We Owe Them A Debit of Gratitude

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The Times also quoted the President of a Michigan Credit Union, who said during Congressional testimony, "I am appalled that our members will shoulder tremendous financial burden and still be on the hook for fraud loss while large retailers will receive a giant windfall at the hands of the government." Where was he when his financial services brethren who were allegedly "too big to fail" received their giant windfall at the hands of the government a couple of years ago?

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Convenience store owners also took part in the spectacle, charging up Capitol Hill in an effort to counter the fusillade of the financial services fat cats. They are reinforcing the efforts of other merchant trade organizations, which have contended that interchange fees are putting a lid on business growth and inhibiting the retailing community's ability to create jobs. What heretofore has been like a battle of gigantic squid beneath the surface of a mysterious ocean has risen from the depths – Kraken tentacles flailing in every direction—and big hunters on all sides are sharpening their harpoons.

According to the Times and OpenSecrets.org, former Congressional senior staffers and advisors from both Houses and both parties are appearing on the lobbying rosters of both banks and retailers. Whatever the outcome of this struggle, it is clear that the Durbin Amendment—as well as many other provisions of the Dodd-Frank and CARD Acts—is a work in progress. The exuberance of the heady days of financial overhaul is being replaced by the harsh reality of power capitalism.

The field of Durbin Amendment supporters is beginning to shrink a bit. According to the Times, Republicans David Vitter (LA) and Michael Crapo (ID) have begun to have second thoughts and are suggesting the Fed needs to consider "all costs to issuers," in particular, expenses associated with protecting against the unauthorized or improper debit card use. Banks estimate that debit card fraud totaled around $1.4 billion in 2009 and argue that the Fed's proposed rule does not appear to take into account the very real cost of fraud protection.

Credit.com: Debit Interchange Rule

The fee cap support group is fighting hard to ensure that the July effective day is inviolate. Leading that charge is Senator Durbin, who is pretty upset that the banks are trying to smother the winds of change with a disaster scenario alleging that 1) the government will take away debit cards; and/or, 2) Merchants won't accept them; and/or, 3) Banks will restrict the amount of each debit transaction to an unworkable tiny number.

After a wild fee-fantasy ride for several years, followed by an era of devastating delinquencies and defaults and, now, hard-earned government restrictions on a host of charges, the financial services community is vigorously scrambling to replace lost revenue. "Fee" is now being substituted everywhere for "free," but as anyone who has a bank account knows, fees can be quietly moved around. So, to me this feels more like a redistribution than an innovation.

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