Durbin’s Amendment: Handout to Retailers Is Why Banks Are Charging You More
by Brad SchaefferOn Fox Business’ Freedom Watch last week I sat down with Democratic strategist and former Chuck Schumer aide Christopher Hahn to discuss the “ Durbin amendment” to the Dodd-Frank Bill. If you are unfamiliar with the attachment to the bill, you may nonetheless be feeling the effects soon enough in the form of higher banking fees from checking account maintenance to debit card usage.
What the amendment (that went into effect on October 1st) does is place a cap on per-transaction “swipe fees” that banks charge retailers when purchases are made via debit cards. They used to charge retailers roughly 44 cents per transaction. Dodd-Frank limits this to 21 cents. Since these fees are absorbed by the retailers, it doesn’t take a Wharton Business School degree to see that the immediate beneficiaries of this government intrusion into the private sector are the so-called big-box, high-volume retailers such as Walmart, Walgreens, Home Depot, Target, and others.
Mr. Hahn may have offered the weak Democratic operative/apologist defense of the bill in that Durbin was just doing what Senators do by helping his constituents, but I made it a point to remind him that the populist senator’s constituents in this case are not the consumers in his state but rather Big Retail. The last time I checked, many retail titans are far wealthier than most Wall Street “fat cats” already. The Walton family’s combined wealth far outstrips Warren Buffett’s (or Bill Gates’, for that matter), making them the de facto richest family in the world. They are about to get a little wealthier as Walmart reaps its share of this estimated $7 billion annual windfall the Durbin amendment shifts from the banking to the retail sector.
As with every Washington meddling, for each winner there is a loser, and in this case there are not just one but two losers. The first one the Democrats certainly had in their Quixotic cross-hairs, but the second one is a group they actually claimed to be helping when imposing this price-control measure.
Loser 1: the banks, who will no longer make a profit per swipe transaction. In fact, since the average cost in terms of infrastructure maintenance is $0.27 per transaction, the banks are now actually losing money on a per-deal basis. JPMorgan Chase, for example, estimates they stand to lose $1.75 billion annually as the result of this new law. Bank Of America will lose another $1 billion.
Therefore, they must make up their losses somehow.
And this brings us to [drumroll]…
Loser 2: you, me, anyone who doesn’t keep their money in gold ingots buried in the back yard. Citing the impact of the Durbin amendment, the banks are compelled to increase fees elsewhere. And what easier way to make up the difference than attaching new fees onto once free or cheaper services? Say $5 per month for checking, plus a little something each month for using their debit card, etc.
President Obama predictably lashed out at the banks and their impertinent desire to make up the shortfall with his now typical politics-drenched-in-class-warfare admonition over the fees that his fellow Democrats’ amendment facilitated: “The banks,” he fumed, “don’t have some inherent right to get a certain amount of profit, if your customers are being mistreated.” That’s true in any business. It is called business ethics. But imposing a loss is a far cry from reigning in excessive profits! Where price controls are implemented against public utilities, for example, it is mandated that they still garner a “reasonable rate of return.” When Apple sells you an iPad they are making a whopping 57% profit margin. But that is quite alright. Banks, on the other hand—those evil institutions like TD and Bank of America, without whose services I could not run my companies—are given no such leeway.
Yes, but won’t this deal “allow retailers to hold down prices for the consumers” as the National Retail Federation claims? Won’t the Democrats’ consumer advocacy result in lower prices for John Q. at the checkout line? Please. A study by the U.S. Congress’s Government Accountability Office found that after Australia enacted interchange price controls for credit cards, there was “no conclusive evidence” that any of the Aussie retailers’ $1.1 billion in savings had been passed on to consumers. Common sense compels one to ask, why would Walgreens and Home Depot spend more than $40 million in 2010 employing over 400 lobbyists to have these fees reduced just so they could pass these hard-won savings on to us?
This amendment reeks of political gamesmanship with lobbyists calling the shots—on both sides of the aisle. Why would Senator Johnny Isakson of Georgia, a Republican who is paradoxically in favor of repealing Dodd-Frank while actually voting for the Durbin amendment, be suffering such dissonance? Could it be that Home Depot and Coca-Cola are both based in Altanta and lobbied him fiercely? In a rather surprising bit of candor, the senator admitted to the chairman of SunTrust, Georgia’s biggest bank, that he is “siding with Home Depot” on this?
