Economic Development Revitalization Act of 2011

BREAK IN TRANSCRIPT

Mr. DURBIN. To my friend from Tennessee, not a chance. My wife over the weekend, in Springfield, said: I would like you to clean the garage. I said: Well, I have decided to clean half the garage. It is a compromise. She said: With whom did you compromise? That is what we are faced with. Senators CORKER and TESTER have come to the floor and said: We have a compromise. With whom did you compromise?

It was not with the people who are affected by these debit card fees. No. They compromised among the banks. The banks all sat down and said: Let's work this out among us because we are talking about real money. That is their compromise. It is not a compromise.

What is this all about? The average person listening to this debate is going to think: What are they fighting over there in the Senate, this bipartisan battle? What we are talking about is something we all carry around in our wallets and purses these days, a debit card.

If I take this card and go to a local restaurant--well, let's use a different one. If I went to a local convenience store and said: I want to get a pack of chewing gum--Wrigley's because that is based in Chicago--I want to get a pack of Wrigley's chewing gum, here is my debit card, they take the debit card these days and they swipe it and they complete the transaction.

What you do not know, but the merchant knows, is he just lost money on that because it costs more to the merchant selling the goods to process the piece of plastic than they could possibly profit on the goods they are selling. So you wonder, how did it reach this point, where the use of this piece of plastic costs so much? It reached that point because the big giants of credit cards, Visa and MasterCard, said to merchants and retailers all across America: If you want to accept plastic at your place of business, then you are going to pay us a swipe fee every time that piece of plastic goes through the reader.

How much is that swipe fee? Turns out it is 1.10 percent, on average. It does not sound like a lot, but it is. The banks that issue these cards receive each month in swipe fees from all across the United States, from convenience stores, restaurants, hotels, charities--if you gave a donation to Red Cross because of the terrible tragedy that happened in Joppa, MO, and used your debit card, guess what. Visa and MasterCard got a percentage of it, the amounts you thought you were giving to the charity--college book stores, you name it.

Every time you sweep these, it ends up generating, each month, on average, for the banks across America, $1.3 billion.

Each year, there are more than $15 billion in swipe fees. What did the merchants have to say about how much they were being charged? Nothing. Take it or leave it, buddy. If you don't want to pay the swipe fee, don't take plastic.

Over the years, as you might expect, merchants and retailers said this is a rotten deal. Not only is this an invisible charge that we have to add to the cost of doing business on everything, we have no control over it. We are faced with paying a swipe fee or not accepting plastic and, in this day and age, imagine how long you would last in many businesses if you didn't accept debit cards.

So 4 or 5 years ago, I called for a study asking: What is a reasonable amount to charge? I was opposed, naturally, by the banking industry. They put out an all-points bulletin to kill the Durbin study of debit fees. They didn't want to study it. All that could do is put the spotlight on them. They don't want that to happen. So we waited and waited and last year we had the Wall Street financial reform bill. I sat here patiently on the floor saying I want to offer this amendment to finally come up with a reasonable way to regulate this fee, which is not a product of competition and isn't transparent or disclosed. The vote finally came along.

After 25 amendments on Wall Street reform, they decided this vote would not require a majority, it would require 60 votes, a supermajority. OK. We won with 64 votes in favor of our position. It surprised a lot of people. It sure surprised the banks. They didn't think this Senate, on a bipartisan basis, would hold them accountable for the fees they are charging on the debit cards.

What do we say in the law? The Federal Reserve--a nonpartisan bank regulating agency--would have the authority to determine what is a reasonable and proportional fee for swiping the card, and that fee would go into effect this July--July 21--1 year after we passed the law. We said, in the meantime, to anybody who has thoughts, ideas or comments, send them to the Federal Reserve. They received 11,000-plus comments. Everybody had an idea. Some didn't like the law, some did--on and on.

So they came out with a preliminary report--not a rule--in December. You know what they found? They found that the average charge per transaction in the United States was 44 cents and the average cost to the bank for processing the debit transaction was about 12 cents--one-fourth. So the plot thickens.

It turns out the banks issuing these cards are not only charging this invisible fee, they are dramatically overcharging merchants and retailers. Guess what Mr. and Mrs. Consumer. We pay it; we pay it in additional charges. Even if you go into that store to buy a package of chewing gum with cash, the price has been raised because they are expecting you to give plastic instead, and you pay more. So then the battle was on--whether the Federal Reserve would issue this rule establishing a more reasonable swipe fee for these debit cards. It is a big battle.

