Restoring American Finacial Stability Act of 2010

Floor Speech

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Mr. DURBIN. Mr. President, America was alarmed to learn that Times Square was closed for business because of the potential of a bomb threat. A vehicle was discovered with smoke coming out of it. Some alert people on the sidewalks and vendors called it to the attention of police, and they determined the contents of that vehicle at least included the crude elements that could have resulted in a bomb killing many innocent people. All they had to go on was the vehicle itself and a fleeting glimpse of the person who might have been responsible leaving, changing his shirt as he left that vehicle. It was a frightening situation where many innocent people who were visiting our largest city in America could have been killed just as on 9/11. What happened? Fifty-three hours later, our government arrested the prime suspect, the man who has conceded he was responsible for that vehicle in Times Square--53 hours.

I listened to some of the criticisms from those who come to the floor and say we should do this better, we should be more vigilant, we should change our approach. I would concede that we need to learn from every single incident how to make America safer, how to avoid those vehicles even being in Times Square in the first instance. But let's be honest--to arrest the person responsible for it within 53 hours is an indication of some pretty good work by law enforcement and intelligence officials.

Then comes the argument about Miranda rights. Should we be treating terrorists as enemy combatants or as criminal defendants? Should they be sent to military commissions for trial or to our courts? Well, the fact is, the person involved in the Times Square bombing incident was an American citizen. He cannot be tried in a military commission under existing law. There is a recourse for him, and that is in the courts of America.

If he is to be tried in the courts, the ordinary process of due process suggests he will receive a Miranda warning. In this circumstance, after a number of hours of interrogation, the suspect was given his Miranda warnings. We hear them often on television. It didn't deter him from continuing to offer information literally for days to our law enforcement and security officials.

Many have come to the floor and suggested it is a bad policy for us to consider giving Miranda warnings to those suspected of terrorism. What they failed to note--and I have never heard one of them concede--is this policy is a policy created by George W. Bush and his administration after 9/11. They decided it would be the basic standard when it comes to interrogating suspected terrorists, particularly those who are American citizens, that a Miranda warning would be given.

This past weekend, Attorney General Holder said he believes we should consider some other elements in terms of when the Miranda warnings would be given and when a person would be presented before a court. I think that is a reasonable challenge for us to look to. But remember that the last time the Congress tried to change basic Miranda warnings, a very conservative Supreme Court across the street said no. They said, in fact, that this is part of due process in the United States of America.

So let's approach this carefully. Let's try to take the politics out of it for a moment. Let's concede that the former Republican President made Miranda warnings part of his ordinary process in dealing with terrorists.

Let's also acknowledge that a lot of hard-working men and women, in the 53 hours after the discovery of that vehicle, did everything in their power to find the person responsible and were successful. Let's give them some credit. These are men and women who work night and day, virtually unheralded, who, in this instance, did an extraordinary job and should be acknowledged in a positive way and not in a negative way.

HEALTH CARE REFORM

There has also been conversation on the floor this morning about the health care reform bill. Make no mistake, not a single Republican Senator voted for it. In fact, they virtually boycotted the efforts to build this legislation, to write this legislation. Given ample opportunities to produce their own amendments or a substitute bill, they did not. When they offered a few amendments, they turned out to be amendments primarily designed to protect health insurance companies for a program known as Medicare Advantage. So at the end of the day, only the Democrats voted for health care reform.

Immediately, we heard from the other side of the aisle and from many of their supporters around the United States: Repeal it. Get rid of it.

Well, the American people see it differently. If Republican Senators are going to come to the floor and talk about polls, they should acknowledge that the polls clearly show the American people believe health care reform should be given a chance.

I think the Senator from Kentucky was suggesting to us this morning that we need to pull the plug on health care right now and stop. So does that mean he wants to eliminate the small business tax credit included in health care reform to help businesses with fewer than 25 employees pay for health insurance premiums? Does that mean the Senator from Kentucky wants to eliminate the $250 to be given to those under Medicare who use the Medicare Part D prescription drug program to fill the so-called gap in coverage called the doughnut hole? Does he want to eliminate that? Does the Senator from Kentucky want to eliminate our efforts to move forward so that children up to the age of 26 will be covered by family plans while they are finishing college and looking for a job? Does he want to eliminate and repeal that? Is that what he is looking for? I hope not.

The suggestion that we can't revisit this bill--and we will revisit it in the future--is just plain wrong. I have said on the floor before that there are few perfect laws that have been written and not many by U.S. Senators. In this circumstance, we did our very best, working with the experts.

The ACTING PRESIDENT pro tempore. The Senator's time has expired.

Mr. DURBIN. I ask unanimous consent for 5 additional minutes.