And what about his esteemed colleague from Illinois? What’s Durbin’s angle? Is it mere coincidence that the heavily pro-retail amendment he authored came on the heels of Home Depot donating $20 million to various Illinois charities while also pledging to open up several stores in the Chicagoland area?
Besides the obvious odor of a corrupt bargain between big box retailers and their men on the Hill—of both parties, to be fair–besides the hit that consumers will take in banking fees (fees that affect lower income people more as wealthier individuals will escape many of them by maintaining high checking account balances)–besides Messers Obama and Geithner once again turning on the very people most necessary to drive any real recovery through financing and servicing businesses like mine, two questions remain:
First, if, according to the Democrats’ narrative that it was MBS, CDS and other Real Estate based derivatives abuse that got us into this mess necessitating Dodd-Frank in the first place, what on earth does regulating swipe fees have anything to do with that at all? Was this not meant first and foremost as a financial overhaul bill whose purpose was ostensibly to reform the OTC derivatives trading markets, not interchange rates between banks and their big-box retail clients? Why did this provision even make it in there? Actually, as Dick Durbin, Johnny Isakson and others will tell you, there are seven billion reasons why.
And second, even if the government had the power to arbitrarily amend such inter-business dealings by fiat (I argue they don’t but that is moot), how does President Obama et al. believe that shifting the profits of the millionaires and billionaires in the banking sector to line the pockets of the millionaires and billionaires in the big-box retail sector helps those working class folk? All it does is, once again, stick them with the bill.
Now, to be fair, for those who think I am shilling for the banks, my view is that if the banks exploit this lemon to make it into lemonade by charging customers to the point where their new fees will surpass their Durbin losses, as some analysts have claimed they might, then shame on them. But at the same time, as I told Mr. Hahn, people are free to move their banking elsewhere. We move our banking around towards better service all the time, and you cannot throw a rock in my town without hitting some branch of some bank, big or small (the real squashing of choice in the marketplace seems to be coming from the growing power big-box retail, which just got a little richer and a little bigger thanks to Mr. Durbin, wouldn’t you agree?).
The overall point is that whether the banks overcharge now or just make up the losses in these new fees, the Durbin amendment is a big hit for the consumer at a time where they are squeezed enough.
So once again, the liberal rubber of good intentions (if you choose the high road analysis, which is suspect on many levels to say the least) meets the road of the law of unintended consequences. Does anyone in Washington understand what that law even means? Or do they just not care when there are bigger, more powerful and well-financed constituents to protect at the expense of the little guy whom they mendaciously claim to protect?
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54 Comments
Rush and others noticed this too. Thank you, Democraps, for throwing more sand in the gears of commerce. All for "the little people", of course. 2012, where are you?
So basically Durbin is saying, that now the banks have the same power the federal government has, the ability to take money from the retailer, which in turn takes it from the end user.
Kind of like taking your tax dollars, and using it to give monkeys crack cocaine, or buy and distribute condoms in Africa.
Nice
What a Dick.
Another law that needs to be repealed (This is from a long time Bank of America customer who doesn't have many other options since I travel, and would rather not pay the "out-of-network" ATM fees).
Since Congress "officially" starts 2 1/2 weeks before the inauguration, we could potentially see the new President signing repeals of ObamaCare, Frank-Dodd and other Marxist laws his first day in office. It's not likely to happen that quick, but we could hope.
Banking does need reform. But not this crap.
One rule I've always thought banks should have imposed on them: If they post charges to your account in real time they should have to post DEPOSITS to your account in real time. Banks like 5/3rd and others play games with this all the time to create artificial "overdrawn" situations so they can charge massive fees.
He is also saying that retailers are the new boogie man and they make too much profits as well.
You see Americans, we are all the enemies of the left.
Retailer, Banks, small businesses and oh yes the consumers who will take it right in backside when their policies are enacted.
It is the U.S. economy and the free market they are after.
Treasonous filth.
