The Federal Reserve’s proposal to price-fix the fee banks charge retailers when their customers pay for a purchase using a debit card is doing something that few other issues seem to be able to do these days – bring Republicans and Democrats together.
As this article from Bloomberg shows, there is increasing bi-partisan interest in changing the Fed’s proposed and very unfair cap. And the bi-partisan opposition to the plan isn’t just coming from junior or newly elected members of Congress.
Former House Financial Services Committee Chairman and current Ranking Democrat Barney Frank (D-MA) has now made his continued opposition to this change clear. Not only is it a strong statement, the fact that Frank said he’ll follow House Republicans lead on this shows that he isn’t simply playing for headlines on this issue; he understands his role in the process that’s ahead and has agreed to make it work to reverse the damage that has already started to occur.
The comments by Rep. Randy Neugebauer (R-TX) are equally as important. Neugebauer, a key member of the House Financial Services Committee who is personally close Chairman Spencer Bachus (R-AL), made it clear that he considers the mandate from Dodd-Frank to the Federal Reserve to be price fixing and, therefore, absolutely unacceptable. His statement is also an indication that House Republicans understand that there’s a problem that has to be corrected and that they have a responsibility to deal with it.
As I’ve discussed a number of times, this proposed fee is already causing huge headaches and real economic pain for consumers and the economy as a whole because of the unwarranted low level at which the fee was set by the Fed. Even before it actually goes into effect, many consumers have already seen services from their banks reduced and additional fees imposed because of the proposed cap. Many investors suffered huge and virtually immediate losses when the fee was announced and it became instantly obvious that banks would suffer substantial losses as a result. And at a time when increased consumer spending is one of the key things needed to get the economy growing, the Fed’s proposal will make it harder for consumers to use debit cards, which over the past year has overtaken credit cards and cash to become the purchase option of choice.
Barney Frank’s statement to Bloomberg about working to fix the problem is the first in what I suspect will be a steady stream of opposition from both sides of the political aisle to what the Fed proposed. In the coming weeks an increasing numbers of senators and representatives will publicly agree with what Frank and senior Republicans are saying on this issue and either force it to be reexamined or to delay the plan’s effective date until more and better information than the Fed had when the proposal was released can be obtained.