Durbin Attacks Bank of America

The increasingly feral Democrat Party decided to attack a specific private enterprise by name today, after the company in question responded to new legislation by adjusting its fee schedule.

The attack came from Dick Durbin (D-IL), previously most widely known as the man who compared American soldiers at Guantanamo Bay to Nazi prison guards.  Durbin is not just an expert on national security.  He’s also an economic wizard who knows exactly how much every “free” citizen should be allowed to charge for every imaginable good and service.  With his Solomonic wisdom, he is far better qualified to decide what level of profit is moral for any given industry.

Durbin is very unhappy that banks have rejected his wise judgment in deciding what fees they should be allowed to charge retailers in exchange for processing debit card transactions.  One such institution, Bank of America, responded to Durbin’s legislative destruction of their income stream by announcing they would charge customers a $5 monthly fee for debit card usage.  They mentioned Durbin by name when they discussed it with their unhappy clients.

Imagine: a company named after America thinking it was “free” to charge whatever price it could get for its services, and believing it had some kind of “right” to its own property!  And they dare to use the name of Prince Richard without his gracious permission!

The Prince did not allow this act of defiance to pass without a spirited response, as ABC News reports:

Holding up a plastic debit card on the Senate floor this afternoon, Sen. Dick Durbin, D-Ill., had some advice for Bank of America customers angry about the new $5 monthly fee: leave.

“Bank of America customers, vote with your feet, get the heck out of that bank,” Durbin said on the Senate floor. “Find yourself a bank or credit union that won’t gouge you for $5 a month and still will give you a debit card that you can use every single day. What Bank of America has done is an outrage.”

Durbin said consumers are rightfully outraged about last week’s announcement.

“It is hard to believe that a bank would impose such a fee on loyal customers who simply are trying to access their own money on deposit at Bank of America,” he said. “Especially when Bank of America for years has been encouraging their customers to use debit cards as much as possible.”

Gosh, it sure is terrible that Bank of America encouraged people to use debit cards, before the compulsive force of government was deployed against them, on behalf of lobbyists for the big retail outlets who formerly paid the fees!  It’s not just a minor adjustment, either: the Dodd-Frank disaster that Durbin pollinated with his “swipe fee” amendment cut those fees from 44 cents to 24 cents per transaction. 

Too bad absolutely none of that billion-dollar windfall for retailers will find its way into your pockets, consumers!  The poor are being hit with a regressive tax – Bank of America confirmed that its new fees can be evaded by those wealthy enough to have “premium” accounts with “higher minimum balances.”  This tax will be used to subsidize the cost of processing debit card transactions for politically connected retailers.  And the poor saps paying the tax will be instructed to feel good about it, because the banks are somehow getting screwed!

As for the advice Durbin screamed at the voters he desperately hopes will forget about his role in soaking them: it would actually be good advice, in the free market Durbin and his Party have worked so hard to destroy.  If you don’t want to pay $5 a month to use your debit card, and you can find another bank that won’t charge you five bucks – and nothing else about the services offered by the two banks makes $5 worth of difference to you – then by all means, change banks.

Of course, that option might not be available to Bank of America customers for long.  Other banks are ramping up surcharges and account fees to implement the Durbin Tax as well.  Back in August, I noted a report that Wells Fargo and JPMorgan Chase were test-marketing exactly the same type of debit card fee, although their fees were pegged at $3.  They have not declared whether or not they will impose these fees on a national basis.

If Prince Richard’s vast wisdom proves true, then other banks will decide they really didn’t need the profits lost to the Durbin Tax, and will win customers away from Bank of America with free checking and free debit card usage.  BofA will eventually be obliged to drop their fees and absorb the revenue loss, if they want to retain any customers.

Or maybe it will turn out that Prince Richard was wrong about how much profit the banks “need,” and they will all begin charging additional fees.  The management of the first bank to pass along the Durbin Tax clearly anticipates that outcome, and it’s just barely possible they know more about banking and their customer base than Democrat politicians do. 

How will the political class respond to the mounting public outcry over the new reality they have imposed?  What’s the Big Government “fix” for the Durbin Tax?  A law that compels banks to provide free debit cards?  Or perhaps one that makes it illegal to charge nice hard-working people for servicing their checking accounts?  That would amount to nationalizing banks in order to compel the “free” provision of financial services, which would become a “human right.”

Were the transaction fees capped by Durbin’s legislation “too high?”  No doubt retailers thought so.  It’s good that they wanted those fees to be lower.  That is the essence of competition: the quest for maximum value at minimum price.  Likewise, every customer of Home Depot and Wal-mart wants their products to be cheaper.  Drop by any retail outlet on the day after Thanksgiving for an exciting and highly kinetic demonstration of this principle.

The disastrous mistake here was the introduction of government force, which is the opposite of “competition.”  Price controls never work, and cost shifting invariably produces a mountain of fiscal sludge that flows downhill.  Acts of raw compulsive power obscure cost information from consumers.  That’s the essence of the dispute between Dick Durbin and Bank of America: the attempt to conceal who is paying for what, and precisely how much it costs.  True cost can never be found in a maze of price controls and subsidies… and if that information is hidden, competition cannot exert downward pressure upon cost.

Among your greatest economic powers is the ability to choose.  You can walk away from a business you don’t like, or refuse to purchase a product if you think it’s too expensive.  The power wielded by many people making such decisions is swift and terrible. 

There is, however, no escape from the federal government.  You cannot treat Dick Durbin the way he wants you to deal with Bank of America.  Unless you live in Illinois, you will never have a chance to vote against him… but he can reshape your life in profound ways, and if you don’t have a well-funded lobbying operation, he’s not terribly interested in your feedback.  The willingness of so many people to surrender their economic power and liberty, in exchange for the “protection” of a demonstrably inept super-government they cannot control, remains baffling.

While we wait to discover if others will follow Bank of America’s lead, enjoy the spectacle of top Democrat politicians savagely attacking a legitimate business that has broken no laws.  Too bad they don’t have a comparable level of animosity for the “green jobs” con artists who have made off with so much taxpayer money, and given so little value in return.