATM machines is nothing. The
machines are said to much cheaper, per transaction, than a flesh-and-blood
teller, but that's only true if you think that it costs the bank anything to
pay a teller. Aren't tellers paid by check, or electronic transfer of
funds? Do those numbers, which the bank adds to the employee's account,
represent anything which the bank then owes the teller? Do they establish a claim by the teller on anything of the bank's? Did the bank have to do some work to get them? Did it part with something in order to place the number in the employee's account?
In other words, the bank pays for everything it wants, including lunch,
with checks that aren't any good, except that the arbiter of what is "good"
or not regarding a check is--the bank itself! In this sense, Senator
D'Amato, if you can believe it, is nearer a true sense of the picture than
the libertarians: how dare the banks charge for something which costs them
nothing! But, of course, the Senator is not objecting to the charge, but
only to what he considers an excess charge.
Well, it's not surprising. In a country which is often associated with the
expression "fair play," and which is prohibited from establishing a royal
caste (at least officially) there is, in fact, a royalty among us that goes
undetected and unappreciated, to its own delight. It has always been
considered the prerogative of the sovereign to issue money; and our
sovereign maintains this tradition. We must work to pay for our lunch, for
work is the only way we can earn the numbers in our checking account. The
banker, by contrast, need merely create whatever number he needs for the
bank's expenses; that is the extent of his "work."
Concern about ATM fees is a molehill; the mountain of injustice represented
by money-creation is, despite its enormity, much less visible. As long as
it remains that way we will remain subjects, and the bankers, sovereigns.
Dr. Paul Hein
pahein@email.com
August 1, 2001
Also by Dr. Hein
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