Updated at 6:30 p.m. ET: Rep. Carolyn Maloney doesn’t want you to unwittingly fork over $35 for a cup of coffee.

Maloney, D-N.Y., Wednesday introduced the "Overdraft Protection Act," a bill that aims to crack down on overdraft fees. The bill aims to limit when and how banks charge consumers who try to spend more money than they have in their bank account. 

If approved, the House bill would also: 

• Require overdraft fees to be “reasonable and proportional” to the cost of the transaction.
• Limit the quantity of fees that can be charged to one per month and six per year.
• Ban banks from manipulating the order in which transactions are posted. Critics say this is done deliberately to maximize overdraft fees.

The bill proposes a major expansion of consumer rights by extending the opt-in requirement to paper checks, ATMs and recurring monthly payments. 

“With the rise of debit cards and the constant presence of swipe-card terminals to pay for everything from a  tank of gas to a candy bar, it’s easier than ever to overdraw an account and incur an overdraft fee,” says Maloney, a senior member of the House Financial Services Committee. “That’s how a $5 cup of coffee can become a $35 cup of coffee faster than you can say ‘overdrawn!’ " 

As I reported earlier this week, many people who have overdraft coverage for point-of-purchase debit card transactions and ATM withdrawals don't know they signed up for their service from their bank. If they are about to overdraw, the transaction will be approved and they'll get hit with a $35 fee. 

A Federal Reserve rule which took effect in August 2010 requires customers to affirmatively opt-in to this for-fee service. But a recent study from the Pew Charitable Trusts found that many people don't understand how the system works. They think if they opt-in they won't pay a fee if they're about to overdraw the account. It’s just the opposite. 

Most said they would prefer for the transaction to be declined and no fee charged. 

Maloney says the Fed rule isn't working, and "it's clear more need to be done in the area of consumer disclosures" to help people avoid multiple overdrafts. 

To their credit, some banks, including Citibank and Bank of America, have responded to consumer outrage over overdraft fees by changing their policy. They now deny debit card transactions that would overdraw an account. 

But the chief banking industry lobbying group opposes the bill.

“Overdraft protection is a service customers freely elect to have and they value their payments being covered," American Bankers Association spokesman Jeff Sigmund said in a statement. "They know the fee in advance and can opt out of overdraft protection at any time.”

Consumer groups support the bill. 

"Overdraft protection can work against consumers when banks use tricks and traps to make it easy for consumers to trigger their overdraft or when banks engage in confusing marketing for expensive overdraft programs,” says Pam Banks with Consumers Union. “This bill is an attempt to curb some of those abuses." 

Susan Weinstock, director of Pew’s Safe Checking in the Electronic Age Project, agrees. "Pew's research shows that there's rampant consumer confusion about overdraft and we think this bill takes a lot of really important steps in clearing up a lot of that confusion." 

Here's a look at the main provisions of the "Overdraft Protection Act." 

• Requires consumer consent before banks can permit overdraft fees to paper checks, automated clearinghouse (ACH) charges and debit card swipe-terminal transactions on consumer accounts, and defines overdraft fees as finance charges subject to the Truth in Lending Act disclosures.  Current Federal Reserve rules require opt-in to overdraft fees only for debit card transactions. 
• Prohibits banks from manipulating the sequence in which checks and other debits are posted if it causes more overdrafts and maximizes fees paid to banks. 
• Requires that fees be ‘reasonable and proportional’ to the amount of the overdraft. 
• Caps the number of fees that can be charged at one per month and six per year. 
• Enhances disclosures to consumers both at the point of opt-in (disclosing alternatives to overdraft protection, including linked accounts or lines of credit) and when an overdraft fee is charged (if consumers choose to opt in). 
• Requires the Consumer Finance Protection Bureau (CFPB) to study prepaid debit card overdraft fees and grants rulemaking authority over those fees to CFPB. 

The Consumer Financial Protect Bureau (CFPB) is already investigating checking account overdraft protection programs to see how they are impacting customers. 

As part of that process, the CFPB wants feedback on a prototype “penalty fee box” it designed for bank statements. This box would highlight how much you paid in overdraft fees and why. Comments are being accepted until the end of June. 

The CFPB also issued a consumer advisory about overdraft coverage. It’s short, simple and should help you figure out your overdraft status. 

MILWAUKEE — A Milwaukee woman is now unemployed after Wells Fargo, her employer, discovered she committed a crime more than 40 years ago.

Yolanda Quesada was fired when a background check revealed she shoplifted in 1972. 

