In this item at Baseline Scenario, Simon Johnson looks at how small businesses are fighting back against big bankers in their efforts to kill one of the key parts of the Dodd-Frank financial reform legislation – exorbitant “swipe fees” for debit cards by big banks.
As a lobby group, the largest U.S. 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 finally being seriously challenged by another potentially powerful group – an alliance of retailers, big and small – now running TV ads (http://youtu.be/9IUt-lY-XgM, by Americans for Job Security), web content (http://www.youtube.com/watch?v=DiKoFzS_lXs, by American Family Voices), and this very effective powerful radio spot directly attacking “too big to fail” banks:http://www.savejobs.org/audio18.html.
The immediate issue is the so-called Durbin Amendment – a requirement in the Dodd-Frank financial reform legislation that would lower 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 US has very high debit card “swipe” fees – 44 cents on average but up to 98 cents for some kinds of cards. These fees are per transaction – representing a significant percent of many purchases but posing a particular problem for smaller merchants. This is estimated to be around $16-17 billion in annual revenue.
The plan was to reduce these fees to a flat 12 cents per transaction, a move that it looked like the big banks would be able to delay (by requiring “further study”) and then kill due to their enormous influence in Washington. But, by the looks of those videos and the tone of the radio spot referenced above, that might not be so easily done.
