There would appear to be no end to the extent to which banks which received TARP funds will go to make Congress and the public unhappy with the program and its results.

Executive pay and perks started the process of eroding confidence in how well TARP money has been used. Now, the greed of the banks reflected in the way that they treat customers will become part of the debate.

According to The Wall Street Journal, “The committee overseeing federal banking-bailout programs is investigating the lending practices of institutions that received public funds, following a rash of complaints about increases in interest rates and fees.” It seems that banks including Citigroup (C) and Bank of America (BAC) are charging amounts for customer transactions that might be considered unreasonable if part of the TARP’s goals are to ease credit. Add that to the fact that the banks are hoarding much of the money they have received to improve their balance sheets, and the public’s confidence in the programs to help banks falls even more credibility.

Since the problem is that the banks are apparently not good stewards of the money they are being loaned by the government, it may be that the issue has to be solved from the customer side of transactions. That may not be as difficult as it seems even though there are only a few dozen banks which have received TARP funds and they have millions of business and consumer customers.

The Administration could simply draw up a customer “Bill of Rights.” It would apply to any consumer or business that is involved in doing business with the banks. It would give them leverage on fees and interest rates. The pressure on the banks would be shifted to the activity of every customer. The powerful argument against this is that banks should be allowed to charge higher fees for more risky lending. That may be true, but if they have taken government money, it may be that a “Bill of Rights” simply says that they cannot charge more for those transactions than other banks do. That makes the profit banks have on lending fair but cuts out exorbitant charges.

The banks will cry “foul” because they will be faced with a new set of rules. But, it is better than having taxpapers say the system is fixed and be right about that assertion.

Douglas A. McIntyre

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