(This story originally appeared on WTMJ's web site.) 

"[I'm] very good at what I do for Wells Fargo," Quesada says.

Quesada says she was a good employee, and has the pins, certificates and photos to prove it. But her supervisor walked her out the door last week after more than five years of service at Wells Fargo.

"I think there's more important things in life than something I did 40 years ago," Quesada says.

"I did do the crime and, you know, I had just come out of high school."

Quesada says she worked in phone customer service and never handled cash.

"We are bound by federal law that generally prohibits us from hiring or continuing the employment of any person who we know has a criminal record involving dishonesty or breach of trust," a spokesman for Wells Fargo told the Milwaukee Journal Sentinel.

Quesada wants her job back, but her termination letter says she's no longer eligible to work at Wells Fargo.

"I think I should get it back because it's something I did 40 years ago," Quesada says.

"I paid for it. I've changed my life."

Brendan Mcdermid / REUTERS

A Goldman Sachs sign at the New York Stock Exchange.

A column on the opinion pages of The New York Times decrying a culture of greed and arrogance at Goldman Sachs, one of Wall Street’s most prestigious investment banks, has Americans asking: Has anything changed on Wall Street since the financial crisis?

Not really, observers say.

Three years after risky bank practices led the financial system to the brink of collapse, and with billions of taxpayer dollars spent on propping up major financial institutions, there’s little or no evidence of repentance on Wall Street, said Matt Taibbi, a contributing editor for Rolling Stone who once famously described Goldman Sachs in an article as “a great vampire squid wrapped around the face of humanity.”

“There is definitely more soul-searching going on in the business right now, and there are people on Wall Street who are good people and struggle with these issues and the difficulties posed by their work,” Taibbi said.

“But in my reporting I haven’t seen any evidence of contrition. The culture hasn’t changed. We are still seeing banks getting into trouble,” Taibbi said, pointing to a recent case where a number of big financial institutions settled with regulators over charges of rigging bids for investments in municipal securities.

“That’s not even a Wall Street crime,” he said. “That’s straight-up organized crime.”

Greg Smith, a former Goldman Sachs executive, explained in the withering newspaper column Wednesday that he was resigning from the bank because it frequently misled its clients, sold them financial instruments that it knew to be junk, and managing directors at the bank sometimes mockingly referred to its clients as “muppets.”

“It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are,” Smith wrote.

Goldman Sachs refuted the opinion piece in an official statement: “We disagree with the views expressed, which we don’t think reflect the way we run our business. In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.”

Taibbi points out that little of what Smith alleged in his column Wednesday is new. It reflects the activities highlighted by U.S. Sen. Carl Levin’s report on the financial crisis, released last year, which found that Goldman gained at the expense of its clients and used abusive practices to do so.

Taxpayers have a right to expect better behavior from major financial institutions, he said, especially those, such as Goldman, which received billions of dollars in taxpayer-backed bailout funding after risky trading activities had brought the banking sector to its knees.

“It’s almost impossible not to make giant profits if you’re getting your money from the Fed,” said Taibbi. “So these banks have been subsidized by the government. Yes, they’ve paid the bailout money back, but they’ve made huge profits from it.”

The problem is banks haven’t had to face the consequences of their bad behavior, Taibbi continued.

“When everything blew up we didn’t take the banks over, or send anyone to jail; instead, we threw money at them,” he said. “So it’s inevitable that they wouldn’t learn a lesson and would carry on doing what they did.”

Another factor contributing to the toxic culture is the leadership vacuum on Wall Street, said William D. Cohan, a former Wall Street investment banker and best-selling author of “Money and Power: How Goldman Sachs Came to Rule the World.”

“The fact is nothing has changed on Wall Street (since the financial crisis), and to me that is incredibly sad,” Cohan said. “(JP Morgan CEO) Jamie Dimon or someone needs to step forward and declare that the industry needs to regain the trust of the American people, because this industry is too important to the way America works.”

The only way to change the negative culture on Wall Street is to change the incentive structure, Cohan added.

“Everyone who enters Wall Street is idealistic; they’re often honest people with integrity. But then they see what they have to do to succeed,” he said. “So we need to change the way they are incentivized. We have to send a message to Wall Street that it can’t act in a way we’ll live to regret.”

Has Wall Street really changed since the financial crisis? Share your thoughts on Facebook.

Steven Bridges for msnbc.com

Jewel and Jack Miser stand in front of their home in Sweetwater, Tenn. After trying for more than a year to modify their loan, they won a settlement in court that cut their monthly payment by about 15 percent.

