A Further Perspective

Blame Transfer Day

The mainstream media gins up a campaign to shift blame for fees away from Obama, Durbin, and Dodd-Frank.

By 11.7.11

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It is amazing, if you think about it, the types of price hikes that get the MSM -- or "drive-by media" as Rush Limbaugh calls them -- and liberal politicos in a tizzy. They think it's no big deal, for instance, that a family staple such as light bulbs will probably increase by more than 20-fold due to "energy efficiency" mandates that go into effect starting next year.

The New York Times buried in its "Energy & Environment" section an article that noted that replacements for the banned 100-watt incandescent light bulb "sell for $5 apiece and more, compared with as little as 25 cents for standard bulbs." The article added that replacements that emit the same amount of light can exceed $100 per bulb. But the only time the light bulb ban gets in the front pages is for the purpose of an MSM to give preachy Jon Stewart-like lectures about how conservatives opposed to the ban shouldn't distract from the "real issues" like a debt ceiling breach that might shut down the Department of Education for a week.

Now now, they reason, it doesn't matter if the cost of light bulbs means that Junior can't have a new sweater for school. The important thing, the Jon Stewart wannabes rationalize, is that the Department of Education will still be there to boss the local school around. And, looking straight at the early Northeast snowfall last weekend, they proclaim that "after all we need the light bulb ban to halt the menace of 'global warming.'"

But let Bank of America, as well as regional banks such as SunTrust and Regions Financial, put in a $5-a-month debit card fee, and suddenly it's a national crisis meriting front-page news! The media ginned up Bank Transfer Day, an event that was set for November 5 with the ostensible purpose of punishing BofA and other fee-imposing banks -- which all have now rescinded the debit fee -- by having consumers transfer accounts to community banks and credit unions.

There is nothing wrong with looking around for the bank or business that gives you the best deal. As Ross Kaminsky noted in TAS, that's called capitalism. But those who participated in Bank Transfer Day should know it won't lower fees for consumers nor shore up smaller institutions. Nor was it intended to do these things by many of its organizers. The purpose was to distract the public from regulations like Dodd-Frank that put a stranglehold on consumers and businesses of all sizes.

You see, for liberals and the MSM, the important thing about price hikes is not the impact they have on the average family. Rather, what matters most is whether new consumer cost is something that can be blamed on private sector "greed" and thus fan the flames for another big government takeover.

That's what they did with the BofA fee, even though as TAS readers know, a large chunk of these fees can be blamed on the price controls of the Durbin Amendment to the Dodd-Frank financial "reform" rammed through Congress in 2010. The measure inserted into Dodd-Frank by Senate Majority Whip Dick Durbin (D-Ill.) limits the amount that banks and credit unions can charge retailers for the interchange fee -- or "swipe fee" -- for processing a debit card to what the government deems "reasonable and proportional to cost." It stipulates that only "incremental costs" can be considered in setting the price controls.

Under the interpretation of the Federal Reserve, this means that the financial institution can't profit on the retailer side and can't even recover many costs, such as those for computer equipment and call centers. Perhaps out of concern for bank solvency, the Fed almost invited banks and credit unions to impose new fees on consumers, pointing out in its regulation that "the interchange fee standard would not limit the ability of an issuer to earn revenue from other sources, such as by charging fees to its cardholders."

In the meantime, consumers have not seen any particular "Durbin discounts" at Wal-Mart, Walgreens, Home Depot, or the many other profitable retailers who lobbied for and are reaping an estimated $12 billion windfall from these price controls. "To my knowledge not one major (or for that fact minor) retailing establishment is offering consumers rebates for using debit cards," financial analyst Richard Bove told FoxBusiness.com. The news site noted that "a search of databases covering the retail industry shows little to no rebates offered to retail customers for the swipe-fee cap."

So if they were really angry about these new fees' impact on families, progressive politicians would simply repeal the Durbin Amendment. Or they would at the very least they would jawbone retailers to pass on their savings from the price controls, which wouldn't be very effective, but would at least be sincere.

But the main concern of these politicos and their MSM defenders was not the toll on the "99 percent," but the possibility that their regulations would be blamed for it. In a revealing answer at a White House press conference, President Obama said that what he most objected to was BofA and others "using financial regulation as an excuse to charge consumers more." Obama added: "Basically, the argument they've made is, well you know what, this hidden fee was prohibited so we'll find another fee to make up for it. Now, they have that right, but it's not a good practice."

So there you have it. Bank Transfer Day should have been called "Blame Transfer Day," because for many of its architects, it was more about making sure progressives and the regulatory state don't get blamed, rather than about helping consumers or saving community banks and credit unions.

For evidence, one need only do some minimal digging for the political connections of some of the organizers. Take Molly Katchpole, who has gotten fawning MSM coverage for starting the petition against Bank of America's debit fee on Change.org. CBS's Early Show described the 22-year-old Washington, D.C. resident as "working two part-time jobs, and living paycheck-to-paycheck."

But CBS, ABC and CNN neglected to specify Katchpole's politics or even name one of her "part-time" employers. which could be relevant to the story. On her LinkedIn profile, Katchpole lists her job as account manager at the communications firm Winning Over Washington. According to Roll Call, the firm was founded by the former communications director of the Service Employees International Union, and clients "include SEIU and some Democratic candidates."

And here are some additional clients listed on the Winning over Washington website : AFL-CIO, National Education Association, Democratic, National Committee, Democratic Governors Association, and EMILY's List. As described by the blog Joust the Facts, which gets a hat tip for being one of the first to catch Katchpole's connections, this list represents "the usual broad spectrum of interests, from far left to farther left."

Then, there are Katchpole's other petitions on Change.org. These include a letter calling on GOP presidential candidate Herman Cain to release his accusers from their non-disclosure agreements, a pledge to "help to win the election by organizing in my community" to repay the president for Obamacare's mandate for covering birth control in insurance policies, and a demand to stop a Congressional investigation of Planned Parenthood. If Katchpole is indeed living "paycheck to paycheck," it's time for her progressive employers to give her a raise!

While Katchpole's petition and Bank Transfer Day may help deflect blame from Durbin, Obama, and Dodd-Frank, they won't help consumers and will do little for smaller banks and credit unions. Even before BofA announced the debit fee in September, a Bankrate.com survey found that in the year since passage of Dodd-Frank and Durbin's measure, just 45 percent of non-interest bank checking accounts were free, down 76 percent from two years earlier, and that the average monthly fee for a non-interest account was $4.37, up 75 percent from a year earlier.

And even though smaller financial institutions are technically exempt from explicit price controls, they are subject to other provisions of Durbin's measure and fear merchants will discriminate against the debit cards they issue. As the Credit Union National Association has stated: "[The Durbin Amendment] will impose a severe hardship on credit unions with debit card programs, draining the revenue they need to offset the costs of providing card services. Much as they would prefer not to, credit unions will have no recourse but to make up these costs by imposing new fees or service restrictions on their members. How are consumers better off under this scenario? The plain fact is they are not."

So if consumers really want to stop higher banking fees, they should organize a Bad Policy Transfer Day and tell Congress to get rid of the Durbin Amendment and much of the rest of Dodd-Frank. They can start by "billing" those responsible with "Durbin Dollars," downloadable on the website of my organization.

Trey Kovacs, a policy analyst at CEI, contributed to this article.

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About the Author
John Berlau is Senior Fellow for Finance and Access to Capital at the Competitive Enterprise Institute and blogs at OpenMarket.org.