A Bridge Too Far

In the end, reaching 60 votes to delay the implementation of the Durbin Amendment debit card interchange rules that had passed overwhelmingly in 2010 was always a stretch.  In this political climate, getting a majority of Senators to agree on much of anything is a daunting task.

It is somewhat heartening to know that 54 members of the “world’s greatest deliberative body” saw fit to fix one of the biggest debacles created by the Dodd-Frank Wall Street Reform Act.  I can readily understand Democratic opposition to the Tester Amendment that sought to delay the rules.  They are often seduced by a populist “help the little guy” argument no matter how disingenuous; though 17 of them didn’t fall for it this time and they are to be commended. 

It is harder to understand the motivation of the 12 Republicans that voted with Durbin on this issue.  One positive here is that this number is down from the 17 Republicans who initially voted to intervene in this marketplace last July.  I suppose I can understand the votes from Senators in a state where a retail giant like Home Depot is headquartered.  After all they are among the biggest winners in this fight.  Contrary to Senator Durbin’s plaintive pleas for the “mom and pop” shops, it is the big box retailers who will enjoy the largesse of this Congressional giveaway, or should I say takeaway.  In fact, it was the CFO of Home Depot who in a recent call with shareholders said that Durbin implementation will mean $35M to their bottom line annually.  But wait, I thought that any savings was to be passed on to consumers.  Is it savings after the $35M?

Freshman Senator John Boozman (R, AK) was a profile in political courage by resisting pressure from a rather large retailer headquartered in Bentonville, AK and voting for the Tester Amendment.  After the vote he said that he couldn’t vote for something that allowed government pricing. 

Republicans purport to be the party of free markets and less government.  In this case, Senator Barbara Mikulski (D, MD), not usually known as a big free market advocate and 17 of her Democratic colleagues were just that.  And Senator Lindsey Graham (R, SC) and 11 of his Republican colleagues were not.  At least I know who to thank when my free checking account goes away.

Republicans can point to a number of achievements.  Unfortunately their latest achievement is defeating the Tester Amendment.

A Bridge Too Far

Tester Bends, Doesn't Break in Interchange Battle



Sen. Jon Tester: No retreat, no
surrender. Montana Democrat
plows ahead with plan to
delay implementation of Durbin
interchange rules.



The week began slowly for "Delay Durbin" proponents in the U.S. Senate where Majority Leader Harry Reid decided to debate oil company tax breaks, offshore drilling and judicial nominations. The small business innovation bill (S. 493), where the Tester Amendment to study and delay the rules on debit card interchange is pending, appears to be in legislative limbo (or purgatory if you wish). Two months remain before the Durbin Amendment is to take effect and the Federal Reserve Board has yet to publish a final rule.

Mid-week saw a significant momentum shift. The highlights are as follows:



Senate Majority Leader Reid.
If Tester can show support, he'll
give him a vote on delaying
Durbin.



• Sen. Durbin spent the last moments of the Senate session on Tuesday giving his interchange "stump" speech. He lashed out again at familiar opponents such as the Wall Street Journal and the American Bankers Association. Durbin revealed one news nugget by suggesting the Fed's final rule will be out the first week of June (Blogger's Note: Ben Bernanke is probably the only person who knows the exact date).
• 
  Majority Leader Harry Reid on Wednesday publicly backed Durbin against delaying the final rule, but he will give Tester a vote on his amendment provided Tester can demonstrate 60 votes in support.

Sen. Tester announced late Wednesday that he will revise his amendment to lower the study period from 24 months to 15 months. News reports speculated Tester's move was to garner a handful of remaining votes pushing him over 60 votes.

Tester is likely to file a revised amendment to another bill to accommodate the study period change and possibly other modifications. Many believe Tester will file the new amendment to the Patriot Act renewal bill which the Senate is likely to debate the week of May 23 (certain parts of the Patriot Act are set to expire May 28).

Please visit next week as this tug-of-war grows ever more intense.

Tester Bends, Doesn't Break in Interchange Battle

Groundhog Day and the Durbin Interchange Debate

 

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.

We all should be channeling our inner Bill Murray to bring this Groundhog Day to an end.

Groundhog Day and the Durbin Interchange Debate

Will the Tester Amendment Be Part of the Small Business Bill?