Revenge can be sweet. It can be even sweeter when you use your enemy’s own weapons to extract vengeance.

Six years into the worst wave of foreclosures since the Great Depression, shoddy underwriting and legal shortcuts are coming back to haunt mortgage lenders. Homeowners, sick of being pushed around by the banks, are fighting back, sometimes with David and Goliath results.

In 2008, Jewel Miser and her husband Jack began trying to get Bank of America to modify their mortgage when Jack lost his job after a local auto parts factory closed.

“We were just a month behind then,” said Jewel. “But I tried every way in the world. And they just put me off and gave me excuses.”

After more than a year of dead ends and red tape, the Sweetwater, Tenn., couple found a lawyer who successfully challenged the shaky paper trail on which the lender relied on to prove it owned the Miser's note. In the resulting settlement, the bank agreed to new loan terms that cut the Miser’s monthly payments by roughly 15 percent, paid their legal fees and stopped the foreclosure.

"I did not want to lose my home," Jewel said. "We had done so much work to it. When you find a home and know it's your home you don't want to lose it. I tried every way in the world."

The Misers and other homeowners who are fighting back in court are using the legal quagmire created by the mortgage lending industry to win loan modifications that lenders have been unwilling or unable to extend voluntarily.

When these homeowners get to court, they find a laundry list of shoddy practices that undercut lenders’ legal claim to foreclose, say consumer attorneys who have pursued these cases. Many cases are tainted by “robo-signers” who failed to properly review files, despite swearing under oath they had done so. Other title claims are undone by improper accounting, including unwarranted fees, and payments that were not credited.

Consumer attorneys also are attacking lenders’ effort to paper over missing links in the chain of documents required to prove that a bank owns a loan and has the right to foreclose. Some of those defective paper trails date to the sloppy underwriting that accompanied the frenzy of mortgage lending in the 2000s, when hundreds of now-defunct lenders churned out a blizzard of notes that were instantly offloaded to investors.

“There are more (homeowner) claims because lenders operated in flagrant disregard of the law,” said Diana Thompson, a veteran consumer attorney with the National Consumer Law Center. “You only have a claim against the lender if the lender didn't do what they were supposed to do.”

Lenders' disregard for the law is still rampant, according to consumer advocates and regulators. Last month, a survey of 260 consumer attorneys in 45 states by the NCLC found that thousands of homeowners were improperly foreclosed on in just the past year. In more than 80 percent of the cases, the lender scheduled a foreclosure sale while processing a loan modification. In four out of five cases, the attorneys reported, lenders failed to properly credit payments or wrongly claimed homeowners owed bogus fees.

An audit by the San Francisco assessor’s office last month found lenders routinely broke the law in some 400 foreclosure cases over the past three years. Last April, the nation's top two bank regulators, the Federal Reserve and the Office of the Controller of the Currency, reviewed the foreclosure and loan modification practices and found a litany of "deficiencies and weaknesses" that "represent unsafe or unsound practices and violations of applicable law."

Though 49 state attorneys general have settled a sweeping complaint covering a long list of fraudulent and deceptive foreclosure practices, a handful of states are pursuing lawsuits against the mortgage industry. New York Attorney General Eric Schneiderman, named to a federal task force to investigate mortgage fraud, has charged lenders with deceptive and fraudulent foreclosure filings based on a national mortgage electronic registry system, known as MERS. The lawsuit claims that Bank of America, J.P. Morgan Chase and Wells Fargo, “have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have.”

Regulators how vowed to crack down on these practices. Lenders say they are correcting them. 

"In 2010, we reviewed our processes and procedures and put in place a number of improvements and worked with our regulators," said Jumana Bauwens, a Bank of America spokeswoman. "And we continue to improve our processes and procedures."

But lenders still have more work to do, according to consumer attorneys, judges and mortgage industry professionals. Until reforms are widely adopted, it has fallen to homeowners and their attorneys to try to see that the law is enforced.

Loan modification
Borrowers have been taking their disputes with lenders to court for decades. The latest efforts, though, have been sparked by rising frustration with other means of trying to get a loan modified, say consumer attorneys. Early in the mortgage crisis, millions of homeowners, encouraged by the industry, tried working directly with lenders.

A succession of government-sponsored programs aimed at providing mortgage relief to millions of borrowers have fallen far short of promises.

"They (lenders) advertised all the time: 'If you want get your mortgage modified all you have to do is call,'” said Jewel Miser. "I called about 100 times. Each time they would tell me different things or that it was 'in process' - but they weren't doing anything."

