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Haven't we already seen this movie? Federal Reserve Chairman Ben Bernanke and FDIC Chairwoman Sheila Bair returned to the Senate Banking Committee yesterday to testify on implementing the Wall Street Reform and Consumer Protection Act (Dodd-Frank).
Sen. Jon Tester (D-MT) questioned Bernanke and Bair again on the workability of the small issuer exemption under the Durbin Interchange Amendment. Bernanke repeated his assertion from his last Banking Committee appearance in February that the exemption will be difficult to execute and lost interchange revenue may lead to failures of certain community banks and credit unions. Bair did not go quite as far as Bernanke by asserting lost interchange revenue probably will not cause any failures, but she said that Durbin will likely cause small bank revenues to decrease while fees for consumers will increase.
Bernanke's real news came when he told Tester the Fed considered (under its Reg E authority) to require two-tier pricing in the final Durbin Amendment rule. Bernanke also hinted the Fed is close to issuing the final rule (in so many words). We should expect rampant speculation on the exact timing in the coming days. Other speculation centers on whether the Fed, in absence of any intervening Congressional action, will delay the effective date (July 21) in the final rule. Legally, can they?
The Senate punted this week any legislative agenda beyond judicial nominations. Sen. Tester's "Delay Durbin" Amendment remains pending to the small business bill (S. 493). Senate leaders cannot agree on the terms bringing this bill to a close. News reports suggest Tester may opt to attach his amendment to other legislation expected to hit the Senate floor in the coming weeks. These bills are extending certain parts of the Patriot Act and an energy efficiency bill.
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