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?