In its review, the OCC also cited widespread failings of lenders’ "voluntary" mortgage relief efforts. The government’s highly-touted Home Affordable Modification Program (HAMP) has badly underperformed expectations, according to housing advocates and counselors working with homeowners, largely because the decision to modify a loan still rests entirely with the lender.

Bauwens, the Bank of America spokeswoman, said that since the Misers applied for their loan modification, the process has been streamlined and reviews and decisions are now made much more quickly. 

"We are in a very much better position to be able to respond to customers modifications in a much more timely manner," she said.

But consumer attorneys said that, in some cases, homeowners are being denied modifications that should have been made under government guidelines.

“Because of the government’s failure to enforce HAMP and failure to hold (lenders) accountable, in many cases in order to get a HAMP modification for which they are complete qualified, homeowners have to hire an attorney and sue their lender,” said Thompson of the NCLC.

That often means a trip to bankruptcy court for a Chapter 13 proceeding, which allows people with a regular income to adjust their debt. Once in court, a foreclosure is typically halted automatically, placing the burden on the lender to have the process re-instated. That forces the lender to prove it owns the mortgage and to account fully for any disputed back payments. When the lender is unable to do so, consumer lawyers say, it is more likely to agree to settle by modifying the loan terms, often by simply lowering the interest charged to current market rates.

Lenders rarely forgive principal, even on homes that are deep underwater, say consumer attorneys. But while bankruptcy law prevents a judge from writing down the primary mortgage on residential property, other loans don’t enjoy that protection.

That means judges often are able to force lenders to take deep losses on second and third mortgages, said Raffi Tal, who advises homeowners facing foreclosure at Los Angeles-based Peak Corporate Network. “That by itself is a great advantage to borrowers who can afford to make the first mortgage payment - just by canceling the second (mortgage).”

Some bankruptcy courts, including the Southern District of New York, have established special procedures to speed loan modification negotiations between homeowners and lenders.

But it hasn’t been easy.

Consumer attorneys often are outgunned by big banks. Though more than six million households are either delinquent or in foreclosure, there are fewer than 500 consumer attorneys nationwide who specialize in suing to stop foreclosures, according to the NCLC’s Thompson. As demand for legal help has risen, more lawyers have shifted the focus of their practice to fighting foreclosures. That can include attending seminars focused on the legal arguments used to successfully challenge lenders in court.

For the past six year, Max Gardner has been running "boot camps" out of his Shelby, N.C., farmhouse, training consumer attorneys from across the country in the finer points of turning the mortgage mess to their clients’ advantage. More recently, Gardner has been taking these seminars on the road.

On a recent visit to New York, Gardner summoned several dozen lawyers, mortgage industry veterans and a handful of reporters to an intensive weekend crash course in a grab bag of legal strategies. It included a tour deep into the weeds of the Uniform Commercial Code, a subject that has been known to put law students to sleep. Once trained, the more than 200 boot camp alumni in 39 states communicate via listserv, swapping tips and sharing legal opinions that help them build arguments to stop the next foreclosure.

Though they’ve won case-by-case victories for individual homeowners, consumer attorneys such as Gardner say regulators continue to turn a blind eye to improper and illegal foreclosures. The industry has been able to keep regulators at bay, he said, by effectively managing public opinion about its role in the foreclosure crisis.

“I think they've done pretty good job - on the other side - of getting across the message that these are just a bunch of deadbeats trying to get a free home,” he said. “And that these (wrongful foreclosures) are just the result of technical problems.”

“So let’s just forget about the system of justice, due process and the rules of evidence and everything else. They’re just glitches. They don't mean much,” he said sarcastically.

For borrowers, those glitches can mean the difference between homelessness and holding onto their house. For lenders, the process of fixing those errors can prove costly. Once challenged in court, some lenders decide it's cheaper to settle the case and move on to the next foreclosure waiting in the pipeline.

“I have quite a few cases where the banks just walked away from the foreclosure litigation and either dismissed the action formally or just abandoned the litigation,” said April Charney, a staff attorney with Jacksonville Area Legal Aid, who has defended hundreds of Florida homeowners facing foreclosure since the market crashed in 2006.   

Homeowner victories in court go largely unreported, however. In some cases, lenders demand borrowers keep quiet as a condition of stopping the foreclosure and settling the case. Other borrowers feel intimidated, say consumer lawyers, fearing the lender could find a reason to restart the foreclosure process again.

“Unless the loan is paid off, there’s always the risk of further fighting,” said Thompson. “And you just don't want to have the (lender) have a reason to be looking over your client’s payment records with a fine tooth comb.”