More than a month has passed since Federal Reserve Chairman Ben Bernanke wrote Congress about missing the April deadline to issue the final rule on debit card interchange and network exclusivity. "Delay Durbin" proponents and opponents have been locked in battle on Capitol Hill, in the news media and in the courts. At this writing, we do not have a winner.

Still up in the air is whether Montana
Democrat Jon Tester's "stop and
study" bill regarding the
Durbin Interchange Amendment will
be part of any small business bill
that makes it out of the Senate.

Congress returned to work after a two week recess. Sen. Jon Tester's (D-MT) amendment to "stop and study" the Durbin Amendment remains pending to S. 493, a small business innovation bill. The Senate has had S. 493 under consideration since mid-March in an off-and-on capacity. Sen. Majority Leader Harry Reid (D-NV) sought to end debate on S. 493, but the vote failed 52-44 (60 votes were required to end debate). Once the vote failed, the Senate tabled further consideration of S. 493 while both sides attempt to resolve several "contentious' amendments such as regulatory reform and budget cuts. The Tester amendment remains in limbo.


More House members signed on as cosponsors to H.R. 1081, the House version of Sen. Tester's efforts. The total is more than 90 as of this week. Two Republican members from South Carolina (Reps. Joe Wilson and Jeff Duncan) removed their names as cosponsors recently suggesting the tug of war between the financial services industry and retail community is alive and well.


Back to the Senate side, leaders will likely reach a deal on final amendments to the small business bill in the coming days or decide to shelve it all together. My sense is a deal will be struck, but the question remains whether a vote on the Tester Amendment is part of the deal. If it doesn't happen with the small business bill, Tester will look for another legislative vehicle as the clock ticks toward July 21.

Will the Tester Amendment Be Part of the Small Business Bill?

A Tester Vote Could Be a Week Away

Could a vote on delaying implementation of the Durbin Interchange Amendment be far off? According to The Las Vegas Review Journal, maybe not. 

Senate Majority Harry Reid continues to work with both Sen. Jon Tester, D-Montana, and Senate Whip Dick Durbin, D-Illinois, on the details of Tester's bill, which would delay implementation of Durbin's long-sought cap on debit card interchange, says the Review Journal.

The Senate will try to finish consideration of its small business bill (S. 493) the week of May 2. The article suggests a vote on the Tester amendment is likely.

On the House side, the Financial Services Committee released a tentative May hearing/mark up schedule. Rep. Shelley Capito's bill (H.R. 1081) is nowhere to be found. The House continues, it appears, to be content to let action happen on the Tester Amendment first.

DIA.org will report on whether Federal Reserve Chairman Ben Bernanke provides any information on the final rule's timing at his press conference--as well as the Senate's floor schedule for May 2.

A Tester Vote Could Be a Week Away

Measure Twice, Cut Once

As I mentioned in a previous blog, budget wrangling would consume Congressional energy and compress floor time for policy issues like the Durbin Interchange Amendment. This week certainly was no exception. And, with passage of legislation to fund the government through the end of the fiscal year, Congress is now taking its traditional April recess and won't return to Washington until May 2.

The Senate continued off and on consideration of a small business bill (S. 493) for the third consecutive week. The Tester Amendment to delay the Federal Reserve rule on debit card interchange remains pending to S. 493, but so do several other amendments. Senate leadership and the bill sponsors continue negotiations on the remaining amendments to be brought to a vote before final passage.

Yesterday, Sen. Tester (D-Montana) took advantage of some floor time to pitch his amendment once again. In a reasoned and deliberate speech to his colleagues, he defended his request to delay the implementation of Durbin so that lawmakers could get it right. He used the old carpenter metaphor of "measure twice, cut once." Speaking for rural America he defended the proposed delay so that interchange regulation will not adversely affect credit unions and community banks, which are an important part of the financial system for rural America. Take a look:



Sen. Durbin perhaps was too busy excoriating JPMChase CEO Jamie Diamond to jump to the floor and rebut Tester.

The House companion to the Tester effort (H.R. 1081) gained several more cosponsors this week (currently standing at 85). At this writing, the House appears likely to continue its position that the Senate act first.

