Why? Because they can. And in the past they've wielded enough political power to prevent Congress from doing anything about it.

TO BE NOTED: From Mother Jones:

"Big Banks

— By Kevin Drum | Mon April 13, 2009 8:55 AM PST

Ezra Klein writes that big banks are bad for small depositors:

They're about the pros rather than the amateurs. Which may be why they're so cavalier about exacting fees and penalties on individual depositors at levels they'd never consider applying to professional markets. Indeed, pretty good research suggests that as banks get bigger — which tends to mean more competitive on the global financial market — they begin charging consumers more.

This seems to be true. Take a look at the chart on the right from today's Wall Street Journal. It shows that banks receiving bailout funds have increased fees at a far higher rate than banks that haven't.

Does this show that banks receiving federal assistance are more likely to raise their fees and penalties? Of course not. This trend is nine years old. However, it's big banks that have received most of the TARP money, so you can pretty much replace "Banks receiving TARP funds" with "Big banks." So what the chart shows is that big banks have increased their fee and penalty structure far more than small banks.

Why? Because they can. And in the past they've wielded enough political power to prevent Congress from doing anything about it. If there's any justice — and needless to say, that's still an open question — those days are finally gone."

“Guarantor agrees to notify Bank of any violation of any applicable usury law within 60 days of its occurrence, and Bank will have 60 days to correct

Just another tidbit from Joe Nocera's blog on the NY Times. It's from an Anon Banker:

"Banks are not making loans. Does that comment mean that no loans are being made at any bank? Of course not. If the borrower provides the bank with both a belt and a pair of suspenders, the loan is being granted. The banks need to recapitalize and they are going to do that. But if the banks receive federal funding through the bailout program they should be required to utilize some of those funds for S.B.A. loans. The big banks are not going to voluntarily engage themselves in boosting our failing economy by proactively utilizing the SBA program, whether it is priced with a base of Prime or a base of Libor +3 percent. I just don’t see it happening. In fact, I see just the opposite. In addition to not making new loans, the banks are systematically withdrawing commitments and capital from the economy. "

This is the problem with a Hybrid Plan like TARP. The interests of the Government and Banks are not the same, and the banks are going to look out for their own interests. Thank you for the money.

"Another friend had his credit line cut. He has a business equity line of credit, a fairly unique product in the industry where the line is actually to the business, but it is secured directly by a lien on the personal real estate. He asked me to look over his loan documentation to see if he had any case for an argument against cutting his line.

I read his personal guarantee, security agreement and Business Equity Line of Credit Agreement from that bank. And, basically, if the bank chooses to cut his line because the value of the collateral decreased, he cannot do anything to change that.

But there was an interesting line written into the guarantee, that I thought might bring some humor to this otherwise humorless topic. And I quote, “Guarantor agrees to notify Bank of any violation of any applicable usury law within 60 days of its occurrence, and Bank will have 60 days to correct such violation.”

Big Banks! Love them, or perhaps, leave them, and go to the community banks."

I'm not sure that I read that correctly. It seems to say that if the bank breaks the law, the borrower needs to tell the bank and allow them to correct the situation, if they don't want to contest it, before they can be prosecuted or fined. I'm pretty sure that I misread that.

"I was expecting a somewhat sexier story"

Joe Nocera in the NY Times:

"Peeking Under the Kimono: A Big Banker Speaks Out

By Joe Nocera

I received this e-mail message this morning. Its author works for one of the country’s biggest banks. He agreed to let me post it here at Executive Suite so long as I did not use his name. It speaks — quite powerfully, I think — for itself.

I’m a 35-year veteran in the banking industry. And I’ve spent the better part of my career working for the big banks as a small business banker and credit underwriter. Small business lending, in industry terms, is defined as a business that has less than $20 million in revenue and that borrows less than $5 million. I’ve been a lender for most of those years and I’ve been appalled at the changes in the industry.

The government has already done plenty for the big banks. It needs to stop worrying about them now. Instead, it need to pump money into the local community banks because those are the bankers who understand their markets, and know the businesses in their markets. They lunch with small business owners at Rotary Clubs and Chamber meetings. They learn, first-hand, about their businesses and the challenges they face. They go to their stores and factories and “kick the boxes.” And most importantly, they learn about the ways in which those business owners are making the tough decisions in cutting back expenses to stay ahead of this economic crisis."

It seems like a good point. Here's my response:

I was expecting a somewhat sexier story, but no matter.

I know this is going to sound silly from a critic of TARP, but isn’t some of that money supposed to go towards smaller banks? Say, half?

— Don the libertarian Democrat