20110830 consumer confidence
How's consumer confidence? The Old Navy store in San Francisco, Calif., doesn't take any chances. - 

Jeremy Hobson: Here in the U.S., the Commerce Department said this morning that consumers spent a little more last month than they did the month before. But they earned less for the first time in two years.

And that's where we'll start with Chris Low, who is chief economist at FTN Financial. He joins us live from New York as he is every Friday. Good morning.

Chris Low: Good morning.

Hobson: So consumers spent more, but they earned less. Which is more the more important number there for you?

Low: Well, I think -- look, consumption is the one that goes into GDP, and for that reason that's what we tend to focus on. But the bottom line is, that over time income is what determines consumption, so when I see extraordinary weakness in income like that, it does make me worry.

Hobson: Well, speaking of incomes going down, we've got a story about people now having to spend more something they've been getting for free -- I'm talking about this Bank of America story -- now they want to charge people $5 a month to use a debit card. What's that about?

Low: Ouch, yeah, and not only Bank of America, but according to the New York Times other banks are expected to follow suit. You know, what's going on is that traditionally a bank makes money by investing the money we deposit with them, but right now a confluence of factors, the collapse of credit, tighter credit regulation, new rules on lending, and then also a very active Federal Reserve driving interest rates down -- all of these things have squeezed the profitability of investment to just about nothing. And banks are now looking for other ways now to just stay in the black.

Hobson: And quickly Chris, you don't think these banks are just blaming these regulations and saying this is what we have to do?

Low: I don't think so, it really has become extraordinarily difficult to make money in the banking business, and I suspect what eventually happen is a real shakeout in the industry. You will see fewer banks and unfortunately we're gonna be paying more for bank services. I think this is probably just the beginning.

Hobson: Chris Low, chief economist with FTN Financial, thanks as always.

Low: You're welcome, thank you.