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Wednesday
Mar092011

Banks Win Again: Congress Caves On Debit Card Fees

It never ends.  As part of the Dodd-Frank financial reform bill, the Federal Reserve was tasked with capping the fees banks charge merchants for debit card transactions.  This rule on fees was supposed to be finalized by April of this year and to take effect by July, but the banks and their lobbyists have been screaming bloody murder. 

They've also been throwing around lots of cash.  See here.  And it worked! 

Call it the glory of "bi-partisanship."  According to reports, Democrat Senators, including Jon Tester of Montana, and Republic Senators, including Bob Corker of Tennessee, are now drafting legislation to block and delay the cap on fees.  All to protect consumers, of course.  Actually, banks stand to lose around $12B in annual revenue from the mandated reduction in fees.

One line of argument the banks and their lobbyists are using is that consumers will just have to pay more for other bank services, like checking, or may not have access to debit cards at all.  Or banks say they will have to cut jobs.  In other words, the banks plan to get their hands on $12B of your money - one way or another.  The unspoken argument here is that they're entitled to it.

TCF National Bank has taken a different tack.  They are using the courts.  In their suit against the Fed, TCF is claiming that because banks with less than $10M in assets are exempt from the new rule, it therefore violates their constitutional rights.  Yes, you heard that right.  Because Congress has passed a law that treats small banks differently on allowable fees, the large banks, including the Too Big To Fail, bailed out banks, are being deprived of their rights.  Here's part of their argument from the brief TCF filed in their suit against the Fed:

"Could Congress knock the price of milk down 80 percent and then exempt all but the 60 largest dairies in the country? Would the hypothetical opportunity to raise butter or cheese prices save such a law from unconstitutionality?”

I'm still on the fence about butter and cheese, but if there are 60 dairies out there, each of which is considered Too Big To Fail and which could credibly threaten to single handedly bring down the world financial system, or if TARP banks could pasteurize and bottle skimmed milk, then I guess they'd have a point.

Even Bernanke, the man in charge of implementing the cap on debit card fees, has publicly stated his belief that the law, as written, won't work.  But won't work for whom?  See here.

The story here is not so much the cap on fees itself, but the ability of banks and their lobbyists to control the legislative process from start to finish.  The banks spent millions on lobbying while Dodd-Frank was being drafted.  Part of the payoff was that rather than having hard, fast rules included in the legislation itself, general guidelines and goals were devised, the details of which would be worked out later on by bank-friendly regulators like the Fed and the OCC.  And it's worked like a charm.  By having now gone back to Congress, spreading around a little more dough and crocodile tears, the banks can now exert further control over, or in this case prevent entirely, the implementation of guidelines originally passed by Congress.

--

Previously...

 

 

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Reader Comments (33)

Mar 9, 2011 at 9:08 PM | Registered CommenterDailyBail
I see even greater campaign contributions on the horizon...
Mar 9, 2011 at 9:57 PM | Unregistered CommenterS. Gompers
I'm running for office ! I want some of those campaign contributions.
Mar 9, 2011 at 10:17 PM | Unregistered CommenterTR
What a Ponzi scheme this whole system is. As if gathering every last owed penny from us 'consumers' is going to prevent the inevitable collapse anyhow.

What a smokescreen. I can't wait to pull back the curtain like Dorothy from the Wizard of Oz.

http://www.activistpost.com/2011/03/economy-hit-with-ultimate-smokescreen.html
Mar 10, 2011 at 7:15 AM | Unregistered CommenterSigmund Fraud
Toto pulled open the curtain
Mar 10, 2011 at 7:43 AM | Unregistered CommenterScarecrow
I used to keep around 10K in my main checking account, for a real comfortable buffer. I think I'll withdraw about 7500 of that and instead of using my debit card pay for everything locally in cash. I'll have a quarter jar, a nickel jar (my favorite), a dime jar and a penny jar, and all the change from these cash transactions will accumulate until I have around $7500 in change instead.

Sure it'll be more inconvenient ... but ... there are a lot of gas stations with cute chicks at the cash register too.

Plus, I'd think I'd rather have $7500 in nickel, copper, silver and tungsten than in paper and "electronic accounting entries" at this point.