Apparently "it's not what you know but who you know" doesn't always turn out well.

A Morgan Stanley broker who met with the alleged "Millionaire Madam" before her arrest on prostitution charges has been put on administrative leave, according to new reports Friday.

David S. Walker, who works for Morgan Stanley's money management arm, hasn't been charged with any crime, and the investment giant said it has seen no evidence he was involved in criminal activity. But the 47-year-old broker will be on paid leave during the criminal investigation surrounding Anna Gristina, a Morgan Stanley spokesman told Reuters.

At Gristina's arraignment, prosecutors said she was meeting with Walker to expand her prostitution business online.

Gristina has pled not guilty on charges of promoting prostitution; her lawyer has said she was starting an online dating service. Prosecutors say she was running a high-end prostitution ring, operating out of a tony Manhattan address and bragging that she had friends in high places who would tip her off if a bust was in the works. 

Walker told local news site DNAinfo.com that Gristina had "other people" with whom she worked at the bank and said he wasn't involved in any business dealings with her.

It's been a rough week for Morgan Stanley bankers. According to Bloomberg, top bond executive William Bryan Jennings pled not guilty Friday in Connecticut on assault and hate crime charges for allegedly stabbing a cabdriver in December after a dispute over a fare.

Wells Fargo is ending free checking in six more states, expanding a $7-per-month account charge that went into effect in other parts of the country last year.

Existing customers in Georgia, New Jersey, Delaware, Connecticut, New York and Pennsylvania will be required to pay the monthly fee for the "Essential" checking account, unless they keep a $1,500 minimum daily balance or make direct deposits of $500 each month, a Wells Fargo spokeswoman said Thursday.

For customers, the fees add up. NerdWallet, a personal finance site, said it found that customers who can't meet the minimum balance and other requirements are charged an average of $110 a year by the five largest banks.

At a time when the country is struggling with 8.3 percent unemployment, the fees have consumer advocates outraged.

"Banks don't realize they are going to lose much more in the way of lost customers than they are going to make on these ridiculous fees," said John Tschohl, a customer service expert who consults with banks.

After converting existing accounts in 24 Western states last year, the San Francisco-based Wells Fargo is working on accounts in Eastern states, where it gained its first branches through its 2008 acquisition of Wachovia Corp. Accounts in its remaining East coast states will eventually be converted, spokeswoman Richele Messick said.

Wells Fargo, the fourth-largest U.S. bank by assets, began notifying customers in the six states of the change this week. The fee will appear in June bank statements. Customers can get a $2 discount by eschewing paper statements.

In recent years, banks have been doing away with free checking accounts as new regulations curb fees on overdrafts and other charges. Banks typically charge customers monthly fees, unless they choose to do more business with the bank.

Wells Fargo ended free checking for new customers in July 2010. It expects 80 percent of its customers to waive monthly maintenance fees by keeping minimum balances and taking other actions.

The Essential account is not available to new customers, who must pay $5 per month for a basic account, unless they keep a $1,500 minimum daily balance or have a direct monthly deposit of at least $250 in one lump sum.

This year, Wells Fargo also eliminated one of the ways customers could avoid monthly maintenance fees on its premium $10- and $15-per month accounts. Customers can no longer waive this fee by setting up a monthly automatic transfer to a savings account.

Messick, the Wells Fargo spokeswoman, said the bank wants customers to contact it. "We can talk to them about their needs and make sure they are in the right accounts," she said.

Wells Fargo has 6,200 bank branches in 39 states and the District of Columbia. 

Reuters and the Associated Press contributed to this report.

© Chris Keane / Reuters / REUTERS

A Bank of America customer uses an ATM machine.

By msnbc.com staff

Bank of America, the nation's second-largest bank in terms of assets, is planning to make changes to its basic checking accounts that would introduce a monthly fee for customers unless they agree to bank online, buy more products or maintain certain balances, according to a report in The Wall Street Journal.

Pilot programs in Arizona, Georgia and Massachusetts are experimenting with charging $6 to $9 a month for what’s called an “Essentials” account. Other account options being tested in those states carry monthly charges of $9, $12, $15 and $25, but give customers opportunities to avoid the payments by maintaining minimum balances, using a credit card or taking a mortgage with Bank of America, according to an internal memo cited by the Journal.

The fee plan is the latest sign of the challenges the banking industry faces as it grapples with low interest rates, slow economic growth and new rules limiting many types of service charges, the Journal said.

