Bailout, Mergers May Lead to Bank Fee Hikes

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If the government succeeds in its renewed efforts to shore up the U.S. financial sector with hundreds of billions of taxpayer dollars, it may spur a "double whammy" in costs to the consumer -- higher taxes and higher bank fees.

President Bush and congressional leaders renewed their push for the $700 billion financial bailout bill, which would allow the federal government to purchase troubled assets clogging bank balance sheets and credit markets. Proponents argue that the plan may actually reap a profit, if the Treasury sells assets back to the market at higher prices than it pays. But in the short term, taxpayers are footing the bill.

And while neither presidential contender will commit to a tax hike -- also known as political suicide -- the bill threatens to push the federal deficit up to $1.3 trillion. That much fat cannot be trimmed easily from the budget.

Regardless of whether the bill leads to higher taxes, several factors threaten to hurt consumers, from stringent lending standards to higher costs for basic bank services. Mike Moebs, an economist and CEO of the research firm Moebs Services, goes a step further. Banks will not only restrict access to loans and hold on to their government capital, he says, but they'll also try to soak up more fees on deposits and basic services.

"These banks and credit unions are going to say, 'Well, there was a cost,' and they pass that cost onto the consumer with higher fees, higher rates on loans and minimums on deposits," says Moebs, who collected bank fee data for the Federal Reserve following the savings & loan crisis in the late 1980s.