Bad Bank

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Rising Bank Fees Pinching Customers to Fatten Bottom Lines

Stricter rules governing how much banks can charge for overdraft and credit card swipe fees have eaten into the profits of big banks, but they have an answer: raise the bank fees their customers pay.

Banks blame increased regulations that limit fees and other charges for wiping out an estimated $12 billion in yearly income. Now it costs banks between $200 and $300 a year to maintain a retail checking account, but they only take in about $85 to $115 in fees per account per year.

In fact, more than half of all checking accounts are unprofitable for banks, according to a study released in 2010 by consulting group Marsh & McLennan Cos. Inc. (NYSE: MMC).

Banks also have lost money on cash they're holding due to few investing or lending options, depriving them of as much as $8 billion in income.

Banks have had to become more creative in finding ways to compensate for their lost income. Free checking is increasingly more difficult to find, and a slew of other bank fees have been added.

"Banks are closely examining what costs they can eliminate and where they might be able to charge, and what the market will bear and not drive customers away," Beth Robertson, director of payments research for Javelin Strategy & Research in California told Consumer Reports.

Avoiding these myriad new bank fees is difficult, if not impossible, for most consumers.

Fees are "rising across the board," Richard Barrington of told Marketplace Economy. "And the least you'll need to keep in your account to get free checking has jumped, on average, by more than 800 bucks."

Barrington said that in addition to the growing bank fees, the average balance requirement has jumped to $4,400 -- far more than most people keep in their checking accounts.

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Irish Banks Get Bailout as Ireland Continues Drastic Moves to Leave PIGS Behind

Ireland's government will extend more aid to the nation's banks in an effort to salvage the economy and avoid going down the same path as struggling Greece.

The Irish government has set up a "bad bank" to help the banking sector rebound from massive losses on loans to property developers. The National Asset Management Agency (NAMA) will apply an average discount of 47% to $21.5 billion (16 billion euros) of loans in the first tranche. The bank will take over a total of $107 billion ($80 billion euros) of loans, transferring the debt from the balance sheets of Ireland's biggest banks - Allied Irish Banks, PLC (NYSE ADR: AIB) and Bank of Ireland (NYSE ADR: IRE).

"It looks like they are going to try and take all the pain now," said Stephen Taylor, strategist at Dolmen Securities. "It looks likely that at this stage the state is going to have to increase its ownership of the banks."

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Plans to Hide Commercial Real Estate Losses Won't Avert a Double-Dip Downturn

Sooner or later, mounting losses on commercial real estate could crash through the market's 2009 optimism and send the economy and stocks into a double-dip downturn.

The major problem is that lawmakers and regulators are setting up investors into believing that commercial real estate (CRE) losses are being effectively addressed. The truth is that escalating losses are being hidden as part of a campaign of optimism in a desperate gamble that a robustly reviving economy will save the day.

To protect yourself from another investment beating, here's what you need to know.

To find out how to avoid the commercial-real-estate implosion, please read on...

Investment News Briefs

With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world. FedEx Profit Drops; Irish Banks Rally; China Green-Lights IPOs; World Bank: Emerging Markets Vulnerable; Petrobras Upping Investment Plan; DuPont Expects Emerging Market Sales Decline; Discover Beats Earning Estimates; Cuomo Pension […]

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FDIC May Run “Bad Bank,” Although Nationalization Concerns Remain

By Jason Simpkins Managing Editor Money Morning The Federal Deposit Insurance Corp. (FDIC) could soon establish a "bad bank" to absorb financial institutions' toxic assets. The bad bank initiative could lead to the seizure of many U.S. banks, but would stop short of nationalizing the banking sector. FDIC Chairman Sheila Bair is pushing for control […]

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