At Bank of America, for example, 2011 revenue declined by $26.2 billion, or 22 percent, from its 2009 level. Other big retail banks are rolling out similar plans to raise their fee revenue, including J.P. Morgan Chase and Wells Fargo, the Journal said.

“We are wary generally of banks charging fees, which have grown to be a highly lucrative source of revenue for them, and also punitive for consumers,” said Bart Naylor, an expert in financial regulation at the consumer advocacy group Public Citizen.

“Bank of America and other banks are probing to see what the market will bear, and we think it’s good for consumers to respond to that the way they know best -- either by changing to another bank, or by considering a credit union, which tends to be more genial,” Naylor added.

Big banks are walking a fine line by raising fees, the Journal said, as they risk alienating their best customers and drawing fire from politicians. A wave of criticism from customers led Bank of America to cancel plans to institute a $5 debit card charge last fall.

Checking accounts are often costly for banks because they lose money on them. They’re used to lure younger customers in the hope that they will stay on at a bank and eventually become more affluent and use other services, such as mortgage and business loans and credit cards, the paper said.

Bank of America did not return calls for comment.

What do you think of these checking account fees? Comment on our Facebook page.

Thinking of a career as an investment banker? Get ready for insomnia, alcoholism, heart palpitations, eating disorders and a violent temper.

A University of Southern California researcher has found these health issues are part and parcel of the lives of entry-level investment bankers that she shadowed as they started their new careers fresh out of business school.

“When you work 120 hours a week, something snaps,” said Alexandra Michel, an assistant management professor at USC’s Marshall School of Business, who shadowed bankers for a decade to collect findings for the study.

“But the interesting finding is what exactly snaps,” she told CNBC. “It’s not technical accuracy; the bankers were quite precise in what they were doing. What snaps is creativity, judgment, and that’s really important in our new knowledge-based economy, because we now compete on innovations.”

Michel began shadowing Wall Street bankers for her study a decade ago, sitting next to them at the office, following them to meetings, basically mirroring their hours at the office and even staying up all night when the bankers pulled all-nighters.

She found that newly minted investment bankers can put up with long days at the office -- on average 80 to 120 hours a week -- and high levels of stress for about four years. After that, there are signs of long-term physical ailments, including insomnia, and substance addictions. Every banker she observed developed a stress-related physical or emotional injury within several years on the job, she said.

One bank vice president who struggled with addictions described his work life as a never-ending nightmare.

“I sometimes wake up in the morning and remember what I have done the day before and wished that it was just a bad dream and all I want is to keep it together for the day ahead and not allow my body to take over again,” the unnamed banker said.

Wall Street workers are likely putting in long hours now as the economy continues to struggle and the financial services industry contracts, said Dr. Alden Cass, a clinical psychologist in New York who specializes in treating Wall Street executives.

“People are working harder, longer and making less,” he said, and it’s leading to apathy and job burnout.

While people criticize Wall Street bankers for excessive pay, it’s an incredibly difficult and unpleasant job, said William D. Cohan, a former Wall Street investment banker and best-selling author of “Money and Power: How Goldman Sachs Came to Rule the World.”

“I used to say the job was good only one day a year -- the day when you got your bonus, and sometimes that day wasn’t that great,” said Cohan.

“You work too hard. You gain weight because you don’t get enough exercise, and you don’t get enough sleep,” he said. “It’s a surprisingly unpleasant job, but on the other hand you’re not putting your life on the line, and you’re not risking your own money. It’s an unpleasant lifestyle, unless you get to the top, and even there it’s not all it’s cracked up to be.”

The life of a junior investment banker is notoriously demanding, with long hours in a high-stress environment. The profession attracts ambitious business school graduates who are attracted by high salaries, and many of them know the grueling hours and stress  the job requires.

Michel notes that her research was qualitative, involving a small group of bankers and no control group. It’s designed to identify patterns that can later be examined through systematic empirical investigation, she said.

However, Michel says the study’s findings can be applied to other areas of the working world.

“We have a lot of people in our knowledge-based economy -- lawyers, doctors, engineers -- who work really hard, and also in more traditional industries that are now competing because of globalization and fast-paced technological change. These people are also pushed to work quite hard,” she said. “So the study asks what the consequences are for these industries, and also for companies and society as a whole.”

The consequence of the overwork is a diminishment of creativity, and that can have a detrimental effect on the economy as a whole, Michel said, citing technology powerhouse Apple as an example.

“They outsource everything that’s related to manufacturing, but what stays here [in the U.S.] are the creative aspects, so I think we need to listen to this,” she said.