The ACTING PRESIDENT pro tempore. Is there objection? Without objection, it is so ordered.

Mr. DURBIN. Thank you. I will be glad to concede the floor to one of my Republican colleagues if they come during this 5-minute period.

When we wrote the health care reform bill, we relied on the best experts we could find. We were dealing with one-sixth of the American economy, which is the sum total of the cost of health care in our Nation, and we did our very best to move forward. It would have been an easier task had we had the cooperation and joint efforts of the Republican side of the aisle, but they decided to step away and say no.

SECRET HOLDS

The last point I wish to make is that we have reached a historic milestone in the Senate with the Executive Calendar. At this point, we have over 100 nominations to the Obama administration for positions, large and small, that have been held up by the other side of the aisle. I wish to salute Senator Claire McCaskill, Senator Sheldon Whitehouse, and a number of my colleagues who have come to the floor and challenged the fact that this calendar is glutted with over 100 nominees who can't be brought to the floor for a vote.

Now let's examine a historical parallel. At the same time in President George W. Bush's administration, there were 20 nominees being held. Now over 100 are being held. Overwhelmingly, these nominees have passed out of committee to the Senate floor with unanimous bipartisan votes or overwhelming bipartisan votes. They are not controversial. These men and women deserve an opportunity to have an up-or-down vote.

What is happening here is that these nominations are being held as bargaining chips for projects and for--I am not sure what. But it is unfair to these men and women who have said they will offer some time in their lives to public service and will go through the rigors of being examined and questioned and then stand up and try to help make this a better Nation by serving in a government post. There is nothing wrong with that. Whether it is Republican or Democrat--and many of these are Republicans--they should have that opportunity.

I would suggest to the Republican side of the aisle, let's not use these good men and women of both political parties as bargaining chips for something else. Let's eliminate the so-called secret holds where Senators can, in fact, hold up these nominees without ever disclosing publicly that they are responsible. If they have a legitimate grievance against the nominee, make that grievance known publicly, argue it on the floor. But to hold up innocent people, to leave them stranded on the Executive Calendar for weeks and months is unfair to them and certainly unfair to this administration.

I see the Senator from Tennessee in the Chamber, and I yield the floor to my colleague from Tennessee.

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Mr. DURBIN. Madam President, I have an amendment which has been filed and is at the desk, and a modification of that amendment, which I wish to explain for a moment.

It is an amendment related to interchange fees. Interchange fees are the fees charged to commercial establishments which accept credit cards. So if I owned a restaurant and accepted Visa or MasterCard, when my customer, who has a bill, presents the credit card to pay for it, then I have to pay a percentage of that bill to the credit card company. That is called the interchange fee.

That is separate and apart from the customer's relationship with the credit card company. This is the relationship of the merchant, the retail establishment, the small business, with the credit card company. Unfortunately, over the years, small businesses across America have had little or no bargaining power with the major credit card companies. They impose interchange fees on these businesses, and if you speak to some of the small businesses in Illinois or across the Nation, you will find that many of them feel they are being treated unfairly.

Let me give you an example. About half of the transactions that take place now using plastic are with credit cards, and there is a fee charged--usually 1 or 2 percent of the actual amount that is charged to the credit card. It is understandable because the credit card company is creating this means of payment. It is also running the risk of default and collection, where someone does not pay off their credit card. So the fee is understandable because there is risk associated with it.

But now gaining in popularity is this so-called debit card, where a person directly draws money from their checking account to pay that same restaurant. Had that person chosen to pay by check--a written check--it would have been banked by the restaurant in their own bank, and drawn from the bank of the customer, with no fee associated with it. If the customer uses a debit card--which accomplishes the same thing without the actual check paper involved--the credit card/debit card companies, Visa, MasterCard, and others--charge similar fees to what they charge for credit card. Yet there is virtually no risk involved in a debit card.

So many of these retail establishments and small businesses across America have come and said: We are not opposed to paying a reasonable, proportional amount for the use of a debit card, for example, at our business, but we cannot even get to first base with Visa and MasterCard. They say: We are going to charge you what we are going to charge you--take it or leave it.

As a consequence, I have submitted this amendment. This amendment is on behalf of small businesses across the United States which have rallied behind this because of their concerns about interchange fees on their cost of doing business. It says we will use the same mechanism we used in credit card reform--a bill that was brought to the floor by Senator Dodd of the Senate Banking Committee, which called on the Federal Reserve to establish the appropriate fees and charges to business establishments for the use of credit cards--and that these fees and charges be reasonable and proportional when it comes to debit cards. I do not think that is unreasonable. Senator Dodd offered that as part of the original credit card reform when it came to customers using credit cards. I do not think it is unreasonable to apply it to the business establishments.