Imagine, if you will, what it means to the biggest banks in America when they have on the line $1.3 billion a month. They pulled out all the stops. A friend of mine--a lobbyist in Washington--said: Praise the Lord. Come up with some more ideas. This is a full employment amendment. Everybody in Washington who is a lobbyist is working on this amendment. We love you to pieces.

The sad reality is, it is coming--maybe--to a close with a vote on this amendment. But the banks and credit card companies started piling it on. Let me be fair. The other side did too. The merchants and retailers said: We want fair treatment, and if we have to fight to protect this new law, we are going to do that.

Senators TESTER of Montana and CORKER of Tennessee have offered an amendment I am about to describe. This is interesting, though. They are offering this amendment in an effort to stop the Federal Reserve from issuing a rule that will establish how much that swipe fee is going to be. How soon would the Fed issue the rule? Within the month, within a matter of days. They are desperate to get this amendment to the floor to try to stop the Federal Reserve from saying what is a fair swipe fee and to protect merchants, retailers, small businesses, and consumers across America. The banks want to stop them.

There is one other part of the story that is important. We decided that when we wrote this law, we would give smaller banks, community banks, and smaller credit unions an exemption. In other words, they are not covered by the Federal rule.

You say, why? From a consumer's point of view, all the arguments made still apply.

Well, that is true. But many of these smaller institutions are more financially vulnerable. I happen to agree with Senators TESTER and CORKER. I believe in community banks and local banks and want them to survive. So we carved them out. Instead, if the value of your bank is below $10 billion, you will not be affected by this. If the value of the credit union is below $10 billion, you will not be affected. How many did we exempt? Out of 7,000 banks in America, only 100 would be affected by the law. Out of 7,000 credit unions, only 3 would be affected by the law.

Then there is another part of the story. It turns out that the three biggest banks in America are the ones that make the most money on debit fees. Each month, they collect more than 50 percent of the debit fees. What are those banks? Chase, Wells Fargo, and Bank of America.

They have been fighting viciously to stop this rule from going into effect because there are billions of dollars at stake. They don't want to lose that income.

Let's have a little trip down memory lane about these banks. Do you remember a few years ago when these banks got us into the biggest economic mess in current memory? Did you notice any change in your savings account or perhaps your IRA--the money you put away for retirement? I sure did. I think Loretta and I lost about 30 percent of our value because they were playing games with subprime mortgages, new derivatives and AIG offices in London and this holy mess ended up being visited on families, businesses, and consumers across America. We were in a panic. The Chairman of the Federal Reserve, Ben Bernanke, and Treasury Secretary Hank Paulson met with us and said: If you don't do something immediately, banks all across America are going to fail and our economy will collapse and not just here but across the world. So you have to come to their rescue.

We had to come up with a bailout for the banks. Remember that, taxpayers of America? How did the big three debit card banks do in the bailout? Chase got $25 billion in taxpayer money because they had acted so recklessly and endangered their bank, and they needed a helping hand. Bank of America got $45 billion in taxpayer bailout funds. Wells Fargo got $25 billion in taxpayer bailout funds. Remember, taxpayers of America, when the same banks that will profit from these debit card fees were so desperate that they needed a helping hand from taxpayers to save their banks? Do you remember how they expressed their gratitude to us? It was heartwarming. As soon as they could, they called a meeting of the boards of directors and awarded one another bonuses for their reckless conduct. It warmed my heart that they were so appreciative of the taxpayers across America sacrificing with their taxes to save these big old banks.

Well, I have news for the taxpayers: They are back. They are back today, and now it is smaller--I will concede that--it is only $15 billion a year. But these same big banks are asking for a handout and a subsidy from the Senate. Are we going to get shakedown a second time?

That is what this debate is all about. At the end of the day, if this amendment that is pending on the floor passes, then for at least 1 year--I think way beyond that--these banks will continue to take in $1.3 billion out of the wallets and purses of consumers across America every time a person uses one of these plastic cards. I don't think that is fair. I don't think it is right. I think there is a way to deal with this honestly. I will tell you what it is.

Let the Federal Reserve issue its rule this month. They will come out with it. Let's look at it. Nobody knows what they are going to say. I have heard both Senators who introduced this amendment say: Well, we cannot accept this rule. They don't know what the rule is, and neither do I. It has not been published yet. At a minimum, should we not see it before we say it is unacceptable?

