Senator Dick Durbin’s (D-IL) amendment to the Financial Overhaul Bill is set to go into effect in April that will allow Obama and the Federal Reserve to set the prices of debit card interchange fees.
That may sound like a boring topic, but consider this: because of Dick Durbin’s amendment, banks are about to restrict the number of and amount of daily debit card purchases you can make. That’s right. JP Morgan is considering capping your debit card purchases at $50.00 to $100.00 per purchase.
Lenders have repeatedly warned that the proposal, in its current form, will force them to cut benefits on debit-cards and impose new fees and restrictions.
Banks say they are considering many options in response; Bank of America Corp., Wells Fargo & Co. and J.P. Morgan have already begun to revamp debit programs.
Why? With the government setting price controls on debit card interchange fees, banks can’t make money off them. Consequently, they’ll be forced to push you and me into actual credit cards to make money. But that’s not all.
The Fed has been talking about capping the interchange fee at 12 cents per transaction, barely ¼ of the current average fee of 44 cents. That means that local banks and credit unions will have to find other ways to make up revenues that will be lost. The banks’ loss, however, is the big box retailers’ gain.
The CEOs, working in cahoots with Durbin and the then filibuster proof Democrat Senate, are thrilled with the extra profits they will make once the rule goes into effect. Home Depot Exec, Carol Tome has said, “Based on the Fed’s draft regulations, we think the benefit to The Home Depot could be $35 million a year,” an amount they are willing to fight for. The lobbying efforts of these merchants have killed any attempts to codify passing savings along to the consumers, guaranteeing that retailers will get all of the profits for themselves.
On the eve of the vote, Wal-Mart donated $20 million to Durbin’s hometown of Chicago; just a small amount compared to the extra profits they plan to line their pockets with once the rule is enacted.
The merchants’ current position is to lobby Republican leaders and ask them to do nothing, which is in fact, allowing Dick Durbin, Ben Bernanke and the Fed to price fix.
In a February hearing of the House Subcommittee on Financial Institutions and Consumer Credit on the Durbin Amendment Interchange Rule, Jeb Hensarling (R-TX) attempted to highlight the lack of consumer benefits this rule will impose when addressing 7-Eleven VP David Seltzer,
“If Congress does not act to delay this for further study, when the Federal Reserve rule is implemented, if I go to the 7-Eleven in Lakewood, Texas, in the Lakewood neighborhood of Dallas, Texas, can I expect a gallon of milk to drop in price? Can I expect a gallon of gas to drop in price?… I expect you don’t know the answer to the question, but I want to make a point here… Do you know what the incremental cost is of producing a Slurpee? I just wonder how 7-Eleven would feel if the Federal Reserve came in with a rule that said you can only recover the incremental cost of selling a Slurpee. My guess is the ice and the fruit flavor don’t cost a whole lot, but you got a lot of fixed cost. I think you get the point.”
So much for consumer protection! Not only can consumers not expect to see prices go down as a result of this rule, many banks are saying that they will have to “abandon free checking and boost other charges to consumers to recover lost revenue,” (Daily Caller). Then there’s the debit card restrictions. Better find that old checkbook wallet.
But merchants need to beware of what they are asking for. Allowing the Obama administration to fix prices could come back to bite them when the next logical step, controlling the price of consumer goods, follows.
Some in the GOP believe that there’s no point in doing anything, since the Senate can’t move a bill. That line of thinking would continue the reckless deficit spending that Harry Reid seems intent to continue.
Thankfully, there is a courageous band of renegade conservatives that need to be commended for fighting for conservative principles. Representatives Spencer Bachus (R-AL), Shelley Moore Capito (R-WV), Jason Chaffetz (R-UT), Jeb Hensarling (R-TX), Randy Neugebauer (R-TX), Jim Renacci (R-OH), Sean Duffy (R-WI) and Senators Bob Corker (R-TN), Mike Lee (R-UT), Rand Paul (R-KY) and Pat Roberts (R-KS) will not take the do nothing bait. They need more conservatives to co-sponsor legislation so the free market can continue.
Let’s just hope they can convince the rest of their colleagues to join in the fight to stop Ben Bernanke from price fixing.
Standing idly by, is an endorsement of Obama Administration price controls and Dick Durbin’s leadership.
It is also an abdication of conservative principles and responsibility.