But Dick Durbin seems to be successful in playing both sides of this issue.
He's telling people to switch banks rather than pay the fees, ignoring his own culpability in the matter.
Kudos once again to new media for exposing him.
Let's hope the message somehow gets to the people.
Yet more confirmation of last years scientific finding that liberalism is caused by a genetic defect.
So the geniuses in DC have yet again passed a bill that through unintended consequences ended up screwing the very people they are supposed to be representing – us. Then again, maybe it wasn't unintended?
Historically the consumer has bitten and still bites the bullet every time congress screws up. Why? Simple? The consumer doesn't have a lobby in DC that can donate large sums of money to one's coffers for reelection purposes. Consumers are the "little" people who carry the load for the fat-cats and politicos. They pay through the nose for every backroom scheme concocted by the politicos and "movers and shakers" located on K Street in DC.
If the OWC crowd were smart, the entire conglomerate would be strung out along K Street to tar and feather every lobbyist they were able to find since the reps of the special interest groups are one of consumers and taxpayers worst enemies.
"And what about his esteemed colleague from Illinois? What’s Durbin’s angle? Is it mere coincidence that the heavily pro-retail amendment he authored came on the heels of Home Depot donating $20 million to various Illinois charities while also pledging to open up several stores in the Chicagoland area?"
That is the most telling part of the entire article. Senator Durbin claiming he is looking out for the consumer when in fact he was bought by Corporate money.
Sweep these cretins out of office in 2012. Do it or we'll face devastating consequences.
The other trick I hate is to make a credit card payment due on a Sunday. You can't schedule it for the following Monday w/o it being late so you schedule it to be received the previous Friday, which gives THEM two extra days to have your money and collect interest on it, and YOU have two days' less.
I tend to pay off and then drop credit card accounts that do that sort of thing.
Dicky Durbin is nothing more than another one of BO's socialist lackeys from the great state of political corruption, cronyism, and old mayor Daily politics. I just wonder how much has flowed into his reelection coffers since the signing of this consumer crushing bill.
Well said.
Corporations were despised by our founders. I say this because originally the corporation in the US was controlled so they could not engage in any business except their chartered business, they could hold no stock except their own, they could own no property except that necessary to conduct their business, they could not engage in any political activities, and when the state inspected them they could be shut down if the state did not like their business practices. their Charters only lasted for 40 years,but could be renewed.
The founders wanted to control the corporations as their influence would dilute the People's influence in the Government. Thank corporate personhood for the change.
I'm just glad that the poor will be charged something for having a debit card, and perhaps even charged for each time they use it.
It's about time the poor paid something out of pocket for parking their Flaming Liberal Butts in the United States of America.
Books to read by Big Peace contributor Peter Schweizer (also available at your local library {if it is still open})
"Makers and Takers: Why conservatives work harder, feel happier, have closer families, take fewer drugs, give more generously, value honesty more, are less materialistic and even hug their children more than liberals": http://www.amazon.com/Makers-Takers-conservatives...
"Architects of Ruin: How big government liberals wrecked the global economy—and how they will do it again if no one stops them": http://www.amazon.com/Architects-Ruin-government-...
"Do As I Say (Not As I Do): Profiles in Liberal Hypocrisy": http://www.amazon.com/Do-As-Say-Not-Hypocrisy/dp/...
Cut up your cards, pay $3 bucks to cash your check, buy money orders to pay bills(might even get the Post Office profitable) and buy with cash.CASH is KING. Screw the banks and the politicos.
One problem with your story. If you think that the retailers eat that 44 cent swipe fee, you are thinking wrongly. That swipe fee is figured in their overhead and added to the price of each item they sell. So we (the customer) are going to pay this fee no matter what. Its just like corporate taxes, we pay those also, its figured in the retail price of the item for sale.
Ive always wanted to pay for the priveledge of spending my own money—
Durbin is a machine liberal big governmet dem. The whole issue here more power to the government – hell with the people.
