{"id":2909,"date":"2011-08-22T05:20:22","date_gmt":"2011-08-22T13:20:22","guid":{"rendered":"http:\/\/hodakvalue.com\/blog\/?p=2909"},"modified":"2011-08-22T05:20:22","modified_gmt":"2011-08-22T13:20:22","slug":"the-durbin-fee","status":"publish","type":"post","link":"http:\/\/hodakvalue.com\/blog\/the-durbin-fee\/","title":{"rendered":"The Durbin Fee"},"content":{"rendered":"

via Thom Lambert at TOTM<\/a>:<\/p>\n

Whoever would have guessed that Mr. Durbin\u2019s valiant effort to prevent future financial crises by\u00a0imposing brute price controls would have\u00a0had\u00a0these sorts of unintended consequences?<\/em><\/p><\/blockquote>\n

Thom is referring to the government’s regulation of debit card swipe fees.<\/p>\n

Government price controls typically have three predictable (sometimes, though not always, unintended) effects.\u00a0 Let’s see if they apply here:<\/p>\n

Politicization of price setting:<\/strong><\/p>\n

Ben Bernanke, who apparently doesn\u2019t have enough on his plate, was tasked with determining\u00a0banks\u2019 processing and fraud-related costs and setting a swipe fee that\u2019s just high enough to cover those costs.\u00a0 Mr. Bernanke first decided that the aggregate cost totaled\u00a0twelve cents per swipe.\u00a0 After receiving over 11,000\u00a0helpful comments, Mr. Bernanke changed his mind.\u00a0\u00a0Banks\u2019\u00a0processing and fraud costs, he decided, are really 21 cents per swipe, plus\u00a00.05 percent of the transaction amount.<\/em><\/p><\/blockquote>\n

Check.<\/p>\n

Complex market workarounds in response to “one-size-fits-all” price<\/strong>:<\/p>\n

The WSJ<\/a> is reporting that a number of banks,\u00a0facing the prospect of\u00a0reduced revenues from swipe fees, are going to start charging customers\u00a0an upfront, non-swipe fee for the right to make debit card purchases.\u00a0 Wells Fargo, J.P. Morgan Chase, Suntrust,\u00a0Regions, and Bank of America have\u00a0announced plans to try or explore these sorts of fees \u2014 \u201cDurbin Fees,\u201d you might call them.<\/em><\/p><\/blockquote>\n

Check.<\/p>\n

Economic harm to the intended beneficiaries of the law<\/strong>:<\/p>\n

Fortunately for me, I can just switch to using my credit card, which will not be subject to\u00a0the price controls\u00a0imposed by Messrs Durbin and Bernanke.\u00a0 Because I earn a decent salary and have a good credit history, this sort of a switch won\u2019t\u00a0really hurt me… Of course, lots of folks \u2014 especially those\u00a0who are out of work or have defaulted on some financial obligations because of the financial crisis and ensuing recession \u2014 don\u2019t have access to cheap credit.\u00a0 They can\u2019t avoid Durbin Fees the way I (and Messrs Durbin and Bernanke) can.<\/em><\/p><\/blockquote>\n

Check.<\/p>\n

Thom then proposes that subsidies may be on their way to those “protected” (i.e., disenfranchised) by this law, harkening Reagan’s famous quip about government action<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

via Thom Lambert at TOTM: Whoever would have guessed that Mr. Durbin\u2019s valiant effort to prevent future financial crises by\u00a0imposing brute price controls would have\u00a0had\u00a0these sorts of unintended consequences? Thom is referring to the government’s regulation of debit card swipe fees. Government price controls typically have three predictable (sometimes, though not always, unintended) effects.\u00a0 Let’s […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"class_list":["post-2909","post","type-post","status-publish","format-standard","hentry","category-unintended-consequences"],"_links":{"self":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/2909","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/comments?post=2909"}],"version-history":[{"count":1,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/2909\/revisions"}],"predecessor-version":[{"id":2910,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/posts\/2909\/revisions\/2910"}],"wp:attachment":[{"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/media?parent=2909"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/categories?post=2909"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/hodakvalue.com\/blog\/wp-json\/wp\/v2\/tags?post=2909"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}