Bank bounce check fees

Maybe it has been asked before on the internet :), but wht's the deal with bank overdraft fees? My bank told me in no uncertain terms that it is ILLEGAL to bounce a check, i.e. to write a check for which you do not have sufficient funds to honor. If this is the case, what is the legal precedent for the $25 fee imposed by the bank which can trigger a cascade of fees as other checks may or may hit my account during the shakeup?

Example #1:
Balance: $300

Check #1: $301
Result: BOUNCE ($25)
Balance: $275

Check #2: $276
Result: BOUNCE ($25)
Balance: $251 + ($576) debt

Net result: ($325)

OR

Example #2:
Balance: $301

Check #1: $276
Result: Paid ($276)
Balance: $24

Check #2: $301
Result: BOUNCE ($25)
Balance: ($1) + ($300) debt (provide the fee doesn't trigger another round of fees)

Net result: ($301)

What gives the bank the right to fine me privately when I have broken a federal or state law? I have not bounced a check in a few years and I have overdraft protection now, which is free, but this issue has always been nagging at me. If someone comes and burglarizes my home and I catch them, can I just fine them, say $6000, and then let them go?