Why Your Bank Is Charging More Fees
Obama favors retail millionaires and billionaires in the debit-card fight.


John Berlau

There are many observations that can be made about President Obama’s remark Monday to ABC News that businesses “don’t have some inherent right just to get a certain amount of profit if your customers are being mistreated.” In and of itself, this comment reveals much about his beliefs and knowledge (or lack thereof) on economics, consumer choice, and the private sector in general.

But in the context in which it was made — Bank of America, Citi, and other banks’ recently announced debit-card and checking-account fees for consumers, which they are charging to recoup losses from the Dodd-Frank financial-overhaul law’s price controls on debit-card fees charged to retailers — what must first be said is that he was lecturing the wrong set of Fortune 500 corporations. The price controls were added to the law by an amendment from Senate majority whip Dick Durbin (D., Ill.).

If he really wanted to point the finger at the big companies that have mistreated consumers and are reaping illicit profits, he should have addressed not Bank of America, but Walmart, Walgreens, and Home Depot. These big retailers are making a killing from the price cap — regulatory corporate welfare that they lobbied vigorously on behalf of — yet so far have not passed on any of their estimated $19 billion in savings to consumers. And even many Democrats can see what’s going on.

For example, consider this quote: “Consumers suffer when the government regulates interchange fees. . . . Merchants are able to offload their fees onto consumers[, and] retailers have no intention of passing along any savings to consumers. . . . We should not allow the federal government to dictate the terms of a private transaction — particularly in a case such as this, where government intervention would drastically harm [consumers].”

What firebreathing free-market zealot made these proclamations? None other than Debbie Wasserman Schultz (D., Fla.), the president’s own handpicked chairman of the Democratic National Committee, in a letter co-written with Rep. Kenny Marchant (R., Texas). Similar sentiments were reflected in a letter signed by 71 Democrats and 60 Republicans in June 2010 urging House-Senate conferees to strip the price controls from the final Dodd-Frank bill. Likewise, Dodd-Frank co-author Barney Frank (D., Mass.) has said repeatedly that this is the only part of Dodd-Frank he doesn’t like, and he’s offered to work with both parties to repeal it.

To be sure, there were defectors in the other direction, too: 17 Republican senators voted for the Durbin Amendment, though all but three of them would vote against Dodd-Frank at the end. And the GOP’s “Durbin Dozen” in June of this year voted against a measure by Jon Tester (D., Mont.) to delay the price controls, depriving it of the 60 votes needed to clear the Senate.

Some of these Republicans were simply hypocritical. Georgia GOP senators Johnny Isakson and Saxby Chambliss are co-sponsoring a bill to repeal Dodd-Frank, yet both voted twice in favor of these price controls, arguably the law’s most intrusive measure. Their sudden conversion to government price-setting seems to have something to do with heavy lobbying in favor of Durbin’s handiwork from Atlanta-based Home Depot, a firm that American Banker described as “on the warpath” against interchange fees. According to the New York Times, “Senator Johnny Isakson, Republican of Georgia, told SunTrust, the largest bank in his state, that this time he planned to vote against the bank and with . . . Home Depot.”

But alas, the president didn’t take the opportunity to bring up any of this history as a path forward to reform this rule.. Instead, Obama expressly took ownership of a regulation that favors the millionaires and billionaires of the retail industry at the expense of consumers and small entrepreneurs who depend on their debit cards and checking accounts.

From the very beginning, Durbin tipped his hand that his efforts were on behalf of the retail fat cats. When he introduced his amendment to Dodd-Frank in May 2010, Durbin said on the Senate floor that his measure came about after Walgreens’s CEO called him to complain that the transaction fees the company pays to process debit and credit cards were “the fourth largest item of cost for their business.”

Yet in this era of the “Buffett Rule” and bashing “millionaires and billionaires,” Durbin and other liberal proponents of these price controls never quite explained why Congress should be concerned with the routine costs of doing business for a retail chain such as Walgreens, which makes $2 billion in annual profits. Or for that matter, other retail behemoths such as Walmart or Home Depot — or Warren Buffett’s Berkshire Hathaway, with retail units from Dairy Queen to Nebraska Furniture Mart — that will benefit from this regulation-driven corporate welfare.