1) repeal Dodd Frank – right now
2) If you are "too big to fail" – do not give them your business – they them fail
3) Deal in cash – Why play into this bait and switch? – The price is only going to go up
4) End the lobby effort and the eeffect it has on system – term limits with strict lobby laws would be a start
Follow the money, who wins and who loses? My customers made 30% less credit card purchases over the last 12 months, banks made less money on transaction fees. Banks win, major retailers win and the average Joe loses. This is like the IRS using depreciation tables when it comes to business equipment purchases. At first it looks like the IRS gets more money upfront instead of letting me take a 100% deduction the year I buy equipment. The reality is now I lease equipment, deduct 100% of the lease payment and still end up owning the equipment, the bank is the only winner.
Umm, nope. That was under British rule. NOT after the constitution was ratified. You need to reread the constitution…
"Democrats Pi$$ All Over Their Voting Base. MSM Claims It's Just Rain"
The FED hates the cards. The cards are competition in the fiat money environment. Banks, big and small, can use pixels more effectively than it can use paper notes. And they can "make" more money, in essence exert more "monetary policy" together than the FED can dictate.
The answer is COINS, folks. This is why the politicos inflate. The more they inflate, the less likely it is people will grab onto the solution and stick the banks, and the overbearing government, where the sun don't shine. The real "crisis" is that the FED is losing control to those it cannot control. The very thing it used to snake control away from the congress is being used against it now. While I do so very much like seeing the FED squirm in that regard, I do not like that what is really happening here is the creation of what amounts to hundreds and thousands of little FEDs. That is no solution either.
Congress must reign in a enumerated power it let slip. Let's just say 1913 was a very bad year. We must put down the dollar bill (the reserve note) and pick up the dollar. We have to use, trade in, currency that represents wealth, not that which represents debt. We must hold wealth in our pockets and purses in the form of currency that is a private possession and owned, not borrowed with the authorization of use by permission.
We are in a mess a century in the making. Can we get out of it now, please?
End the Fed. Force Congress to do the job it is tasked with doing. Vote out all those who refuse to relent before the Constitution as it is.
The only one even more slippery than TRICKY dick durbin is chuck SLIMEY schumer! Those two and dingy hairy make the real THREE STOOGES look like geniuses! Sad that LYING, DECEITFUL dirtbags like these libTARDS pass laws and then are not held accountable at the ballot box. Just wait till all the obummercare provsions kick in. Then as another LYING DECEITFUL LOON said, "we have to pass the bill so you can see what's in the bill". I hope the IGNORANT SHEEP that keep voting for these LIARS finally wake up and start voting with their brain for a change!
Thanks WalMart. Just another reason to hate them. They destroyed most of our retail world, and killed many small towns in the process. Now they are helping themselves by screwing the banks, and us. Are the banks their next takeover target? When does it end? Stop WalMart shop local stores. The only way to kill this beast is to cut off their money.
Great article. Please boil it down into a simple picture or 4 "bullet points" to get the information to the millions who don't bother to read or not bright enough to understand.
I heard a good analogy to this. What if the government passed a law requiring restaurants to provide drinks for free … does anyone think the price of your burger wouldn't increase?
Mr. Schaeffer, have you requested an interview with Senator Durbin? If so, what has been the response?
Every poster here who lives in Illinois should call Senator Durbin's office and loudly denounce his phony and fraudulent actions. Does Durbin want more banks to go under, and thousands of more people to lose their jobs? And the question about Dodd-Frank not regulating the problem that actually caused the financial meltdown is never, ever asked.
The constitution has no references to corporations or business except in reference to a uniform bankruptcy law. The States were in charge of incorporating corporations, still are. Most of the problems were the result of the colonies being treated as corporations that were granted under license of the King. You better do a little reading about corporate personhood and the treatment of the corporation by the States. Google is a good place to start. The granting of rights under the Constitution started soon after our founding by the courts and was finally granted in the late 1800's.
I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country. – Thomas Jefferson
Merchants have no country. The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains. – Thomas Jefferson This applies especially to the multinationals.
"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered…I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs." Thomas Jefferson
So much of the price we pay for any product or service is embedded with the tax amount that any entity pays along the way from inception to store delivery. That's akin to the government socking it to the dumb masses who don't pay much income tax…. they don't realize how much 'tax' they pony-up on payday when they purchase their beer, liquor, cigarettes, lottery tickets, and gas (govt makes a lot more per gallon than the oil company)!
