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What The Media Tell Americans About Free Enterprise

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April 1998


Only NBC Allows Air Time for Arguments that Consolidation Helps Customers
Purging Good Bank Merger News

The recent spate of bank mergers has the networks concerned. So concerned that on April 13, the announcements that Bank of America was merging with Nations Bank and that Bank One was merging with First Chicago led ABC World News Tonight, CBS Evening News, and NBC Nightly News, a rarity for a business story. But all except the latter ignored key arguments that the mergers would be beneficial to bank customers.

Peter Jennings began ABCís coverage by asking: "Does bigger mean less competition, which means less reason to service the customer, especially those with less money?" Correspondent Betsy Stark then pointed out that "banks say with size comes efficiency. Back-office operations like data-processing and billing get cheaper as the customer base gets bigger. Plus, they say, only financial giants will have enough money to invest in the electronic future of banking."

But Stark wasnít buying it. She argued that "there is evidence that bigger has not been better for bank customers," namely that "over the last few years, as banks have merged at a feverish pace, bank fees have become noticeably fatter. Starkís conclusion: "All these fees helped banks rack up record profits last year, while mergers have helped them trim costs. Theoretically, in a competitive market, at least some of those lower costs should have been passed on to consumers. But thatís not how the game has played out so far."

Dan Rather introduced CBS Evening News coverage of the mergers by noting that their impact "will be felt by tens of millions of Americans for better and for worse." Ray Bradyís story then focused on the "worse."

Brady ran a soundbite from Ken Gunther of the Independent Bankers Association, who warned: "When the big are getting bigger, I think you can be sure that someone is going to pay the piper. And itís going to be the man on the street thatís going to pay the piper in worse service and higher fees." Brady ominously brought up the specter of the Great Depression: "Todayís deals cap a fifteen year trend of bank deregulation, and the undoing of laws originally enacted to prevent a repeat of the bank failures of the 1930s. This latest consolidation of banking power represents the biggest and boldest moves away from those laws."

NBC began its coverage with the same take as ABC and CBS. "Experts say these banking mergers are leading to the creation of so-called financial supermarkets, which will be able to handle everything from your checking account, to your credit cards, to your mortgage, to your insurance, to your stock portfolios," reported correspondent George Lewis. "But, do people really want that?"

A soundbite from Ed Mierzwinski of the U.S. Public Interest Research Group provided the alleged answer: "Well, bigger is actually badder. Big banks mean bigger fees for consumers. In fact, Nations Bank and Bank of America are two of the most fee-gouging banks in this country."

But NBC was willing to allow another independent viewpoint some air time. In an "In Their Own Words" segment, banking analyst David Barry noted the mergers would bring about "greater geographic convenience. So you could live in Florida, move to Texas, move to California, and never have to change your bank."

He said that "people are always concerned when they see big banks, theyíre going to see higher fees, or higher mortgage rates, and the fact is some banks charge higher fees and some lower. I think what it really means for the big banks is they can offer different kinds of service and convenience."

He pointedly added that "we all complain about fees, but none of us really notice the fact that you can access your bank seven days a week, 24 hours a day. And the fact is, for a lot of products like credit cards and mortgages, rates are pretty competitive these days. Thatís a function of consolidation."


ó Rich Noyes


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