We’ve been following the fate of the Durbin Amendment because with its price controls and favoritism, it’s a great example of a bad policy. It also has a Minnesota angle, too, as a recent editorial in the Star-Tribune mentions.
The editorial supports a delay in the implementation of the Durbin Amendment, something I wrote about earlier, and would support. (Even better would be to scrap the amendment.)
The Star-Tribune editorial recognizes several important facts about the legal limit on the fees that banks charge to merchants for their participation in credit-card transactions:
- It’s a form of price controls
- It’s a windfall for retailers
- It’s the result of some-state boosterism by Sen. Durbin (D-Ill.)
- It “ignore[s] that banks must cover the costs of processing transactions, including taking on the risk of fraud.”
- Congressed decided to pick a “winner” between banks and merchants
The Star-Tribune also notes the impact on one bank with a large number of employees in Minnesota: “TCF Financial sued the Fed over the amendment, warning that the 12-cent limit would cut its annual profits from $120 million to $70.4 million.” If that’s actually the case, jobs are threatened by political fiat.
The success and failure of TCF should depend on how well it serves the needs and wants of its consumer and business customers–not whether it (like Walgreens) has a powerful political patron.
By the way, you can read the TCF lawsuit (PDF) here; as far as legal documents go, it’s an interesting read.