Julia Coronado: The TARP legacy and debit card fees

Julia Coronado

Adriene Hill: Here in the U.S., it's the third anniversary of our own bailout -- the Troubled Asset Relief Program. Which got us wondering -- just how stable is our financial system today?

For that we turn to Julia Coronado, chief economist for North America at BNP Paribas in New York. She joins us now live. Good morning Julia.

Julia Coronado: Good morning.

Hill: TARP was controversial at the time. We're now three years out -- how healthy are the U.S. financial institutions right now?

Coronado: Well, they've definitely come a long way since 2008, they have done a lot of capital restoration and working through the losses of the mortgage crisis, so they're definitely at much lower levels of debt and much higher capital.

I think right now the concerns that we're seeing in the market revolve around the global economy and what that means for future losses, or delinquencies on the loans that they extend, and secondarily in the world of a slower economy and tighter regulation, how are they going to be able to actually grow their revenue stream.

Hill: Now is that need of a revenue stream the reason we're seeing these new bank fees from Bank of America which is adding a $5 a month debit card fee or Citibank charging new checking account fees?

Coronado: Absolutely. If you think about, you know, years back where you used to pay a fee for your checking account -- and that was also a world where we didn't really have debit cards. Then we went to a world with debit cards, banks put these fees on, they earned a lot of their revenue that way and then were allowed to -- were able to entice customers with free checking.

Now that that route of revenue has been closed off by regulation, now they're going to have to make their money some way or another. They're going to have to, you know -- they provide a service, they need to charge a certain amount for that service in order to stay profitable and cover their costs, so I think we are headed to a world with higher banking fees.

Hill: Julia Coronado, is chief economist for North America at BNP Paribas in New York. Thanks.

Coronado: It's my pleasure.

Julia Coronado is chief economist for North America at BNP Paribas' global market economics team. After receiving a PhD. in Economics from the University of Texas, Julia worked as an economist for the Federal Reserve Board of Governors, as director of retirement research at the think tank Watson Wyatt Worldwide, and as a senior U.S. economist at Barclays Capital. Currently, she also has a seat on the board of directors of the Pension Research Council at the Wharton School.

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