If only more people would wake up and realize that a large part of the charge for any product or service is tax to the government…. all passed down to the shareholder or consumer. The government is an insatiably hungry beast.
Unfortunately, most of "The People" have been fed phony populism for so long they do not have the intellectual horsepower to understand the problem, much less the solution.
Yes, the big boxes win — but the smaller merchants continue to lose. Think of the costs they'll incur with customers now writing more checks (loss of immediate credit to their accounts, fraud, not to mention more cumbersome deposit processes) and using more cash to avoid debit fees. They're going to need the extra $.23 and more. This is like telling drug companies they can only charge for the ingredients and production of medicines — no research. Did our austute lawmakers even consider the maintenance, development, and enhancements (mobile for one) to the payments system? Of course not, this was just another case "sound bite" legislation. "We hit the big banks, now don't all you voters feel better?"
That's what Big Business, or frankly, any business, doesn't seem to understand – the Left is always looking for the scapegoat and eventually it will be your turn.
The scary thing is – I've never seen it blown up like it is now. The first time I got a pit in my stomach was when they were going after AIG and others for giving out bonuses that we later find out were agreed to by the gov't when they gave them the "bailout" in the first place. Then there was talk of taxing it at 90% which sounded to me like a clear violation of the Constitution – the legislation they were pushing was both "ex post facto" AND "bill of attainder". I can only assume it never passed and I don't recall much discussion after it first blew up.
Now we have this.
That's what happens when you take the money. It's like taking money from the Mafia – then they own your @ss. You never want to be owned – by anyone.
Include my mother in that. It's been impossible for her to really understand what is going on. She hates gov't, and she hates big business but she can't seem to grasp that having limited gov't means big business has limited to no opportunity to influence gov't in any way because there is no reason to.
She's a total centrist populist. And all I can do now is keep reminding her to watch who she's standing next to.
And I remind her about the French Revolution.
Perhaps it will sink in someday, but she's 68, so I doubt it.
I just received this e-mail from Senator Durbin. Can you believe it?
Dear xxxx,
It's just outrageous. Last week, Bank of America announced it will start charging its customers $5 a month just to access their own money with a debit card.
If you're a Bank of America customer who doesn't appreciate being gouged with excessive fees, you should show Bank of America what a competitive marketplace looks like and find a bank or credit union that values their customers.
We can't let B of A get away with this — and we've got to speak out, loud and clear, to show other banks that it is unacceptable to pad already excessive profits on the backs of hard-working Americans.
Click here to forward a message to CEO Brian Moynihan right now: Urge him to reverse his decision to charge debit card customers a $5 monthly fee, and send a powerful message that every bank will hear.
I see this ending up one of two ways:
Outcome #1: Bank of America gets an earful from so many customers and potential customers — like you — that it decides against making monthly fees the new "normal" for American debit card users.
OR
Outcome #2: Too few folks notice and speak up about the new fees, sending a message to other big banks that they can charge this monthly fee to their debit card customers, too.
Outcome #2 is completely unacceptable — but I need you to speak out to make sure it doesn't happen.
In 2007, we sent thousands of emails to convince BP's CEO to give up his company's plan to dump more toxic chemicals into Lake Michigan. The DickDurbin.com community has proven that we can take on some of the biggest special interests around.
Now let's put that same kind of pressure on Bank of America's CEO to make sure he knows these new debit card fees are simply unacceptable — and to make sure every single bank gets the message.
Click here to forward a message to CEO Brian Moynihan right now.
Thanks for helping us chalk up another victory for the DickDurbin.com community on behalf of the American people.
Sincerely,
Dick Durbin
U.S. Senator
Your mom sounds like a true child of the 60's. So many drank the kool aide and never recovered.
BTW, I'm 66, but never drank the Kool aide.
Actually my mother is not a baby-boomer and never was a hippie. She was raised in England by Polish parents. She and her family were refugees from WW2. She was born on a Nazi workfarm in Austria. When I first learned about Woodstock in my youth, I asked if she went and she looked at me as if I asked her if she had ever engaged in Satanism. LOL!
