“No Man’s life liberty or property is safe while the legislature is in session”.

- attributed to NY State Judge Gideon Tucker

Monday, March 28, 2011

Dick Durbin's Debit Card Games

Part of the Dodd-Frank bill passed last year that is soon to have serious consequences for consumers was a last-minute, virtually unread provision added by Illinois Democrat Dick Durbin to aid retailers and hurt banks.

Essentially, Durbin's amendment caps the debit transaction fee at 12 cents, which is much lower than current typical fees. I can't personally attest to whether Durbin's campaign funding benefited from the likes of Wal-Mart, Target, et.al., or not. But his amendment clearly distorts what were previously market-determined pricing structure for debit card processing.

Merchants receive major benefits from debit card usage. They don't pay a percentage of revenues as a discount fee which credit card purchases exact. And having customers use debit cards provides instant collection, reduces costs and risks related to the handling of physical currency, and, quite likely, enables more purchases for higher amounts than would otherwise be made with cash.

Why the US Senate needed to step in and set prices for this service is unclear. But that's what Durbin has done.

Now, with the law scheduled to take effect on Friday, people are becoming aware of his actions.

As a Wall Street Journal editorial points out, loss of debit fee income by banks will force them to raise prices on other services. As they wrote,

"Do you like free checking? Enjoy it while you can, because unless you're a high roller you will soon be paying for check-writing privileges. The price controls have also caused banks to deny credit to marginal borrowers- i.e., those with low incomes."

According to the editorial, something like $12B-14B will be lost to banks and accrue to merchants from the new law. But don't expect to see any impact on prices you pay in stores because the merchants pay lower debit card fees.

The Journal piece goes on to identify Senators who voted for this prior to November's election, but now have 'seen the light' and want to reverse it, if only for two years. This includes 17 Republicans.

My point in writing about this is to do two things.

First, to highlight what a nefarious numb scull Dick Durbin is. It's legislation like this which simply has no place in our federal laws and/or Congressional process.

Judge Andrew Napolitano, a contributor on Fox News and retired NJ judge, reminds viewers often that the Constitution stipulates that Congress' laws shall apply to all citizens. It's not supposed to be a special favors shop.

Durbin's gambit is a fine example of why voters have come to loathe and mistrust so many Senators and Representatives. Who in the hell is Dick Durbin to legislate what should be market-determined pricing for debit card transaction fees?

Why do these morons who become Congressional legislators suddenly feel that they know enough about anything to pass laws like this? Certainly, Durbin does not. Care to guess his pedigree?

You might have assumed, as I did, correctly, that his academic background was- law school. Meaning he has virtually no practical knowledge about anything regarding the US economy. But it's much worse than that.

Durbin interned with and apprenticed to one of the lesser lights of Illinois' contributions to the US Senate- Paul Simon. No wonder Durbin has a huge appetite for legislation which contrasts with his apparent non-existent common sense. A chip off the old uber-liberal block of bow-tie Paul, Durbin is essentially a lifer- a professional federal politician. His bio mentions no real work experience between being Simon's staffer, then running for a House seat.

The most vile, despicable breed of Congressional legislator- the lifetime federal hack.

Between ObamaCare, the Dodd-Frank bill, and the EPA's assault on coal, oil and natural gas, It seems there's nothing Washington won't try to legislate or dictate to us anymore.

I guess the silver lining in Durbin's crafty, disingenuous behavior is that it provides such a clear example of what's wrong with Congress.


Dgerzee said...

Yet another conservative nincompoop blabbering in favor of the trillions-of-dollars a year profit-earning banking industry. The banks invented the preposterous lie (and tried to sell it to their customers) that using their debit cards as credit cards when purchasing retail goods would protect their pin numbers from being viewed and stolen. The truth, of course, is that customers who "credited" their purchases instead of "debiting" them were earning the banks billions, while punishing small businesses. Durbin's Law is yet another example of Congress acting effectively. By the way, I'd like to use this space to congratulate President Obama for announcing his re-election bid for 2012, and celebrate in advance his assured victory over a field of right wingnuts and conservative embarrassments, in 2012.

C Neul said...

Yes, well, it's clear you have no understanding of how banking and credit and debit systems work.

You, and others, are always free not to use either.

Durbin is an idiot and an ass. Congressional price-fixing to try to punish banks, after costing them more money with senseless over-regulation, will only compound inefficiencies.

Yes, it looks like the snake is running again. This time, though, the liberals won't feel guilty, and most independents will know better, hopefully sending him into early retirement in some community organizer retirement home.