In the run-up to passage of financial reform, internal tensions among Democrats were frequently on display. (The GOP political landscape appears much simpler: whatever can be labelled as “anti-regulation” gets approval from both the leadership and the Tea Party freshmen.) Now the grand guignol over interchange fees has exposed growing faultlines among Senate Democrats. The future of the party lies either with Chuck “Wall Street” Schumer, or Dick “Austerity” Durbin. Their struggle illuminates a great deal about the modern legislative process.
Ryan Grim and Zach Carter lay out the contours of the battle:
Delivery surcharge. Paper charge. Equipment charge. There’s an additional fee for using cards from banks outside his contract, but [retailer Charlie] Chung says he has no way of knowing until he’s gotten his bill how much of that pricier plastic has been swiped. The fees Chung pays are a tiny fraction of Wall Street’s swipe fee windfall; banks take in a combined $48 billion a year from these “interchange” fees on debit and credit cards, according to analysts at The Nilson Report. That money comes out of the pockets of consumers as well as merchants, as stores pass on whatever costs they can to their customers.
Last year’s financial reform bill ordered the Federal Reserve to crack down on debit card swipe fees, a $16 billion pool of money from which $8 billion flows to just 10 banks. As a concession to Wall Street, credit card fees were left unscathed. But the clock never ticks down to zero in Washington: one year’s law is the next year’s repeal target.
Mike Konczal and Adam Levitin have exhaustively analyzed the interchange battles; suffice it to say, it’s hard to read their work (and compare fees internationally) without getting the sense that banks are getting a massive windfall here. Usually that kind of extractive industry can use its profits to buy endless favors in DC. But the extremely high rates started irking retailers, who had enough leverage to push for legislation that required the Fed to reduce the swipe fees. Now Chuck Schumer (and his surrogate, Jon Tester) want to delay that reduction; Illinois Senator Dick Durbin, who sponsored it, is fighting back. According to Carter & Grim, “118 ex-government officials and aides are currently registered to lobby on behalf of banks in the fee fight,” and retailers “have signed up at least 124 revolving-door lobbyists.”