Measure Twice, Cut Once

Tester and Frank Drive News of the Week

Frustration defined is watching the U.S. Senate trying to pass bill on the Floor. The Senate's attention this week was dedicated to the small business bill (S. 493) and government shutdown/budget talks. Sen. Jon Tester's amendment (#267) to delay implementation of the interchange debit card rules remains pending to the small business bill, but no agreement has been reached to call it up for a vote at this writing.

Sen. Tester took both to the Senate Floor and the media airwaves to tout his effort to delay and study the debit card rules. On CNBC's Squawkbox, Tester expressed confidence that he will have 60 votes in support of his amendment when called on the Floor. Sen. Richard Durbin also spoke on the Floor and with CNBC against any effort to delay implementation of his amendment.

On the House side, Rep. Barney Frank, former chair of the House Financial Services Committee, and one of the namesakes of the sweeping Dodd-Frank Wall Street Reform Act, made news by supporting legislation that would delay implementation of the Durbin Amendment. The House bill (H.R. 1081) gained more bipartisan co-sponsors this week (current total is 71). Frank's support for delay makes it a near certainty the House can pass a bill with a strong, bipartisan majority.

This takes brings us back to the Senate.. The Senate Floor schedule for next week has not been announced and it is unclear how a possible government shut down will affect Floor activity. We do know both the House and Senate are scheduled for a two week recess (Apr. 18-29). Again, a government shutdown could call into question that schedule as well.

The legislative process, above all else, requires patience sprinkled with some humor.

Tester and Frank Drive News of the Week

Fed May Hold Fate on “Delay Durbin” Bills

Congress is back in business (session, i.e.) next week, but the committee schedules are a bit slow getting published. At this writing, the House Financial Services Subcommittee on Oversight and Investigations will conduct a hearing on March 30 to explore the budget implications of Dodd-Frank. I would expect the interchange issue to be raised in some capacity.

The Senate Banking Committee has scheduled a hearing on March 29 relating to housing, but another hearing for next week could be announced today or Monday.

Sen. Jon Tester’s legislation to delay the Durbin Amendment (S. 575) picked up two co-sponsors recently. Sen. Max Baucus (D-MT), chair of the Finance Committee, and Sen. Daniel Akaka (D-HI), member of the Banking Committee, added their names in support of S. 575. More than 10 House members agreed this week to co-sponsor Rep. Shelley Moore Capito’s (R-WV) “delay Durbin” bill (H.R. 1081). Total House co-sponsors currently stand at 42.

The Federal Reserve may be unintended decider on the legislative momentum for the Tester and Capito bills. The Fed’s final rule on implementing the Durbin Amendment is due April 22. If the final rule fails to address concerns with the small issuer exemption and resolve how fraud prevention may impact interchange rates, we should expect Tester/Capito proponents to swing into action.

Fed Chairman Ben Bernanke said this week he wants to address legitimate concerns with the small issuer exemption in the final rule. Since the Fed defended its proposed rule in February by telling Congress that it was merely following language in Dodd-Frank (Section 1075), it would appear inconsistent that the Fed get “creative” in the final rule. We will find out in about a month.

Meantime, Tester/Capito proponents may be in a “wait and see” approach until the final rule gets published.

Fed May Hold Fate on “Delay Durbin” Bills

Pen Meet Paper: Interchange Delay Bills Finally Introduced

Ending weeks of speculation, Sen. Jon Tester (D-MT) and Rep. Shelley Moore Capito (R-WV) introduced legislation (S. 575/H.R. 1081) to halt the implementation of the Durbin interchange amendment as proposed by the Federal Reserve Board. S. 575 was referred to the Senate Banking Committee and H.R. 1081 was referred to the House Financial Services Committee. At this writing, 13 Senators have co-sponsored the Tester bill and 43 Representatives have co-sponsored the Capito bill.

S. 575/H.R. 1081 propose to do the following:

-- Require more banking agencies (FDIC, OCC and NCUA) to join the Federal Reserve in studying the Durbin Amendment effects

-- Halt implementation of the Fed's final rule (schedule to be July 21) while the study would take place (the Senate bill proposed a two year study while the House bill calls for a one year study)

-- Make "null and void" any final Fed rule implementing the Durbin Amendment if a sufficient number of regulators deem it did not adequately assess the costs associated with debit card transactions, the effects on consumers and the smaller issuer exemption

In the normal legislative process, the Senate Banking Committee and House Financial Services Committee would hold additional hearings and then schedule a mark up session (amend the bills and vote them to full Chamber). No one can be sure at this time how "normal" this legislative process will be. Speculation already exists that Sen. Tester may bypass the Banking Committee and offer his bill as an amendment to a budget bill.