For peasants like me, this could represent a move in the right direction. Who knows what coins will be worth in "dollars" a year from now, when the lowly nickel in your pocket TODAY is worth at least 134% of it's dollar-based face value.
http://www.coinflation.com/

And I'm sure I'll find a few pre-1982 pennies in that jar, worth 277% of it's dollar-based face value today.
Separating pennies out may become a national pastime in the post-paper collapse, right up there with capturing rainwater and trapping squirrels for din-din.
Mar 10, 2011 at 12:32 PM | Unregistered CommenterWil Martindale
"Toto pulled open the curtain"

The banks would put a hit on ToTo or anyone else who even tries to open the curtain. Any exposure of truth or transparency is to be blocked at all costs and whistle blowers will be persecuted by the U.S. Justice Department under Rule of $$$$$. Rule of law has been abandoned by the Government of the United States and Rule of $$$$$ is the new standard.

All hail Wall Street and the Multinational Corporations, the true Rulers of America.
Mar 10, 2011 at 12:46 PM | Unregistered CommenterSagebrush
Let's flood Tester and Corker with faxes and calls. These SOBs have got to learn who they work for. DO IT!!
Mar 10, 2011 at 2:17 PM | Unregistered CommenterGregDiablo
"Let's flood Tester and Corker with faxes and calls. These SOBs have got to learn who they work for. DO IT!!"

They don't work for us, they work for the $$$$$, and the special interests have all our $$$$$.
As long as the special interests finance their campaigns and the corporate controlled MSM sings their praise they ignore emails, faxes, phone calls, and letters.
Mar 10, 2011 at 4:02 PM | Unregistered CommenterSagebrush
Regardless of who throws money around, it ain't the proper role of the federal government to control banks or the financial industry. If it ain't in Article 1 Section 8 the feds should not put their hands on it.
Mar 10, 2011 at 6:40 PM | Unregistered CommenterManfred
The Banks and financial industry control the government. The Feds don't have any control they just do what the big banks tell them to do when they're told to do it.
Mar 10, 2011 at 8:02 PM | Unregistered CommenterSagebrush
You can be sure whatever the Feds do, or fail to do, they'll insist they are motivated by the desire to "create jobs." They will say this even as the capitalists sell all the machinery to Asia and lay off everyone at the factory except the janitor and the grounds keeper. The feds are buying the liabilities out of mega bank mergers, and passing them on to the taxpayer, and thereby leaving the banks larger, more liquid, sleeker, and hungry for more.
Mar 10, 2011 at 9:30 PM | Unregistered CommenterJay C. Davis
The cards are stacked and the dice loaded. The only way to win is to not play their game. It's been this way for a very long time. People still use credit cards and trust banks? Calling them or voting accomplishes nothing. Quit being willing victims and the vampires starve. DON'T SUPPORT YOUR OWN ENSLAVEMENT! Many people are just like Dorothy from Oz, looking for the answer that they have always had, be more like Toto and follow you instinct. But hey, I don't have a brain, just a diploma from the wizard that makes me think that I'm smart.
Mar 10, 2011 at 11:50 PM | Unregistered CommenterScarecrow
Most excellent posts.

The rabbit-like fecundity of Bankster apologists never ceases to amaze, tho the vomit always tastes the same.

Seeking antidote, I searched for our old friend Wal$streetpro2 on youtube earlier this evening. Fairly high in the hits queue on this cripple of a blackberry came up a video I hadn't seen before, one with 80-some views. I hadn't seen any of the footage, which was consistently outstanding.

I'll attempt to paste a link here, see the disclaimer supra.

http://market-ticker.org/akcs-www?post=182001
Mar 11, 2011 at 3:22 AM | Unregistered CommenterCheyenne
Good God how I hate this device.

rtsp://v5.cache8.c.youtube.com/CjgLENy73wIaLwmY80D69WOxQBMYJCAkFEIJbXYtZ29vZ2xlSARSB3Jlc3VsdHNg5KbK9PLI8pBNDA==/0/0/0/video.3gp;connectionuid=WAP2%20trans

I'm quite sure that link won't work. But I tried in a Friday Night Lights kinda way.
Mar 11, 2011 at 3:29 AM | Unregistered CommenterCheyenne
Bob Corker: 202-224-3344 Fax: 202-228-0566
Jon Tester: 202-224-2644 Fax: 202-224-8594

Sagebrush: Congratulations; with an attitude like that, you've already proven your own nihilistic self-determinism. Why even bother to read this website then? Why not just kick back, watch Fox News, and be happy as a plantation slave?
Mar 11, 2011 at 6:46 PM | Unregistered CommenterGreg Diablo
If I'm allowed, I'll stick my neck out and momentarily defend the banks' position in the Minneapolis Star-Tribune article above on the JOBS link. The banker's point about reducing the per-swipe fee they charge merchants by "70%" (I didn't do the math) is a fair point, and certainly a place for Congress to start a negotiation. What has been forgotten is how the whole bank regulation bill started, with a loud protest against predatory practices (high-risk mortgages) and excessive fees and other punitive practices they applied to their most financially distressed customers.

