While posting breathtaking profits in the last two quarters – Wells Fargo’s $3.2 billion, Citigroup’s $3 billion and Chase’s $2.7 billion – U.S. banks have figured out a way to squeeze some extra dollars from those who can least afford it, the unemployed.
Here’s how it works. In the past two years, states have been overwhelmed with unemployment claims. Always eager to serve, America’s banks offered a deal the states couldn’t refuse.
Sign a contract — which won’t cost you a dime — and send us your weekly unemployment funds, the banks said. In return, we’ll issue our VISA or MasterCard debit cards to your laid-off workers, on which we’ll post their benefits electronically.
Thirty states signed on with the usual suspects — Citi, Wells Fargo, JPMorgan Chase, Bank of America — and some smaller ones, too. More states are lining up.
In a stroke, states dropped all their costs for printing and mailing checks. Andrew James, with North Carolina’s Employment Security Commission, told me that in the past year, his state saved a whopping $10 million. During the same time, Nevada saved $800,000, Maryland $400,000 and West Virginia $340,000.
But if the system is good for the states, it's great for the banks. A February 2009 Associated Press article noted that Missouri’s Central Bank, which won that state’s contract, could reap $6.3 million this year alone.