I am ready to wait. I trust that the Federal Reserve will do its job. I think it can produce a good rule--a rule that is fair to consumers, retailers, small businesses, and the banks too. Senator Corker said the problem with Durbin's amendment is, he doesn't allow the banks to add in all the possible charges and costs in a debit card transaction; he is just allowing them to count the value of the dough and the pizza, not all the other things they might add in.

No. What we said was that you can charge a fee that is reasonable and proportional to the cost of the transaction. Pretty simple, right? Reasonable and proportional. Well, this amendment on the floor decides to open the door wide. It is no longer reasonable and proportional. They have full pages describing all the different things the banks can add in to establish the fee they charge small businesses and consumers. Are you trusting of these banks to be careful with what they add in? I am not. I can tell you that when you look at the list of things they include, it includes executive compensation, because it is about the costs of the operation of the program, which happens to include a lot of managers and officers as well. I don't know what else it includes, but it is wide open.

Here is what the banks have said. Incidentally, I guess it is somewhat gratifying when your name is associated with an amendment and you hear it over and over--Chase, for example, wrote to every person that is a customer in my State of Illinois and said: Beware of the Durbin amendment. If it goes through, it reduces the debit fee charge we can charge, and your fees are going up. Your benefits and premiums are going to go down. Here is what Chase failed to mention--and the other banks as well. The total amount the Big Three banks take in in a year from debit cards fees is about a little over--almost half the total amount collected, about $8 billion a year. So the argument that JP Diamond and Chase are making is that if you cut our credit card fees, your fees are going to have to go up, and it is a cost of doing business. What Mr. Diamond and others in that business failed to note is, last year on Wall Street, the banks awarded, in bonuses, $20.8 billion. So when they argue that an $8 billion loss means fees are going up, oh, really? Or does it mean bonuses might go down? On behalf of consumers and businesses across America, that is part of it.

Let me tell you a few things about the pending amendment. It is not a compromise. Second, it includes costs that cover the whole ballpark, that they can say we are going to add in the cost of ATM machines to the debit card fees and pretty soon, get serious, they are right back up to 44 cents a transaction. That is how it is designed.

They carefully wrote this so there is no effective date for the rule. It says the Board will decide the effective date. There is no effective date for this going into effect. That is awful.

Finally, the argument made on the floor over and over is that we just want to protect the community banks and credit unions. That is why we are doing all this--not a word in here--I take that back--there is one reference to these smaller exempt institutions. There are ways--and they know it--if they wanted to, to have even more protection and reassurance for the smaller community banks and credit unions. They didn't include them because that is not what this is about. This is about all of the banks. Particularly, it is about the giant banks on Wall Street that have at stake in this amendment $8 billion a year in profits--$8 billion a year in subsidies through this amendment and through the second round of bailouts.

This is a good test for the Senate. I don't know how it is going to end. I won last year, but they have poured it on ever since. The banks have done everything they can to reverse what we accomplished last year. It is up to my colleagues now. They have to decide whose side they will be on. It is simple. They are either going to be on the side of the banks and credit card companies or on the side of consumers and businesses all across America, to give them a fighting chance.

How many speeches have we heard on the floor of the Senate about small business? If we could unleash the power of small business--their expansion and hiring of more people--we could turn this economy back where it should be. This will be a direct hit on small businesses all across America if this pending amendment is enacted.

This is our chance to say to the big banks on Wall Street: If you can have $20.8 billion in bonuses last year, you are doing quite well, thank you. Incidentally, one of these banks had a 48-percent increase in profits. They are doing okay, folks. We don't need a tag day for any of the Wall Street banks.

Secondly, if you believe in small businesses and merchants and retailers in your hometowns, stand up for them, fight for them. That is what they are asking for. That is what this debate is all about.

Let's wait until this rule comes out. Let's defeat this amendment, and see what the Federal Reserve says. I have given my word--and I will say it again--to work with any Senator on either side of the aisle. If we need to have any kind of reassurance or protection added to what we have done in this law, I am there. As I have said many times, the only perfect law I am aware of was carried down a mountain on stone tablets by Senator Moses. The rest of the time we just do our best. If there is a way to improve it, I will be there.

But at the end of the day, let's finally, finally, finally stand up for consumers and small businesses across America and say to the Wall Street banks and Visa and MasterCard: Sorry, this party is over.

I yield the floor

BREAK IN TRANSCRIPT

Source