The other day, President Obama urged his financial regulators onward in the implementation of the Dodd-Frank Wall Street Reform and Consumer “Protection” Act — they are most humiliatingly behind on putting into practice even more top-heavy, market-distorting, economically damaging, and fundamentally flawed rules and restrictions, you see — but of the most insidious and controversial rules they have already come up and tried to implement is the minutiae of the oh-so-munificent Durbin Amendment.
This might surprise you, but in their infinite wisdom, the federal government actually purports to know better than debit-card companies themselves how much these companies should charge for debit-card swipe fees, a.k.a. interchange fees. The Durbin Amendment so magnanimously ventured that the government needs to set a cap on how much card issuers can charge merchants and comply with standards that they have arbitrarily deemed “reasonable and proportional to the actual cost.” I suppose we’re meant to overlook the fact that there are real transaction costs that need to be paid for, and that the processing price will inevitably be passed on to the consumer in one way or another — but whatever, who’s counting? Greedy banks! Free stuff!
Anyhow. In July, a judge struck down the Fed regulation that governs how much retailers have to pay to banks when customers swipe their debit cards — and the retailers were most pleased with the decision, because another rewrite could mean that they might have to pay even less for fees. (I might merely add that, in the meantime that this fight has been going on, banks have started to increase fees elsewhere and done away with things like “free” checking and rewards. Ahem.)
The U.S. Federal Reserve will appeal a judge’s decision that its rules on debit-card transaction fees and processing were illegal, a lawyer for the central bank said.
Visa Inc. (V), the world’s biggest payments network, climbed 3 percent to $178.39 in New York, the most in almost a month, as a successful appeal could help the company maintain its market-share lead. Smaller rival MasterCard Inc. (MA) slid 0.5 percent to $619.31.
The Fed’s general counsel, Scott Alvarez, told U.S. District Judge Richard Leon in Washington that the bank would file its case with the higher court today and asked the judge to keep the rules in effect as long as the appeal is pending.
Leon said he’d leave the current regulation in place at least while he considers the Fed’s request for the longer stay. The Fed is seeking to overturn Leon’s ruling that the central bank improperly set the cap on debit-card transaction fees, known as swipe fees, at about 21 cents for each transaction, and neglected to bolster competition among payment networks.
Oh, geez. The overriding point here, of course, is that all of this uncertainty and the federal government’s dictates on private-sector market signals are accomplishing approximately nothing to help our economic fritz, and that I highly doubt the Dodd-Frank rules that have yet to be written and implemented are going to hold any less potential for special-interest ploys and market distortions. …And the beat goes on.