The one thing we do know is that S.575/H.R. 1081 are not halting the Federal Reserve's statutory deadline (April 22) to issue its final rule implementing the Durbin Amendment. Congress is in recess the week of March 21, but we hope to have the Committee schedules for the week of March 28 posted here by next Friday.

Pen Meet Paper: Interchange Delay Bills Finally Introduced

House to Senate: You Go First

Rep. Spencer Bachus, chair of the House Financial Services Committee, made the most significant news this week on the "Delay Durbin" front. He told a group of international bankers that the House would wait for the Senate to act on legislation delaying the Federal Reserve's interchange proposed rule on debit cards. Chairman Bachus took this position despite his Committee having two hearings in the last month on this issue and hearing broad, bipartisan support for a delay and study approach.

So, what is happening on the Senate side? News reports this week suggest a bill introduction to delay Durbin is eminent. These reports also identified Sens. Jon Tester (D-MT), Tom Carper (D-DE) and Bob Corker (R-TN) as the lead sponsors. The good news here is all three Senators are members of the Banking Committee which would first consider any legislation affecting the Durbin Amendment from Dodd-Frank. Expect a bill to be dropped the week of March 14.

Two interesting organizations jumped into the Durbin discussion this week as well. The Officer of the Comptroller of the Currency (OCC) wrote the Federal Reserve to voice strong concerns with the proposed rule's inflexibility for companies to recover identifiable costs associated with running a debit card program. The National Association for the Advancement of Colored People (NAACP) wrote House Speaker John Boehner (R-OH) this week urging the House to move swiftly on legislation to delay the implementation of the Durbin Amendment because study has not taken place on the potential impact to the unbanked and "risker" consumers.

Please visit my blog next week as I hope to finally report on actual legislation and its contents.

House to Senate: You Go First

Does the CUNA Meeting Provide Insights on the Future of the Durbin Interchange Amendment?

The big news this week on delaying the Federal Reserve's proposed rule on debit card interchange happened in Washington, but not at the usual venue.

The House Financial Institutions and Consumer Credit Subcommittee essentially held its second hearing on the Fed's proposed rule on Wednesday. The hearing centered on the effects of the Dodd-Frank Act on small financial institutions and businesses. The first panel comprised of small financial institutions (chiefly credit unions and community banks) voiced concerns with the potential, damaging effects of the Durbin interchange amendment. [They additionally voiced concerns with the Consumer Financial Protection Bureau even though Dodd-Frank exempts institutions with less than $10 billion in assets from the CFPB's authority.]

Sen. Jon Tester says Senate
 may revisit Durbin

The real news was generated off Capitol Hill at the Credit Union National Association's (CUNA) annual government affairs meeting. House Speaker John Boehner, CFPB overseer Elizabeth Warren and House Financial Service Committee Chairman Spencer Bachus highlighted a "who's who" roster of important Washington decision-makers.

Two Senate Banking Committee members (Jon Tester of Montana and Mike Crapo of Idaho) assured the CUNA audience the Senate would revisit the Durbin amendment is some capacity given the questions raised by the small issuer exemption. [Please note Sen. Crapo voted for the Durbin amendment last year while Sen. Tester did not.] Speculation arose that Sen. Tester would soon introduce a bill. And, on the House side, Rep. Shelley Moore Capito, chair of the FI Subcommittee, would be the lead sponsor.

Despite this positive news from the CUNA conference, we unfortunately have yet to have a bill formally introduced in the House or Senate. The good news is Congress is building a hearing record on the debit card interchange issue so swift action could occur once a bill is dropped in the hopper. The key question is whether any proposed bill will simply delay the effective date or will Congress be compelled to "fix" the Durbin amendment in some way. Given the nature of the nature of the legislative process, the latter may be a real possibility.

As always, please stay tuned.

Does the CUNA Meeting Provide Insights on the Future of the Durbin Interchange Amendment?