You would think there would be general support of this across the board, except from the credit card companies and the biggest banks. But it turns out there is opposition to this from the so-called independent community banks and credit unions.

We created an exemption in my amendment saying if you are a so-called independent community bank that has assets of less than $1 billion, you will not be affected by this--believing we took the lion's share, the vast majority of community banks, and exempted them with the $1 billion exemption. Regardless, the independent community banks again teamed up with the American Bankers Association and said: We are going to oppose it anyway, even if the majority of our members are not covered by it. And credit unions, which go lockstep with the so-called independent community banks when it comes to a lot of banking issues, said the same thing. So in an effort to reach a compromise here that will help Members come to the support of this amendment, I am going to modify my amendment to extend and enlarge the exemption to institutions of $10 billion or less.

Let me tell you what that means. With the modification--changing it from $1 billion to $10 billion--it will have a dramatic difference. With a $10 billion exemption, 99 percent of banks would be exempt. All but the very largest banks in America--the ones that have a controlling interest in establishing interchange fees, I might add--99 percent of banks would be exempt. And 99 percent of credit unions would be exempt. All but three credit unions in the

United States have less than $10 billion. And 97 percent of thrift institutions would be exempt--19 thrift institutions across America.

When I have talked to my friends on both sides of the aisle, they have said: If you can find a way to resolve the opposition of the community banks and credit unions, then we are open to this. Many of them have said they believe small businesses and retail establishments are being treated unfairly and they wish to support this. But they wanted to make sure they did not harm local and community banks.

Well, I have gone from a $1 billion exemption to a $10 billion exemption. There are very few communities across America that have banks that will not be protected because of this enlargement of this exemption, and I urge my colleagues to consider that, and to also consider the other side of the equation. Think of the hundreds, if not thousands, of small businesses in your State that are being disadvantaged and treated unfairly with these interchange fees.

What we are asking for is to have an arbiter--in this case the Federal Reserve--determine whether the interchange fees, particularly for debit cards, are reasonable and proportional.

We also say you ought to allow a commercial establishment which accepts a credit card to establish a minimum amount which you can charge to a credit card. I went into Washington National Airport, standing at a news stand there, and was behind a woman who was charging 35 cents to a credit card. I said to the person at the cash register: Is that the lowest amount you have ever had charged to a credit card? She said: No. We had 25 cents charged one day.

If you look at the actual calculations of fees paid by that business for the use of that credit card, they lost money on that transaction. They did not make any money on that. By the time they paid the swiping fees and the interchange fees, at the end of the day, they made nothing. They could have lost money.

Is it unreasonable for a business to say: We are not going to accept credit cards for any purchase under $5 or $1? I do not think that is unreasonable since they are going to lose money in the process, and yet the credit card companies prohibit small businesses from even establishing those basic standards. They prohibit small businesses from saying: We will give you a discount on the price if you pay cash. Why? If we are truly going to have a competitive atmosphere and give small businesses in a struggling economy a fighting chance, why would we prohibit these things? Why would we give a monopoly--a virtual monopoly--situation here, where two major credit card companies can impose rules on small businesses which are so costly to them?

That is why I have submitted this amendment. It is not an easy amendment--I understand that--because we have some competition among friends here and Members will have to decide which they think is the just position. I hope they believe this amendment is. I hope they believe that small businesses--which currently have no bargaining power against these monopolies, such as Visa and MasterCard--deserve a voice in the process. I hope they believe that some of the unreasonable standards set by credit card companies and imposed on small businesses have to stop across America.

I cannot tell you how many glowing speeches are given in Congress on behalf of small businesses. We all know how much they mean to us in our communities and in our overall economy. Well, here is our chance. Senators will have a chance to vote on behalf of retail establishments and small businesses all across their States who have come to me, begging me to move forward on this amendment.

I have said--and I believe it is true--this is the first time anyone has offered an interchange fee amendment on the floor of the Senate or in the House of Representatives. The fact is, it has not been offered because it is controversial. Some people do not want to touch it: Stay away from it. Don't bring it up. Well, that is not fair to small businesses. They deserve for us to step forward, and to offer these amendments, and to make a policy choice.

When I tried to offer this amendment on the Credit Card Reform Act, they said: Wrong place. When I try to offer it on this bill related to banks and financial institutions, some have said: It is the wrong place.

I have concluded there is no right place. This is a good place because it relates to consumer protection, it relates to financial institutions, it relates to our economy and making sure it thrives, and thrives in a responsible way. That means making sure interchange fees are reasonable across the board.

This amendment is needed. It is a response to price fixing by Visa and MasterCard. Interchange fees are received by the card-issuing bank in a debit transaction. However, Visa and MasterCard--which control 80 percent of the debit market--set the debit interchange fee rates that apply to all banks within their networks. Every bank gets the same interchange fee rate regardless of how efficient they have been in conducting debit transactions.

