Friday, September 30, 2011

Dick Durbin and the Bank Profit Dyke

Dick Durbin is a painfully predictable communicator which, it seems, he attempts to compensate for by spewing out of his acerbic pie hole fantastic claims that do nothing more than provide evidence of his mind boggling ignorance.

One of Durbin's biggest legislative accomplishments is the inclusion of the Durbin Amendment to Dodd–Frank Wall Street Reform and Consumer Protection Act, an act signed into law last year in response to our current economic malaise. (It should be noted that many critics of the Dodd-Frank fiasco point out that the act responds to our current economic crisis by addressing exactly zero of the factors that contributed to the economic crisis, that it would not have headed off the recession had it been passed in previous years, and that its passing will contribute significantly to the likelihood that we might fall face forward into the second half of a disastrous double-dipper.)

It does all of these things because it misinterprets the major causes of the recession to begin with. It blames Wall Street and the big banks for the recession (two easy-to-hate culprits) while it conveniently forgets that it was a predictable housing bubble coupled with a government-mandated relaxation of lending standards that were the principle motivators of the credit crunch. Then, when benevolent bureaucrats swooped in to save the day, they exacerbated the problem by holding risky lenders largely unaccountable for their ill advised exploits while siphoning out of the private sector badly needed capital.

Hundreds of billions of taxpayer dollars flowed into the coffers of careless banks, conveniently blinded mortgage lenders and insurers, poorly managed car companies, overspending state and local governments, and ill-advised green energy favorites until those numerous billions, now adding up to trillions, had been fatally squeezed out of the American economy and no longer were available to private enterprises who needed the capital resources to expand their businesses while also expanding their employment bases.

Dick Durbin, Barney Frank, and Chris Dodd were three of the swooping bureaucrats--all of them partly responsible for the catastrophic credit meltdown in America, and all of them equally as guilty of misdirecting blame for their own complicity at Wall Street and the banking boardrooms.

You see, the rich and the banks they own make wonderful villains. They are the haves while we are the have-nots. They board corporate jets to flit about the globe while we haven't had a vacation in years. They own yachts while we cannot afford fishing licenses. The rings on their fingers could pay off our mortgages. They are the millionaires while we live paycheck to unemployment check.

It is the evil banks and their excessive profits that Dick Durbin was aiming at when he slipped the Durbin Amendment into the Dodd-Frank disaster at the last moment. The villainous banks needed to have their profits reined in, and Durbin was just the man to do it.

And yet, even responsible banks must operate at a profit and must maintain a certain profit margin. Falling nether a particular profit margin makes banks, like any free market business, unworthy of investment. So, when the benevolent Dick Durbin struts around a bank and sees profits he feels are unnecessary or unfair, he attempts to plug those leaks with regulations. Unfortunately, when more and more of these profit centers become plugged with the pudgy fingers of Durbin, more and more seemingly unreasonable measures of revenue must be gathered elsewhere.

This is not because banks want to punish their customers for their patronage, but rather the banks are being forced to scrounge for dollars under the seat cushions because many of their conventional streams of income are being crushed by regulations.

Do I love banks? Nope. They piss me off as much as the next guy. My free checking went away years ago, my ATM charges keep climbing, and it is rumored that my e-banking might start costing me money. But, these seemingly unreasonable charges are becoming the norm these days because government regulators are busy trying to plug profit holes that they deem excessive even though eliminating them makes banks turn to more creative (and unreasonable) measures to maintain their profit margins.

Says Durbin:

“Earlier this year the Federal Reserve determined that the interchange fees Visa and MasterCard fix for big banks grossly exceed the cost of processing a debit card transaction by some 400%. These hidden fees were designed to boost big-bank profits by charging small businesses and merchants every time a debit card was swiped. And profit they did. Bank of America hauls in billions in debit interchange each year.”

“Thankfully, on October 1st that flawed system will be replaced by a more transparent and competitive market. Swipe fee regulation will still allow banks to cover the actual costs of debit transactions but will rein in the banks’ excessive profit-taking. Small business and merchants will benefit from fee relief and consumers will benefit from lower prices. And banks that try to make up their excess profits off the backs of their customers will finally learn how a competitive market works.”
The more 'transparent and competitive market' that Durbin has announced that will result from his brilliant private sector intrusion, in part, amounts to millions of debit card holders having to fork over an additional few dollars every month for the right to spend their own money. Other annoying charges are certain to follow in order to pay for Durbin's bulbous nose snuffling about my bank account, and to pay the salaries of the additional bank regulators necessary to pull off this sort of intrusion, as well as to pay the higher overheads incurred by banks that must install and maintain viable systems in a more regulated world.

Profits will not go down. But costs, as accompanied by all regulations, will go up. These will need to be paid for.

Thanks. Dick.

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