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ATM Tyranny


Some years ago, when gas stations began replacing free air pumps with coin operated models, some motorists objected. “But air is free,” one protested. To which a gas station owner replied, “Fine; blow the tire up yourself.”

I’m reminded of that story by the current flap over fees for ATMs. Here’s a controversy tailored-made for demagogic political leaders looking for a cause and for the people who are unable to pierce the demagoguery, thanks in part to the “education” they received in the government’s “schools.”

As the New York Times sees it, “Suddenly, the fact that it costs an extra $1.50 or so to get money out of a cash machine seems to have tapped into some deep well of public resentment — or at least politicians believe it has.” Connecticut Attorney General Richard Blumenthal says that “consumers see no reason for it [the fee]. They regard it almost as a personal insult.” Jon Golinger of the Naderite California Public Interest Group says, “Banks are basically holding our money hostage.”

Thus people who put up with all manner of coercive imposition from their rulers get cranky because of a small fee charged by banks with whom they do no business whatsoever.

Santa Monica, California, became the first jurisdiction in the nation to outlaw banks’ charging ATM fees to noncustomers. The people of San Francisco followed. New York and Los Angeles are examining the issue, and other cities are interested. The issue has “legs,” as they say in the news biz. (At this writing, a judge has issued preliminary injunctions that stop the ban in Santa Monica and San Francisco.)

The issue is actually making a comeback after an unsuccessful debut. Alfonse D’Amato, while a Republican senator, tried to ban the fees nationwide, but failed. Bernard Sanders, the only avowed socialist in the U.S. Senate, has picked up where D’Amato left off.

Is there any more eloquent commentary on where the welfare state has delivered us?

Let’s be clear on what we’re talking about. People put their money in Bank A. Then they want to retrieve “their money” from Bank B’s automated teller machine. But they don’t want to have to pay a fee for the service. “They shouldn’t be allowed to charge us to get our own money,” says the aggrieved customer.

But Bank B doesn’t have that customer’s money. Bank A does. Fortunately, money is fungible. So Bank B can advance the money to the customer and settle up later with Bank A. To advance the money so conveniently, Bank B invested in sophisticated devices to dispense the money and keep records, and placed these devices around town.

The service costs money

The demagogues and their followers think that all this costs nothing. It might not have occurred to them that ATMs are not found in nature; they are man-made devices, the manufacture of which entails opportunity costs.

Or perhaps the anti-fee lobby believes that any associated expenses should be borne by someone other than the customer. After all, it’s his money. That’s like saying that when someone leaves his car in a parking garage, the garage shouldn’t be allowed to charge him to get it out. After all, it’s his car!

To state what should be obvious, the people who make and maintain ATMs are not our slaves. They don’t owe us anything. They wish to be paid for their services. If the crusade against ATM fees isn’t a bid for legalized plunder, I don’t know what is.

What the opponents of the fees miss is that they don’t have to pay them — ever! They can use only their own banks’ ATMs. No transaction fees are charged. Or they can search for other ATMs that don’t charge fees. A cursory search of the World Wide Web turns up several directories of free ATMs. Or they can keep their cash at home and carry enough with them when they go out. Why don’t they exercise those options? Perhaps it’s not as convenient as stopping at the nearest ATM, regardless of which bank it belongs to. That’s the point. Someone is providing a convenience, and that someone has a right to set the terms.

The issue is something of a tempest in a teapot. Three-quarters of ATM transactions involve no fees. The fear that the fees favor big banks, which usually have more ATMs, seems baseless. The Wall Street Journal reported that “San Francisco’s community banks, all 18 of them, opposed the bans.” Of course, the issue of minorities has been raised, but that doesn’t work either. The Journal says opponents of the ban in San Francisco include the Asian-American Contractors Association, the Black Chamber of Commerce, and the Chinatown Merchants Association. It’s even hard to make the case that fees drive ATM users away. “The number of ATM machines in America has doubled since 1996, the year the banking industry began charging such fees,” writes the Journal.

No one would go to the trouble of installing an ATM if there were no demand, and no one uses an ATM unless he values the service more than what he gives up to obtain it.

But these other issues are beside the point. It all comes down to property rights. Who owns the ATMs?

Resisting the petty tyrants

The heartening aspect of this story is that finally some businessmen are standing up for their rights. In Santa Monica, noncustomers of the Bank of America now find that they can’t use its ATMs. Instead of “their” money, they get a note stating, “Due to a recent vote by the Santa Monica City Council, the convenience of this A.T.M. is now available to Bank of America cardholders only.” Wells Fargo of California has followed suit. Maybe that will send the message that slavery was outlawed by the Thirteenth Amendment.

If only other businessmen would do something similar when the government encroaches on them. It was disappointing to watch Microsoft’s apologetic defense in the antitrust action. Bill Gates and his colleagues were most reluctant to proudly assert their right to set any terms they wish on the sale of their products. Nor should they be shy about admitting that they aspired to win over as many customers as possible — even if that meant depriving Netscape of customers. Netscape’s people have not been shy about denouncing Gates as the devil and announcing their intention to destroy his company. Why should Microsoft be afraid to admit that it would like to have the only Web browser in the marketplace?

What gets lost too often is that anything businessmen do is ultimately subject to the verdict rendered by consumers. People often see businessmen as ruthless: they lay off unneeded workers and play hardball with suppliers and downstream customers. But as ruthless as they may be, it is nothing compared with the ruthlessness of consumers — you and me. We show no mercy. We might buy the same thing from the same business for years only to change our minds suddenly and switch to something else. Do we call the old business and explain? Do we phase out our purchases before switching? No, we don’t. With the fickleness of a grade-school student, we just switch. That’s why good businessmen are tough. They are afraid of us! They are always trying to anticipate what we will want tomorrow. They are always hoping to keep a step ahead so that we won’t have cause to cut and run. What looks like mercilessness is really an effort to please us and keep us from deserting them for something we like better.

The day we think a product or service isn’t worth the price, we’ll stop buying. And the day businesses stop trying to monopolize, that is, attract all the business, we’ll all be a lot poorer and sadder.

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    Sheldon Richman is former vice president and editor at The Future of Freedom Foundation and editor of FFF's monthly journal, Future of Freedom. For 15 years he was editor of The Freeman, published by the Foundation for Economic Education in Irvington, New York. He is the author of FFF's award-winning book Separating School & State: How to Liberate America's Families; Your Money or Your Life: Why We Must Abolish the Income Tax; and Tethered Citizens: Time to Repeal the Welfare State. Calling for the abolition, not the reform, of public schooling. Separating School & State has become a landmark book in both libertarian and educational circles. In his column in the Financial Times, Michael Prowse wrote: "I recommend a subversive tract, Separating School & State by Sheldon Richman of the Cato Institute, a Washington think tank... . I also think that Mr. Richman is right to fear that state education undermines personal responsibility..." Sheldon's articles on economic policy, education, civil liberties, American history, foreign policy, and the Middle East have appeared in the Washington Post, Wall Street Journal, American Scholar, Chicago Tribune, USA Today, Washington Times, The American Conservative, Insight, Cato Policy Report, Journal of Economic Development, The Freeman, The World & I, Reason, Washington Report on Middle East Affairs, Middle East Policy, Liberty magazine, and other publications. He is a contributor to the The Concise Encyclopedia of Economics. A former newspaper reporter and senior editor at the Cato Institute and the Institute for Humane Studies, Sheldon is a graduate of Temple University in Philadelphia. He blogs at Free Association. Send him e-mail.