Do you feel sympathy for investment bankers? Let us know on our Facebook page.

Brendan Mcdermid / Reuters

No house in the Hamptons this summer for some traders. Wall Street pay is expected to drop this year for a number of reasons.

Cue the world's smallest violin? Ahead of fourth-quarter earnings reports from major banks, compensation at 34 big financial firms in 2011 is projected to plummet. Some Goldman Sachs traders could lose up to 60 percent of their pay and will get no bonuses, and the average pay at Goldman Sachs will fall to $385,000 from an average $431,000 in 2010, according to the The Wall Street Journal Monday. By contrast, a report by Sentier Research last fall found that U.S. median household income in June of last year was $49,909, down from $55,309 at the end of 2007. 

Banks' earnings were crimped for several reasons: The stock market fluctuated wildly, fewer IPOs were filed and companies had less demand for banks' high-priced consulting skills. The financial industry also tends to lay the blame at the feet of increased regulations for banks, such as limits on consumer banking fees. Still, the amount of money banks set aside for compensation has inched up over the past couple of years and now stands at 36 percent of revenue.

While bonuses have traditionally made up the bulk of banking's most eye-popping pay levels, some banks have changed their pay structures to focus more on salary than bonuses. Bonus-based compensation could motivate some employees to take on potentially damaging risks because it prompts them to focus on their own rewards rather than the health of the firm or the financial system overall, say some industry observers such as Nassim Nicholas Taleb, author of "The Black Swan: The Impact of the Highly Improbable.” 

The drop in compensation for 2011 is expected to be so drastic that it's likely some mid-level bank employees will wind up taking home more than the executives to whom they answer, the result of a compensation structure in which top-level workers earn much of their income via bonuses. Banking industry analysts say financial firms might have to adjust to this "new normal" in which the outsized compensation of the mid 2000s is a thing of the past. Some banks are also adjusting by giving out bonuses in stock instead of cash, which could benefit today's recipients in the future. Bank stocks struggled last year, but if the financial sector recovers and share prices increase, those bonuses could be worth more. 

New federal data show that the number of small bank loans to business has fallen to the lowest point in more than a decade, cutting the flow of money to a sector that's usually a job-creation powerhouse.

"It's usually the smaller business that is more able to bounce back and take advantage of different opportunities faster than a middle-market company," said Linda O'Connell, manager of small business research at Barlow Research Associates, a Minneapolis market research firm that focuses on the financial industries. "We haven't seen that."

An analysis of recently released Federal Deposit Insurance Corp. data by the Investigative Reporting Workshop shows that overall commercial and industrial lending by banks has increased for five straight quarters, but small loans to business of $1 million or less have been shrinking consistently since June 2008. As of Sept. 30, total outstanding loan volume was down 14.7 percent from its peak.

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The reduction of bank credit has had an even bigger impact on small business than it would on large business, which can borrow money through corporate bonds and "commercial paper." In contrast, small businesses rely almost exclusively on credit provided from banks.

The current situation stands in stark contrast to the recession at the start of the decade, following the dot-com bust. Even though commercial lending dropped severely, small business lending kept chugging upward. In this recession, the number of individual small business loans has fallen even further. Banks reported having just 1.5 million of those loans outstanding on Sept. 30, the smallest number since 1999, according to the FDIC data. Bank regulators define small business lending as loans of $1 million or less, regardless of the size of the business.

The numbers are especially troubling because businesses with fewer than 500 employees created 65 percent of the jobs between 1993 and 2009, according to the Small Business Administration. But in a November survey conducted by the National Federation of Independent Businesses, a small business advocacy group, only 7 percent said the next three months would be a "good time to expand."

Graphic by Jacob Fenton / Investigative Reporting Workshop

While overall commercial lending has rebounded, lending to small businesses has fallen over the past two years. (Source: FDIC Call Reports)

There are many reasons that mom-and-pop businesses have been hit harder than international behemoths, economists say. Local businesses — especially service providers — can't easily tap overseas markets, though small-scale manufacturing firms that can have done slightly better. And construction, which has traditionally driven the local recovery, is expected to linger in the doldrums for years, as it has since the real-estate bubble popped. Finally, the sheer length of the country's economic woes has left small businesses with fewer reserves and hardly ready to jump back up, were conditions to start looking up.

Even successful businesses find it hard to get credit
With annual growth of around 40 percent, David Ehreth's six-person sauerkraut and pickle business in Healdsburg, Calif., had a different problem — he couldn't grow his "Alexander Valley Gourmet" and "Sonoma Brinery" brands fast enough without new machinery. "Everything we were doing, we were doing by hand," he said.

