Big Banks Have a Powerful New Opponent

[ProSense]

Big Banks Have a Powerful New Opponent

By SIMON JOHNSON

As a lobbying group, the largest American banks have been dominant throughout the latest boom-bust-bailout cycle – capturing the hearts and minds of the Bush and Obama administrations, as well as the support of most elected representatives on Capitol Hill.

Their reign, however, is being seriously challenged – finally – by an alliance of retailers, big and small, on whose behalf a variety of ads are now running, including on television (such as this one, by Americans for Job Security), the Web (such as this, by American Family Voices) and a powerful radio spot directly attacking the too-big–to-fail banks.

The immediate issue is the so-called Durbin amendment –- a requirement in the Dodd-Frank financial overhaul legislation that would lower what are known as the interchange fees that banks collect when anyone buys anything with a debit card. Retailers pay the fees, but these are then reflected in the prices faced by consumers.

The United States has very high debit-card fees, colloquially known as swipe fees –- 44 cents on average (that amounts to 1.14 percent of the average purchase price of $39) and up to 98 cents for some kinds of cards. These fees are per transaction and although the formula is complex, the payment is a significant percentage of many purchases and poses a particular problem for smaller merchants. These fees are estimated to amount to $16 billion to $17 billion annually.

Other countries, including Australia and members of the European Union, have acted to reduce interchange fees – because the actual cost of such transactions is quite low. Think about it: the interchange fee for checks, which also draw directly on bank deposits, is zero.

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[Ikonoklast]

1. I refuse to use debit cards in any transaction for that reason.

Cash, check, or credit card paid off in full every month, or I don'y buy it.

[starroute]

4. Credit cards also cost the merchants transaction fees

They're either the same as debit card fees or a little higher -- I'm finding it difficult to get any hard information online.

The only real difference I know is that using a credit card gives you more protection in cases of fraud or defective merchandise, so it's safer for major purchases and online transactions. But I prefer to use my debit card for groceries and such because it's easier to budget that way than having one whopping payment at the end of the month.

[patrice]

2. Kick! for a shot across the bow of the private-money masters. nt

[mopinko]

3. small time merchants really get screwed

ask any artist that sells direct what it costs them to take credit cards at art fairs, etc. if you don't do well, you can end up having all your proceeds go to your merchant account. and that is always through a third party vendor. the card companies have a deal with them to screw you.

[ProSense]

5. The ads are really good.

The second one is long, but includes more details from the small business owner's perspective.

[Fuddnik]

12. I used to own a carry out restaurant.

We did a big lunch delivery business (and one of our biggest customers were Capitol One employees). We would get an order for 7 different people on six different credit cards, and maybe, just maybe, one for cash. And it went on all day like that.

The fees ate us alive.

[jwirr]

6. I gave up my credit cards and do not want any more regardless what

changes they make.

[asphalt.jungle]

7. Sen. Jon Tester huh?

i thought he was apparently a progressive hero not in the pocket of the banks. shhh don't tell anyone. it's like how progressive hero anthony weiner being one of bibi netenayahu's reliable votes in washington is ignored.

[flpoljunkie]

8. Tester and Capito's bills to postpone implementation to study fee reductions 'best way to kill' cap

Unsurprisingly, the big banks’ lobbying machinery sprang into action, arguing that the fee cap would hurt small banks and credit unions. Senators Jon Tester, Democrat of Montana, and Bob Corker, Republican of Tennessee, are offering legislation –- as is Representative Shelley Moore Capito, Republican of West Virginia –- that would postpone implementation of the fee reduction for up to two years, pending further study.

In Washington, the best way to kill something is to study it further.

http://economix.blogs.nytimes.com/2011/04/07/big-banks-have-a-powerful-new-opponent/

[flpoljunkie]

9. Small banks (with less than $10 billion in assets) are exempt from Durbin's amendment

Worth noting.

[ProSense]

10. The top

50 banks have assets ranging from $18 billion to more the $2 trillion.

Anything below $10 billion is a really small bank.

[flpoljunkie]

11. Indeed!