Strike Zones, 60 Votes and the Interchange Amendment

When I was young I was a baseball player—a southpaw pitcher. I learned early on that each umpire had a slightly different variation on the strike zone. As a player and pitcher, there was nothing I could do about that. You could not complain, you could not whine, you either adjusted to it or you lost. It’s that simple. The only thing I hoped was that regardless of where each umpire set his strike zone, he would be consistent.

No one can say that the Senate is not consistent when it comes to the 60-vote rule. Once used only on the highest-profile votes, a 60-vote threshold for winning legislative measures has been the norm for more than a decade now. We all know that—we all know where the “strike zone” is. In the case of the interchange issue, we were not able to get the 60 votes we needed to win.

So now is not the time to whine or complain that the strike zone changed. It was consistent with the Senate’s modern idea of a majority. We just were not able to get the “strike out.” We came close, but in baseball and politics, close does not get it done.

So rather than complain about strike zones and supermajorities, ICBA will move forward—not back. We will find other ways to win this issue for our community banks—and ultimately we will prevail. Just like a good pitcher, you learn from your setbacks and you keep your eyes focused on the next batter. Because the object is to win the game.

Big-Box Stores Selling Smoke and Mirrors on Interchange

A recent Washington Post op-ed suggests that small businesses should be wary of the promises of big-box retailers. A study conducted by David Merriman and Joseph J. Persky found that a new Wal-Mart in a Chicago neighborhood contributed to the closure of up to 82 nearby independent businesses.

So it certainly seems odd that big-box retailers such as Wal-Mart are teaming up with small businesses to impose government price fixing on debit card interchange. While large retailers claim that government interference will help small businesses compete, their internal communications show other motivations. For example, a recent e-mail from a top official at Sears Holdings lamented efforts to delay debit interchange price fixing because it would mean $1 billion a month in lost revenue for merchants.

As the Merriman/Persky study demonstrates, this additional cash for mega-retailers won’t do small businesses a whole lot of good. What’s good for “big box” isn’t good for “mom and pop.”

Community banks, which are small businesses themselves, aren’t fooled by the claims on behalf of government interference in the debit card marketplace. The plan is simply bad news for community banks, small businesses and consumers, whether they are in Chicago or Main Street communities across the nation.

Merchants Having it Both Ways on Interchange and Fraud

A recent security breach helps demonstrate that when it comes to fraud and interchange price fixing, merchants apparently are looking to have it both ways.

The data breach at Michaels Stores affected stores in at least 20 states after fraudsters replaced PIN pads with fraudulent “skimming” devices. Of course, as I noted in an American Banker op-ed, while Michaels is responsible for the security failure, community banks and other financial institutions have to take the actual financial hit.

Thankfully, debit interchange revenue helps community banks quickly reissue debit and credit cards to customers to protect them against these types of fraud. Unfortunately, once the Federal Reserve’s proposed rule cuts debit interchange revenue to below the cost of providing the service, future fraud costs will be borne by consumers and the community banks that serve them—not interchange revenue or the retailers who fail to protect customer card data.

While merchants clamor for government price fixing of debit card interchange to boost their bottom line, they also count on financial institutions to provide fraud protection that is funded by interchange revenue when their stores are compromised.

Do you get my drift? This is yet another reason why ICBA is fighting for legislation to delay the Fed rule and study the interchange issue, so policymakers can catch on as well.

Interchange Legislation—A Reason to Dig Deep

The will of the nation’s community bankers to make their voices heard in Congress has never ceased to amaze me. Once again, it is time for community bankers to stand up, fight, scream and be heard on the terribly misguided and dangerous interchange rules that threaten our ability to continue to serve Main Street customers.

Bipartisan legislation is pending in both the House and Senate to delay the draconian Federal Reserve proposed rule on debit card interchange. The legislation also would require federal banking regulators to study the rule’s impact on community banks and their customers. I can tell you without a study that the impact will be severe indeed—and the consumer will be the biggest loser—and I am not talking about a TV reality show—I am talking real life!!

ICBA has fought tooth and nail against debit card interchange price fixing from the moment Sen. Durbin announced his intentions to offer his misguided amendment, and now we have legislation we can get behind to slow this lethal financial virus of a rule. That’s why I am asking every community banker in the nation to rattle your member of Congress’s cage—House and Senate—to co-sponsor these critical measures. MAKE YOUR VOICE HEARD ON THIS ISSUE! DO NOT WAIT FOR THE OTHER GUY—YOU ARE THE OTHER GUY—DO IT!

With a positive reputation among lawmakers, community bankers are effective advocates. This effort on interchange is as important as any in my memory to ensure that community banks and their customers are not harmed and that our nation’s Main Street communities continue to thrive. Dig deep and leave no doubt in any member of Congress of where we stand.