Under the GW Bush administration the banks got tougher and more punitive procedures for personal bankruptcy, and the banks have no controls on late fees, punitive interest on credit cards, over-draft fees, an intrusive credit rating system, interlinked credit tracking (if you pay one of your ten cards late, the interest goes up on them all!). These products were designed with the same mindset that conjured half-a-trillion (I admit I pulled that figure out of my hat) in high risk, balloon payment, reverse amortization mortgages, $500K mortgages for a $40K income, with no supporting paperwork, and the like, all at astronautical prices. And it's probably preaching to the choir here, to observe they decimated neighborhoods and whole cities, gutting property values and strangling tax revenues. This is the same mindset that's made pawnshops, payday loans, rent to own, storefront check-cashing and other low-rent financial services one of the fastest growing sectors in the US economy in the last few years. The reason the banks are so determined to process foreclosures, and why their victims are forced to fight back in courts and the press, is because a whole army of mortgage servicers, as well as the banks, profit from the draconian fees and penalties. Being foreclosed is ridiculously expensive, with endless paperwork, filing, and processing fees, penalties, collection costs, legal fees, etc. If you weren't ruined already, the vultures will figure out how to finish the job. Any money the foreclosure victim ever makes in the future is at risk.

Government, banks, many businesses, courts, and the press (to say nothing of the penal system) profit from the financial injustices perpetrated on the poor and disempowered. The financial reform bill was conceived to address some of these pressing issues, but it's been co-opted. When the bankers (or their lobbyists) can turn the discussion to "threatened jobs," and blame "price controls" they've got the upper hand again. The rate issue is related to their being monopolies. The businesses, some very large, who pay the fees have their own lobbyists, who like the way this law cuts their rates.

No one is explaining to legislators how the law must address rapacious financial service practices that pauperize millions of Americans, not how much they charge BestBuy to process a card-swipe. By diverting the conversation to how they price their most fair and sustainable product (debit card processing), instead of discussing their exploitation of the poorest Americans, and their efforts to create more of them, Congress is missing the main point. It's too bad I can't afford a lobbyist.

If you've gotten this far, thanks for reading. I love this website-- it has made me think.
Mar 11, 2011 at 8:54 PM | Unregistered CommenterJay C. Davis
Thanks, Jay C. I think you hit a few nails right on the head. As we say above, it's not about the Durbin Amendment per se, but how the banks can so easily get the "upper hand." It's a stupid, ill-conceived amendment, admittedly, but the impetus for it is precisely those dirty practices you cite. If I were of a more conspiratorial mindset, I might think the whole thing were a deliberate distraction.
Mar 11, 2011 at 9:23 PM | Registered CommenterDr. Pitchfork
I should add, there are doubtless other ways to regulate card fees. And there are better ways of holding banks and bankers accountable than regulating card fees, but this provides a good way NOT to talk about real accountability, like prosecution. And we're not even talking about credit card fees here.
Mar 11, 2011 at 9:27 PM | Registered CommenterDr. Pitchfork
@Greg Diablo,

"Why not just kick back, watch Fox News, and be happy as a plantation slave?"

Because people who actually think they're going to change that corrupt mess in D.C. with phone calls and faxes piss me off, and I like to bitch and inform them of what I think are the facts of the situation. The polls said a majority of the american people were against TARP. The polls said a majority of the american people wanted a complete audit of the Federal Reserve. The polls said no bailouts for the banks, a Consumer Financial Protection Agency that would hogtie those crooks on Wall Street. No health care bill without competition across state lines and more other things that need changed in this country than I care to count. I made phone calls, sent emails and letters, sometimes dozens on one issue and I'm sure there were tens to hundreds of thousands of other people doing the same. No matter what the polls, phone calls, emails and letters indicated the people wanted their representatives to do, our sold out government did exactly what the special interest lobbies requested and to hell with the american people.

So if you think your going to change anything, I'd forget phones, Fax machines and computers. A couple million folks marching up Pennsylvania Ave. might get the ball rolling. Put that together and I'll see you there.

P.S. I don't watch any MSM least of all FOX noise channel and sounds to me like your a hell of a lot closer to the plantation then I am.
Mar 11, 2011 at 10:40 PM | Unregistered CommenterSagebrush
Sage--

Agree re faxes and phone calls. Waste of resources.

Instead of that, I found it more satisfying to stop paying the mortgage and just wait for the jackals. It's their move now.