Visa and MasterCard do not allow banks to compete with one another or negotiate with merchants over interchange rates, and there is no constraint on Visa's and MasterCard's ability to fix rates at unreasonable levels.

VISA and MasterCard consistently raise interchange rates because the more interchange fees the banks receive, the more the banks will issue cards. Visa and MasterCard receive a fee each time a card is swiped, so rising interchange rates enrich them as well.

Visa and MasterCard incidentally have reduced debit card interchange fees in other countries while they have increased them in the United States. Let me repeat that. Visa and MasterCard have reduced debit interchange rates in other countries while they have increased them in the United States. Visa and MasterCard continue to raise U.S. interchange rates, which are already the highest in the world.

The General Accounting Office found that regulators in other countries have worked with VISA and MasterCard to voluntarily reduce their interchange rates. Just last month, VISA lowered many European debit card rates by 60 percent while increasing many U.S. debit card rates by 30 percent.

What can businesses do about it? Nothing--no bargaining power. So these American-based companies are cutting their charges in overseas markets and raising them at a time when we are facing one of the worst recessions in American history. They are making it tougher for that small business to survive. They are making it tougher for them to keep their employees at work. Is that the right thing to do when our economy is facing a recession? I don't think so.

I don't set an interchange fee rate in this law. Some have argued that we would reduce credit availability by regulating credit card interchange rates. However, the amendment's reasonable fee requirement only applies to debit cards; it doesn't apply to credit cards.

The Durbin reasonable debit fee requirement exempts small banks and credit unions with assets under $10 billion, which, as I say, includes 99 percent of all banks, credit unions, and thrift savings and loans across the United States.

This amendment would not enable merchants to discriminate against debit cards issued by small banks and credit unions. VISA and MasterCard contractually require merchants to accept all cards within their networks, and the amendment does not change that requirement. The amendment would not have the Federal Reserve set interchange prices. Under this amendment, the Fed would not set them. Instead, it would oversee the debit interchange fees set by card networks to ensure they are reasonable and proportional to cost.

It is the same standard which the Banking Committee and Senator Dodd offered when it came to credit card reform. It is not a radical notion. It is in the law already.

There is an argument some make that consumers benefit greatly from the current interchange fee structure. Let me tell my colleagues the reality. This statement is contradicted by statements from groups that represent consumer interests.

Ed Mierzwinski, who is the consumer program director at U.S. PIRG, testified before the House Judiciary Committee and said as follows:

The deceptive anticompetitive practices of the two credit card associations VISA and MasterCard have injured consumers and merchants for years. Interchange fees or hidden charges are paid by all Americans, regardless of whether they use credit, debit, checks, or cash. These fees impose the greatest hardship on the most vulnerable customers: The millions of American consumers without credit cards or banking relationships. These consumers subsidize credit card usage by paying inflated prices for many goods and service. These prices are inflated by the billions of dollars of anticompetitive interchange fees used to subsidize reward programs.

The industry of credit cards also argues that merchants benefit from the
present interchange system. A 2009 GAO report found that merchants receive benefits from the existence of credit and debit card systems. It does not say those benefits are the result of the present interchange system. In fact, the same report starts with the title, ``Rising Interchange Fees Have Increased Costs for Merchants,'' citing numerous growing costs that the interchange fee structure imposes on merchants. For example, the report states:

Although accepting credit cards provides benefits, merchants report card costs are increasing faster than their ability to negotiate or lower these costs.

I would say basically if we are going to revitalize small business in America in retail establishments, if we are going to give them a fighting chance, we cannot ignore this any longer.

There are some who say: Withdraw this amendment. Wait for another day. Well, I have waited for a year and I don't want to wait anymore. I think we ought to go on the record. I think we ought to have the courage to stand up and say reasonable and proportional debit card rates that will be regulated by the Federal Reserve is not unreasonable; and secondly, that the anticompetitive practices which are imposed on small businesses and retailers across America have to come to an end.

Most of the people I talk to on the floor of the Senate understand this. I hope this modification I am making to my amendment--creating an exemption for banks with assets valued at lower than $10 billion--will make it clear that we are not trying to create any hardship on community banks and credit unions. Instead, we are going after the largest banks and credit card companies for what I consider to be unreasonable conduct when it comes to the treatment of small businesses and retail businesses as well.

I hope to call up this amendment either late today or tomorrow. I hope my colleagues will join me in standing up for small business. We give a lot of speeches about small businesses and retail businesses. This will give my colleagues a chance to vote for them on this interchange fee regulation reform.

I yield the floor and suggest the absence of a quorum.

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