Ehreth's hardly a standard food entrepreneur. He started brining pickles full-time about six years ago, following a lucrative three-decade career in the technology sector. As a tech executive, Ehreth had overseen "hundreds of millions" in sales and peppers his conversation with phrases like "credit facility."

He had reason to be optimistic about borrowing. "I am an individual of relatively high net worth with no debt of any sort. ... When I approached the banks we had about four years' worth of track record of steady growth of about 40 percent year over year."

None of that mattered to the banks, though. "I was just flatly turned down without any discussion," he said. "Just about everyone I know in the food industry has given up on banks."

Instead, Ehreth and his crew kept working by hand, even though that slowed their growth. Finally, he decided to sell a vacation home, even though the price he got for it wasn't great. The investment in his business, he reasoned, was a sound one.

Banks' unwillingness to lend was especially galling to Ehreth because jobs he would create — small-scale, blue-collar manufacturing that's unlikely to go overseas — is the kind of job that's most needed. "For those who are college educated, for those who have engineering degrees, there's plenty of work. But for those who were working in factories, who saw their jobs sent overseas, people like myself create opportunities."

Bank profits reach four-year high
Though small business has suffered, bank results continued to improve in the third quarter of this year. Profits rose to $35.3 billion, the best in more than four years. Most of the improvement came because troubled loans continue to decline. Meanwhile, lending rose for the third straight quarter, though it remains well below pre-recession levels, mostly because of real estate lending remains very sluggish. The number of banks with troubled assets greater than their capital and reserves also declined.

The small-scale, business lending slowdown is all the more remarkable given the federal government's exceptional efforts at reversing it. The 2009 stimulus bill and 2010 Small Business Jobs Act cut fees and included "credit enhancements" that pumped up the Small Business Administration's loan guarantee rate.

The last three months of 2010 was the biggest quarter in the agency's history in terms of total new loan guarantee volume, said spokesman Mike Stamler.  Many of those loans are for amounts greater than $1 million, and don't show up in FDIC's statistics. Yet bank lending during the SBA's biggest quarter ever still declined.

The jobs bill set aside $30 billion to buy preferred stock in midsize banks, with those that actually increased small business lending eligible to lower the dividend rate paid back to the government. But just $4 billion of that money was actually lent out.

"The lending program through the federal government certainly didn't do a whole lot. We've heard from many banks that we've talked to that they have enough money to lend, it's just that there aren't enough borrowers out there," said Holly Wade, a senior policy analyst for the NFIB, the small business group.

Bankers say lending standards aren't the issue, and point to research that backs them up. In 2011, 17 percent of businesses with sales between $100,000 and $10 million applied for additional credit, but of those, only 22 percent were denied, according to Barlow Research surveys.

Overall, the number of businesses that haven't sought credit because they don't think they'll get it has been rising. In 2010, 15 percent of the small businesses that didn't apply for credit did so because they thought they wouldn't succeed, according to NFIB surveys. And 24 percent of small businesses that did seek additional credit reduced the amount they sought for fear of being turned down.

"The longer it goes on, the worse the financial condition for those that are just hanging on becomes, so they become less credit-worthy," said Robert Seiwert, director of the American Bankers Association's Center for Commercial Lending and Business Banking.

"Are credit standards tighter today than they were two years ago? Absolutely. But they should be because we're operating in a different economic climate," said the ABA's Seiwert. "The business that was viable in the past may not be viable in the future."

That’s hardly consolation to upstart entrepreneurs trying to launch. Michael Marquess, chief beer officer of Mother Road Brewing Co., in Flagstaff, Ariz., spent six months trying to get financing to open his brewery and taproom. “Borrowing has changed dramatically in the past five years from easy lending to extreme process,” he wrote in an e-mail.

“We had the plans in with the city. The contractor was on board. Everything was just waiting on that funding,” he said. But his SBA loan application for less than $300,000 fell apart, he said, because plans for a small craft brewery didn’t match up to numbers loan examiners expected for an established beer manufacturer.

Marquess’ story turned out well, though, thanks to the persistent bankers at the National Bank of Arizona, who he said helped him cobble together another application that was finally approved in June. Mother Road Brewing Co. opened last month and now has four employees. “We sold our first pallet of beer two weeks ago,” he said.

Some of the information in this story came from interviews with members of American Public Media's Public Insight Network, which the Investigative Reporting Workshop joined earlier this year.