Meantime, I bought a 30' Winnebago so I can drive to Las Vegas (never been) to invest the withheld payments. Why give the banks an exclusive on moral hazard. The hell with that.
Mar 12, 2011 at 10:48 AM | Unregistered CommenterCheyenne
Great Idea Cheyenne,

I'm headed that way too in June as most of my family live there. Sounds like a great way to invest and have a good time doing it. The locals tell me Sams Club has the best odds for folks who don't have a fortune to bet plus some good music and and a great wildlife show with an RV park right next door.
Mar 12, 2011 at 12:44 PM | Unregistered CommenterSagebrush
I'm against the Government imposing restrictions of what companies can charge for their services. If it gets too expensive somebody else will come along and offer a similar or better service at competitive rates. The banks should not at all be limited to charge on debit and credit card transactions, that's a business decision they have to make. To impose restrictions is just another big government regulation that is at the root of why companies leave the US. We don't need more of that, we need to deregulate and de-tax our corporate environment.
Mar 12, 2011 at 3:00 PM | Unregistered CommenterJesse
Jesse,

As a general rule, yes, big gov shouldn't be setting prices. But this is a case of government sponsored enterprises (the TBTF banks) acting as a cartel in pricing debit and credit transactions. Were it not for taxpayer and Fed bailouts, most of the firms fighting the cap on fees would be out of business. Again, this is a story about the ability of the banks to control the legislative process -- within mere months of being saved from bankruptcy -- not the merits of the Durbin Amendment.

Moreover, if the banks don't like price controls, then let's get rid of "price controls" on the price of money - especially on the short end of the yield curve. Let interest rates rise to their natural level. Let the banks who can't handle it go under, and let savers receive a fair return on their money.

People who care about freedom and markets have to work together to end the TBTF problem. The TBTF banks are probably the biggest threat to free markets and to the health of our political system -- not over-regulation of the financial industry. I wish it were otherwise.
Mar 12, 2011 at 3:27 PM | Registered CommenterDr. Pitchfork
No offense Dr. P but what makes you speak with such an authoritative tone on just about every issue? I have already nailed that one down with regards to your partner. Are you marching to the beat of the same drum?

In this case, I think that the TBTF banks would enjoy higher interest rates. Why would an increase in interest rates hurt the big banks? It is the discount rate and the federal funds effective rate that impacts them most. Make the TBTF banks increase their reserves and lower their leverage ratio. In Europe, the leverage ratios are even worse (higher). The TBTF European banks have got to deleverage big time. They also need to wind down their huge bets with derivatives and be prevented and prohibited from taking part in that market going forward. It is not more regulation that’s needed. It is simple math and eliminating the gambling that goes on at the TBTF banks. Their business model should be boring and should stick to facilitating growth through loans and the needs of its depositors. This is just my take.

I am keeping in mind that most of my comments get deleted because they don’t parrot the status quo around here. It is indeed a shame but my comments have found more fertile ground elsewhere without all the attacks and deletes for content.
Mar 12, 2011 at 6:56 PM | Unregistered CommenterThe Dance
"Why would an increase in interest rates hurt the big banks? "

It's called juice where I am. As in our country pretends to afford the stuff as it is.
Mar 12, 2011 at 7:42 PM | Unregistered CommenterCheyenne
Dr. Pitchfork,

I have to disagree with you on that. Just because banks should have never received a bailout doesn't mean that regulation should limit the fees companies can charge on credit and debit card transactions. Where will that ever end, if we extend the size and power of Government to price fix? I'm fully aware of the current state of the economy and the extent of price fixing through manipulation of supply and demand variables. However, two wrongs don't make it right. The only way we'll have a fair and viable economy is through a free economy without the big players setting the rules and setting themselves up for bailouts.

I'm fully aware that many Americans are against the "evil" corporations. I understand that both Republicans and Democrats voted for the bailouts and that the many hypocritical Americans that are against those Corporations are being bailed out themselves through loan modifications and other RE bailout perks, e.g. foreclosure moratoriums, loan modification, continuation of low interest rate policy allowing them to refinance when they shouldn't have that opportunity, mortgage payment assistance, etc.

Here's another Socialist Bailout for the homeowners:
http://www.wtffinance.com/2011/02/more-socialism-for-california-homeowners-3000-monthly-housing-allowance/

The interesting thing is that many defaulted homeowners are still not happy having had the ability to live mortgage free for nearly two years and are using a bogus excuse trying to delay foreclosure once again...the MERS case comes to mind..many of those homeowners are the ones voicing support for the limitation on credit/debit transaction fees while bitching about the evil big banks...hypocrisy at best.

http://www.wtffinance.com/2011/02/the-mers-bailout-more-foreclosure-delays-and-increased-consumer-spending/

Visa, Mastercard and American Express didn't get a bailout, so your "GSE" argument falls out the window. I agree with you that we shouldn't manipulate the cost for credit, there shouldn't be government guarantees, and those that fail should be allowed to fail.