She was educated in England and didn't come to America until she was in her early 20s. I think it's a combo of being raised in a more socialistic country and also just coming from a blue-collar background where you feel like the "big guy" is always after the "little guy".
That said, she's seen what communism is about and definitely doesn't want that. She also hates unions (her parents were in unions and she saw how they were treated), especially public sector unions.
But she can't shake that attitude about "greed" and rich people making lots of money, etc. And she doesn't understand the 2nd Amendment at all. She hates guns.
She's just bought into the idiotic populism. She doesn't think anyone knows anything about anything and so conversations with her usually end up being pointless. On the one hand she thinks the gov't is made up of corrupt evil people, but so are the corporations so she'll argue for more regulations. I've tried over and over again to explain it to her, but she just refuses to engage.
I use her age as a point – sometimes you can't teach an old dog new tricks.
LOL! Umm, no it doesn't. HOWEVER, show the state laws in effect AFTER the constitution that disallowed a "corporation in the US from engaging in any business except their chartered business".
Waiting…
I see your point. It's a shame, though, that someone who had her life experiences has not formed a hard libertarian / conservative core like Fredrich Hayek, or David Horowitz.
I'm not going to school you but start with:
http://www.iiipublishing.com/afd/santaclara.html http://www.uuworld.org/ideas/articles/157829.shtm... http://reclaimdemocracy.org/corporate_accountabil...
There is a lot more, Educate yourself. Only took a few minutes to find these.
Umm, learn to read.
I'll ask the question ONE more time to determine your literacy.
HOWEVER, show the state laws in effect AFTER the constitution that disallowed a "corporation in the US from engaging in any business except their chartered business".
Waiting…
Yes, we were paying the swipe fees in the retail price. Now, we'll be paying a monthly ATM fee to the bank, BUT prices at the retailers are not going down. That point was made in the article.
http://www.truthout.org/unequal-protection-early-...
Read the article, go to the footnotes. These are laws for Wisc . If you will read about the early US at the time of the Revolution the laws were just as repressive of the corporation. Each state was a sovereign state and controlled corporations differently.
As I said educate yourself. I did. The next lessons are not free.
From the article – "Since these fees are absorbed by the retailers…" implying that the retailers absorb these fees and don't pass them on.
I'm waiting. You having trouble understanding what you are reading?
Still waiting
LMAO! You are confusing "person-hood" with the question I asked.
You ARE illiterate.
You didn't read the article idiot. You are the idiot.
From the article:
found that in Wisconsin, as in most other states at that time:
Corporations were required to have a clear purpose, to be fulfilled but not exceeded.2
Corporations’ licenses to do business were revocable by the state legis- lature if they exceeded or did not fulfill their chartered purpose(s).3
The state legislature could revoke a corporation’s charter if it misbehaved.4
The act of incorporation did not relieve corporate management or stockholders/owners of responsibility or liability for corporate acts.5
As a matter of course, corporation officers, directors, or agents couldn’t break the law and avoid punishment by claiming they were “just doing their job” when committing crimes but instead could be held criminally liable for violating the law.6
State (not federal) courts heard cases where corporations or their agents were accused of breaking the law or harming the public.7
The first one is the question you asked.
Use the footnotes to the laws idiot.
By the way – Until they were granted corporate personhood by the courts they could not claim rights under the Constitution.
There are several very scary things with this administration and the left.
First of all, this has been coming for a long time. Carter, freaked us all out so they gave us Reagan, then Bush, Clinton who looked moderate but he did try to prime us for healthcare. then Bush 2 who I am a little concerned about publicly commenting on those very crazy 8 years and now we have Obama the great divider.
Who's propaganda machine, attitude and agitation are right out of central casting for pre WW2 and the Weimar republic.
Make no mistake, it the U.S. citizens Obama is after, not the Big Banks or the super rich. It is us.
A funny thing happened about 10 years ago. Social media's began popping up around the world and it is these social media networks, like this one that exposing every single evil thing the left is trying to do to us.
Believe me, this is the thing they are most afraid of and it is for that reason we must stay with it.
There is a real evil in the world now and Obama has helped to foster this evil and we must fight it.
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