I'm a proponent of free markets and a such I disagree with the Government setting limits on how much anybody can charge and profit from. I very much disagree with the bailouts for the banks but I am principled enough in my limited Government, pro-free market position that I'm not picking and choosing when this should apply.
Mar 12, 2011 at 11:11 PM | Unregistered CommenterJesse
Jesse,

I think we're in violent agreement here. I don't favor a cap on fees, per se, and I think the Durbin amendment is a classic example of unintended consequences (which is a point the EPC is making in their ads). I do, however, enjoy the schadenfreude aspect of it.

BTW, the EPC (Electronic Processing Coalition) includes the credit card companies, as well as a bunch of banks who issue cards (most or all of whom got TARP funds). And American Express did get TARP funds. It's a BHC, too. Just like Goldman Sachs. ;-)

This is the key, though: "The only way we'll have a fair and viable economy is through a free economy without the big players setting the rules and setting themselves up for bailouts."

How do we accomplish this? Simply advocating free-market principles won't get us there when they control the political system so effectively. I favor breaking up the TBTF's so that they can't threaten the system, and so they become less powerful politically. That's not a market solution, but we won't have free markets if we keep the status quo, either -- in my opinion. Scrupulously following market principles from here on out, without looking back at what just happened, seems misguided when the very fabric of the republic is at stake. I'm not demanding the answers from you personally, but that's the situation we have to wrestle with and I don't think there are easy answers.
Mar 13, 2011 at 12:06 AM | Registered CommenterDr. Pitchfork
Same one, okay.
Mar 13, 2011 at 6:20 PM | Unregistered CommenterThe Dance
Nothing?
Mar 14, 2011 at 11:21 PM | Unregistered CommenterThe Dance
Dr. Pitchfork,

Thanks for correcting me about AXP having received TARP funds. I think we agree on what the economic environment *should* be, we just disagree on the policies that we should have now in response to not having a free market system.

"I favor breaking up the TBTF's so that they can't threaten the system, and so they become less powerful politically. "

I have to disagree with you on that. Breaking them up is not the answer as political influence doesn't rely on the size of those corporations. I don't believe that Government should dictate how big your business can get and what kind of acquisitions they can make. I think the key would be to have the population understand that Government is not the solution but the problem, that anti-free market policies distort market dynamics and are at the root of our economic and monetary problems.... I won't hold my breath for that happening as big government is popular...You don't need to break up banks that are too big to fail, you just need to NOT bail anybody out.

We're so far from a free market system that I don't think we'll ever have one. Big Government is just too popular, especially when the Nation has a fiat currency system and the means to continuously debase the currency without major economic consequences. Ultimately the entire house of cards will have to fall apart though...until then nothing will change and even after a currency system collapse people will not have learned anything from it in the process, plus the big players are already positioned to continue their game as usual. I'm certain that nothing will change but that doesn't make me change my beliefs about the free market and the role of Government. You can't fight for a free market with anti-free market policies, at least that's my belief. If you do that you are just joining everybody else that "is" for a free market unless they themselves can benefit from the Government rules and regulation. Isn't that how we got here to begin with?

"Scrupulously following market principles from here on out, without looking back at what just happened, seems misguided when the very fabric of the republic is at stake."

It wasn't free market economics that got us here, so I think it's scrupulous to follow the same big government policies that got us here in the first place. What do you mean with the "republic is at stake"?
Mar 15, 2011 at 12:00 AM | Unregistered CommenterJesse
What do you mean with the "republic is at stake"?
---
Yeah, that's a bit high-falootin' even for my taste, but what I meant was -- something a number of congressman have said themselves -- that the banks basically own the government, and they are the government. The revolving door between SEC, private law firms, Goldman Sachs and back doesn't stop spinning. Nor the door between Treasury and Wall St. Nor between the Fed, private equity, academia, Treasury and back.

I see taking on Big Finance and breaking up the big banks as methods of self defense, not exercises in central planning. Instead, we have an autocracy that clothes itself in the barest threads of democracy and individual liberty.
Mar 15, 2011 at 12:13 AM | Registered CommenterDr. Pitchfork
Our electoral process is made to order for government entities with private components, big banks, and corrupt politicians. As long as special interests can buy Congress any time any time they want to put the shaft to the American Majority nothing is going to change. Public campaign financing and removing the revolving door would be a good beginning.
Mar 15, 2011 at 1:15 PM | Unregistered CommenterSagebrush

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